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[MARKET ANALYSIS] DXY ignores US-Iran strikes, KRW pressured following the announcement of a massive spending package

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[MARKET ANALYSIS] DXY ignores US-Iran strikes, KRW pressured following the announcement of a massive spending package

EU Consumer Confidence Final (Jun) -17.7 vs. Exp. -17.7 (Prev. -19)

EU Services Sentiment (Jun) 3.2 (Prev. 2.2)

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  • Snapshot: G10s are mixed against the USD and to varying degrees. The Kiwi slightly outperforms vs peers, whilst the GBP and EUR follow closely behind. The JPY resides at the bottom of the list. Outside of the G10 space, the KRW is weaker this morning after South Korea unveiled a USD 1tln chip/AI investment plan. Potentially on fears surrounding a) how Korea aims to finance the government's portion of the investment, b) pressure in SK Hynix/Samsung shares, which leads to outflows in domestic markets, c) heightened geopolitical risk, and the associated inflationary impacts on the region.
  • DXY is incrementally weaker against the USD, and currently holds within a 101.15 to 101.39 range. Focus for the index over the weekend was on the increased geopolitical risk, which ultimately highlighted the uncertain nature of the current US-Iran MoU. As a reminder, the US and Iran conducted tit-for-tat strikes; thereafter, the pair agreed to halt strikes and resume meetings this week. It seems to be the case that markets are happy to ignore the short-term flare-ups, and broadly focus on whether there are any material disruptions to the Strait of Hormuz.
  • The week ahead is packed with some key catalysts for the USD. 1) A slew of labour market figures, which precede Thursday’s NFP report, 2) Fed’s Cook Supreme Court ruling, 3) commentary from Fed Chair Warsh at Sintra.
  • GBP is slightly firmer, holding within a narrow 1.3191 to 1.32282 range. Really not much driving the action this morning for the GBP, but focus ahead will be on commentary from likely PM Burnham. He is expected to announce plans to devolve powers and money from the central government to England’s regions. This would mark his first major policy speech since announcing his intention to stand for leadership of the ruling Labour Party.
  • That aside, speculation around the next UK Chancellor continues. The Sun reports that current Work and Pension Secretary McFadden is a contender, under the belief he would steady the market. However, Miliband remains a contender, with a source to the Sun remarking that it is now between McFadden and Miliband. The latter remains the worst option for markets.
  • JPY remains the slight underperformer this morning. USD/JPY currently holds towards near-term highs at 161.95, and within a 161.72-161.88 range. Speculation surrounding intervention remains heightened, particularly heading into US Independence Day. Japan favours intervention during periods of low volume, given the improved effectiveness when attempting to strengthen the JPY.

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