[MARKET ANALYSIS] DXY is rangebound but holds on to the prior day's mild gains amid expectations for another rate hike this year

DXY: Flat

• Trades little changed and holds on to the prior day's mild gains amid the ongoing view of another rate hike this year despite the recent pullback in oil prices due to diplomatic hopes. Fedspeak from Goolsbee (2027 voter) and Musalem (2028 voter) reinforced expectations of another hike this year, with the latter arguing that without further policy restraint, it is more likely inflation will remain substantially above the 2% target 18 months from now, while Collins (2028 voter) said the renewal of combat in the Iran war was a key reason she supported rate hikes last week, and has pencilled in another hike this year but expects rates on hold in 2027. In terms of data, the calendar stateside is thin this week, leaving most focus on the UN General Assembly and the Trump-Xi summit.

EUR/USD: Flat

• Trades indecisively within tight parameters at the 1.1400 handle, while comments from ECB's Lane did little to shift the dial, in which he noted the Eurozone economy should continue growing at a steady but moderate pace if the energy shock does not intensify, and that a second wave of energy price increases will push inflation higher before it falls towards the target from mid-2027.

GBP/USD: +0.1%

• Ekes slight gains but with upside limited amid a lack of drivers and after the recent retreat from resistance at the 1.3400 level, while it was also reported that US President Trump will challenge UK PM Burnham over Britain’s defence spending when they meet today.

USD/JPY: +0.1%

• Kept afloat after returning to above the 157.00 level, despite the prior day's decline in yields and oil prices, while global catalysts remain light and Japanese participants are away from the market through to Wednesday.

Antipodeans: AUD/USD Flat / NZD/USD +0.2%

• Price action is somewhat mixed, with AUD flat amid a very quiet calendar and despite the positive risk appetite, while NZD outperforms with support seen following comments from RBNZ Governor Breman that near-term inflation is expected to be somewhat higher if elevated oil prices persist, while she noted the RBNZ remains focused on the inflation outlook ahead of the October policy decision.