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[MARKET ANALYSIS] DXY remains pressured, JPY subject to volatility once again

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China PCA vehicle sales (Jun): 9% M/M (prev. 9%), -21% Y/Y (prev. -22.1%)

German New Car Registrations YoY (Jun) Y/Y 15.7% (Prev. 0.1%)

[MARKET ANALYSIS] DXY remains pressured, JPY subject to volatility once again

[MARKET ANALYSIS] Fixed income benchmarks rotate in narrow ranges; ECB's Lagarde fails to rule out stepping down early from her role

Earthquake of Magnitude 6.25 strikes Kuril Islands, GFZ reports

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  • Snapshot: G10s are firmer against the broadly weaker USD this morning, albeit to varying degrees. The Antipodeans outperform, given the risk-tone and rising metals prices, whilst the Loonie lags vs peers.
  • DXY is a touch lower this morning and trades within a 100.60-100.99 range, and towards the lower end of the prior day’s bounds. This week’s USD action has been dictated by an unwinding of hawkish bets, after: 1) Fed Chair Warsh avoided any overt hawkish language mid-week, 2) a soft NFP report. The USD downside was also facilitated by JPY strength, in the aftermath of potential intervention/rate check activity.
  • Do note that US markets are shut on account of Independence Day, as such, light volumes can be expected. A factor which may lead Japanese officials to conduct another round of intervention, given that lower volumes improve the effectiveness of such action. Earlier, there was some brief selling in USD/JPY, where the pair fell from 161.04 to a trough of 160.48. However, the move was pared soon after, which signals that the action was more conducive to a rate check, rather than intervention itself.
  • Separately for Japan, the final Rengo survey showed that firms offered an average wage hike of 5.01% (vs. 5.25% Y/Y). Initial readings were already indicative of c. 5.26%, though the final tally remained above the 5% threshold demanded by the union. All-in-all, the metrics should not change much for policymakers at the BoJ, who had already broadly estimated a level beyond 5%.
  • EUR and GBP both gain to similar degrees. For the single currency, a report in Les Echos got some attention. It noted that ECB President Lagarde said she would not rule out an early resignation, so that she could give a “European voice” in the French presidential debate. For reference, her term at the ECB ends in October 2027. As a reminder, she had previously pushed back on reports of an early departure, stating that “the captain of the ECB ship must remain on board”. Markets remain attentive to any developments on this front, with focus on who the next President could be. As it stands, reports suggest that former board members Knot and de Cos are the favourites, whilst Nagel and Villeroy are also seen as viable candidates.

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