[MARKET ANALYSIS] DXY marginally softened following the recent pullback in yields, while CNY strengthens after the PBoC defended its currency policy and denied weakening the yuan for trade advantages

DXY: -0.1%

• Marginally softened after the recent pullback in yields, but with mixed risk appetite and recent AI concerns limiting the downside, while the declines in yields had coincided with a flight to safety, somewhat dovish ECB Minutes, and with President Trump stating no strikes on Iran will occur before the midterms amid 'productive' talks with Iran. Furthermore, there were some comments from Fed officials, but they failed to spur the dollar, with Fed's Musalem (2028 voter) noting that inflation is elevated and being driven by persistent demand pressures and a supply shock, while he added that bringing inflation back to 2% in a timely manner and limiting second-round effects is key.

EUR/USD: +0.1%

• Eked slight gains following the prior day's intraday recovery and slew of central bank rhetoric, but with gains capped after the ECB Minutes implied that recent yield moves helped its tightening aims, further dampening already declining rate hike expectations.

GBP/USD: +0.1%

• Continues its rebound against the buck, albeit in a gradual manner, with prior comments from BoE speakers doing little to influence price action despite Governor Bailey stating that monetary policy needs an unwavering commitment to returning inflation to the target.

USD/JPY: +0.2%

• Price action is choppy and continues to oscillate through the 158.00 level, with mixed Household Spending data from Japan contributing to the indecision.

Antipodeans: AUD/USD +0.3% / NZD/USD +0.3%

• Mildly outperformed against G10 counterparts alongside a firmer yuan after the PBoC defended its currency policy, stating that it does not intend to devalue the CNY for trade advantages and will keep the market as the main influence on the yuan exchange rate.