[MARKET ANALYSIS] DXY holds steady; AUD benefits after hawkish commentary from RBA's Hauser, whilst GBP digests UK CPI

• G10s are mixed against the USD. The Antipodeans outperform, but with mild outperformance in the Aussie after hawkish commentary from RBA’s Hauser. The EUR holds towards the foot of the pile.
• DXY is essentially flat and trades within a 101.73-101.83 range, holding towards the lower end of the prior day’s range. The data docket has been light this week, and will remain so; therefore, the USD may need surprises in tech-earnings/geopolitics to make a move in either direction. On that note, the USD came under mild pressure on Tuesday following reports that the Iranians were presented a “compromise proposal”; newsflow since then has been lacking, but the Iranian FM suggested that indirect negotiations were ongoing. Nonetheless, the situation remains tense with reports suggesting that tankers are still under fire.
• AUD is the best performer this morning, following hawkish commentary from RBA’s Hauser. He mentioned that the inflation outlook is “materially worse”, blaming AI spending and rising energy costs. Hauser added that Q3 CPI will show inflation accelerating. Money markets have upped their bets of a hike at the November meeting, and now assign a c. 50% chance of such a move. Further adding to the hawkish tone was Goldman Sachs now expecting a 25bps rate hike in November, vs its initial call of no move. AUD/USD topped the 0.70 mark, to trade back towards levels not seen since late-September.
• EUR is the slight underperformer this morning, with sentiment around Europe remaining downbeat. The OAT-Bund spread remains exceptionally wide at c. 156bps, and building on recent advances. Of course, the civil unrest in France and the ongoing French fiscal situation remain front of mind.
• Across the channel, the GBP is a touch firmer this morning. Some mild strength was seen following the region’s inflation report, which saw the headline rise a touch more than expected, whilst Core M/M fell from the prior. Overall, a slightly firmer-than-expected inflation report, which plays in favour of those pushing for a hike at the BoE's November confab. Today's report, alongside the recent solid jobs report, will provide MPC members with enough evidence to suggest that the UK economy is holding up fairly well to deliver a hike in November. For reference, Danske, MUFG and Pantheon all expect a hike next month, and Pantheon sees another in February.

Sessions of this kind, where the dollar index sits in a narrow range on a thin data calendar, tend to resolve on idiosyncratic central bank and political drivers elsewhere in G10 rather than on the USD leg itself. The AUD move fits the standard pattern: hawkish surprise from a deputy governor, front-end pricing shifting toward a live hike at the next meeting, and the currency responding through the short rate differential channel, with a sell-side house flipping its call acting as the classic confirmation tell rather than a catalyst in itself. Whether the move extends has historically depended on whether the flagged CPI print validates the warning, since official commentary pre-committing to an acceleration in the data raises the stakes on that release. The EUR side is the familiar distinction between cyclical and fiscal drivers: a wide OAT-Bund spread reflects a French political and fiscal risk premium rather than growth divergence, and episodes of this sort have tended to cap the single currency until the spread stabilises rather than compress on each headline. For GBP, the sequence is well-worn: a marginally firm inflation print layered on solid labour data keeps the next MPC meeting live, and sterling's response typically tracks short gilt pricing rather than the print itself. The residual USD driver in a quiet data week is geopolitical, where negotiation headlines on Iran have historically faded without follow-through while escalation feeds through oil and haven demand; tanker incidents are the tell that separates the two.