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[MARKET ANALYSIS] DXY reverses APAC session gains, GBP helped by technicals & JPY lags on budget fears

The DXY's reversal in the APAC session, driven by political comments and falling oil prices, indicates a risk-off sentiment that is negatively impacting the USD.

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[MARKET ANALYSIS] DXY reverses APAC session gains, GBP helped by technicals & JPY lags on budget fears

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  • FX shows a risk-on bias with high-beta outperforming and DXY in the red. 
  • DXY firmed at the Asia trade and rose to a 99.40 peak as participants digested US President Trump’s remarks over the weekend, “the clock is ticking for Iran.” However, with Brent crude falling from its USD 112/bbl peak (curr. 110/bbl), the index now trades modestly in the red, a touch above 99.00 where its 50 DMA lies. Nothing notable scheduled today, though the rest of the week sees weekly ADP jobs on Tuesday, FOMC Minutes + NVIDIA earnings Wednesday, Jobless Claims and PMIs Thursday and UoM on Friday.
  • GBP is one of the best G10 performers, likely a factor of technical factors than political reprieve with newsflow light heading into the likely June 18th by-election. EUR/GBP reversed from 0.8730, and Cable bounced from 1.33. On domestic politics, PM potential candidates Streeting and Burnham were on the wires talking up the importance of rejoining the EU. On the Fiscal/Consumer front, the Times reported Chancellor Reeves has plans to retain the cut on fuel duty from September amid fuel price concerns, while separately drawing up plans for a targeted intervention on energy bills - both potentially factors helping the Pound today. The week ahead sees Jobs on Tuesday, CPI on Wednesday and PSNB on Friday, the former which ING says is expected to be mild because of base effects.
  • JPY is the only G10 currency that trades lower against the buck amid: a) a weak 5yr JGB auction, b) reports that the Japanese government is to start compiling a supplementary budget, c) lack of Iran progress, and d) surging energy prices. (See Fixed Income 09:35 BST for more). USD/JPY +0.1%, up a touch despite earlier gains which were capped by the 159 mark.
Context

Meanwhile, GBP is showing strength due to technical factors and political positioning, suggesting it might continue to outperform ahead of upcoming jobs and CPI data. In contrast, JPY weaknesses stem from concerns over a weak JGB auction and a supplementary budget, highlighting a divergence in sentiment among major currencies.

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