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[MARKET ANALYSIS] DXY reacts to reports that Iran could reopen Hormuz in seven days; JPY benefits on yield differentials

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Former Iranian Vice President for Parliamentary Affairs says US President Trump has expressed readiness to meet and negotiate with Iranian President Pezeshkian, but argues Pezeshkian should not hold talks with Trump, Fars reports

Germany sells EUR 3.735bln vs Exp. 5bln 2.90% 2031 Bobl: b/c 1.21x (prev. 1.56x), average yield 3.28% (prev. 3.09%), retention 25.3% (prev. 22.16%)

[MARKET ANALYSIS] DXY reacts to reports that Iran could reopen Hormuz in seven days; JPY benefits on yield differentials

Microsoft (MSFT) is reportedly planning another round of Xbox layoffs, as part of a larger restructuring, The Verge reports citing sources

Ukraine's Naftogaz says that the Russian attack caused critical damage, which makes it effectively impossible to restore it

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  • Snapshot: The FX space has been exceptionally choppy this morning. Initially, G10s were mixed against the USD, but are now mostly lower, as the USD clambered higher as the session progressed. The Kiwi outperforms after hawkish comments from RBNZ Governor Bremen. She noted that near-term inflation is expected to be somewhat higher if elevated oil prices persist.
  • DXY is essentially flat this morning and holds within a 100.32 to 100.66 range. The bias was initially stronger for much of the European morning, before a report in Kyodo, citing an Iranian source, suggested that Iran had told the US admin that it will open the Strait within seven days, if the US lifts its blockade on Iranian ports. This spurred immediate and sustained pressure in the crude complex, weighing on yields and therefore on the USD.
  • Following this action, JPY was the largest beneficiary, flicking from red to green within a few minutes. USD/JPY fell from 157.62 to a session trough of 156.85 within a small timeframe – largely thanks to narrowing yield differentials.
  • Some may view this move as a bit outsized, given that there is currently no progress to peace at this stage. However, it points out that the mood is a bit more constructive heading into the UN General Assembly, where the Iranian President is set to make an appearance. No sideline meetings are currently expected between the US and Iran, however, the US and Gulf leaders will meet. Any positive mood music following that meeting will no doubt put another bout of pressure on the USD.

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