[MARKET ANALYSIS] USD pressured throughout the morning, benefitting G10s; CHF and Antipodeans outperform

• Continued USD weakness throughout the morning saw DXY fall to a 99.30 trough, its lowest since 5th June, while EUR/USD eclipsed the 1.16 mark, not seen since 17th June. The move was gradual and over the course of roughly an hour, the initial downticks without a driver, but later weakness seen around remarks from the Iranian Foreign Ministry which signalled commitment to the diplomatic process; remarks which also modestly weighed on Brent at the time. Analysts expect the USD weakness to continue, ING suggesting the USD can “probably trade to the soft side all week”, while others highlight the soft July data series; for now, DXY -0.3%, the level to watch below is the 200 DMA just below 99.20.
• Action elsewhere is very quiet, G10s mostly move in tandem with USD weakness.
• GBP/USD +0.3%, off the back of the weaker USD with UK catalysts light, Cable trading just above 1.3560, above all significant DMAs. Over the weekend, FT reported that Jamie Dimon warned the Treasury against raising bank taxes, a report which highlights the proximity of the Autumn budget. GBP is primed for a busy week of data, Tuesday sees Jobs data, Wednesday is inflation, Friday is Retail Sales.
• Low yielders are among the best performers as some likely carry USD positions unwind. USD/CHF -0.6%, testing the 50 DMA, USD/SEK -0.4% ahead of the Riksbank this week. High-beta currencies are also doing well on the back of easing Fed expectations which has helped the risk environment; markets now assigning a 30% probability of tightening in September, last week was c. 50%.

Broad dollar slides without a single identifiable catalyst have historically been the hallmark of a positioning unwind rather than fresh information, and the pattern here fits: low yielders leading the move is the classic signature of funded carry positions being cut, which tends to be self-reinforcing for a session or two before it stalls. The distinction worth drawing is between dollar weakness driven by shifting rate expectations, which shows up in front-end differentials and pulls all of G10 in tandem, and idiosyncratic stories, which do not; a synchronized move with the funding currencies outperforming points to the former. Gradual, hour-long grinds of this kind have tended to respect well-watched technical references, and prior episodes show breaks of long-term moving averages in the dollar index inviting momentum participation, while failures at them have marked short-term lows. The data-heavy UK calendar illustrates the usual asymmetry: a currency riding a soft-dollar wave with domestic releases ahead carries event risk in both directions. What bears watching is whether the repricing of near-term Fed expectations survives the next US activity and inflation prints, since soft-data narratives built over quiet summer sessions have historically been vulnerable to a single firm release.