[MARKET ANALYSIS] DXY regains poise after suffering yesterday on haven outflows

DXY: +0.2%

  • Dollar regained poise after weakening yesterday as the drop in oil and the broad risk-on environment sapped haven demand. Nonetheless, an overnight rebound has been facilitated by a partial recovery in oil and upside in yields, while recent commentary from Fed officials had little impact, with Fed's Daly noting there are at least two possible paths for the US economy depending on whether the Middle East conflict is resolved quickly, or becomes more protracted.

EUR/USD: -0.2%

  • Pared some of its gains and returned to beneath the 1.1600 handle as the greenback recovered, while there was little reaction in the single currency to the EU and Australia agreeing to a free trade agreement, nor to reports that the US and EU are close to a critical minerals deal.

GBP/USD: -0.2%

  • Battles to maintain the 1.3400 status after climbing yesterday in the heightened risk environment, but with price action contained overnight by a lack of fresh drivers and as the Middle East conflict persisted.

USD/JPY: +0.2%

  • Mildly bounced back from yesterday's trough after finding support at the 158.00 level, with tailwinds seen as oil recouped some losses and after Japanese CPI decelerated.

Antipodeans: AUD/USD -0.4% / NZD/USD -0.2%

  • Momentum petered out with AUD/USD failing to sustain the 0.7000 status and was not helped by weak flash PMI data from Australia, while NZD/USD is also subdued with RBNZ Governor Bremen recently stating they will see higher inflation in the near term and some growth impacts.
Context

The DXY’s rebound indicates a stabilization of the dollar after previous weakness driven by haven outflows amid a risk-on environment. This recovery is supported by rising oil prices and stronger yields, while Fed officials' comments suggest ongoing uncertainty linked to the geopolitical climate, specifically the Middle East conflict. Currency pairs like EUR/USD and GBP/USD are showing slight declines, reflecting the dollar’s regained strength, despite limited new developments in their respective economies.

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