[MARKET ANALYSIS] DXY takes a breather after hitting fresh YTD highs yesterday as oil prices and yields climbed

DXY: Flat

• Trades rangebound after printing fresh YTD highs yesterday as yields climbed for a third consecutive day and Brent returned to above the USD 100/bbl level, with Iran's Supreme leader advocating for the Strait of Hormuz to remain closed. The inflationary concerns spurred a further unwinding of Fed rate cut bets, and money markets are no longer fully pricing in a cut by year-end, while the attention turns to incoming data with the Fed's preferred PCE metric due later.

EUR/USD: Flat

• Languishes around this week's trough after sliding to near the 1.1500 level after recent dollar strength, energy disruption concerns and light EU newsflow.

GBP/USD: +0.1%

• Regains some composure, but with the recovery limited heading into the monthly UK GDP and industrial output data.

USD/JPY: Flat

• Price action is choppy overnight, but with support seen at the 159.00 level and after recently coat-tailing on firmer US yields and higher oil prices.

Antipodeans: AUD/USD +0.1% / NZD/USD Flat

• Conforms to the uneventful price action across the FX space amid a quiet calendar and overall tentative mood

The DXY's pause after reaching year-to-date highs reflects a mixed sentiment in the FX market as rising oil prices and yields heighten inflation concerns, which have led to a decrease in expectations for Fed rate cuts. This interplay is pivotal for assessing the dollar's strength moving forward, particularly with key data like the PCE on the horizon, which may further influence rate expectations and market positioning across currencies, particularly the EUR and GBP as they navigate near recent lows.