[MARKET ANALYSIS] DXY strengthens on higher oil prices, while yuan outperforms on firmer-than-expected trade and inflation data

DXY: +0.2%

• Dollar strengthened amid a higher yield environment and the upside in oil prices, while the overall risk sentiment is mixed overnight as participants digest the recent encouraging data releases from the world's two largest economies, including last Friday's NFP report stateside and China's firmer-than-expected trade and inflation numbers. Furthermore, there were comments from Fed officials in which Governor Waller announced the 12 regional Fed banks agreed to a framework to standardise and centralise some functions, while Goolsbee (2027 voter) said on Friday that inflation is "the topic of the moment", and it would be wrong to only think that rate cuts are before the Fed, while he added they have to pay attention to the inflation rate when price pressures are mounting.

EUR/USD: -0.2%

• Mildly pulled back amid the firmer dollar but with downside stemmed following recent comments from ECB officials, including Lagarde who stated that the ECB is carefully considering its response to the Iran war and the impact on inflation to ensure it doesn’t act too prematurely or too late, while Nagel said on Friday that they will do whatever is needed to contain energy price jumps, and that the ECB is highly alert to increasing inflation risks.

GBP/USD: -0.3%

• Dipped beneath the 1.3600 handle before bouncing off today's worst levels, but with the rebound contained as UK PM Starmer faces increased threats to his leadership following last week's heavy election losses, although he remained defiant and said that he wants to remain in his job for a decade, as well as lead the Labour Party into the next election.

USD/JPY: +0.3%

• Edged back above the 157.00 level amid the firmer buck and with Japan's economy facing headwinds from the higher oil prices.

Antipodeans: AUD/USD -0.2% / NZD/USD -0.3%

• Mildly retreated as most major currencies gave up ground to the firmer buck, and with cyclical currencies not helped by the mixed risk sentiment, although further downside is stemmed alongside outperformance in the yuan after Chinese trade and inflation data topped forecasts.