US FX WRAP: Dollar benefits from equity jitters and risk-off; JPY haven status leaves it outperforming G10 peers
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US FX WRAP: Dollar benefits from equity jitters and risk-off; JPY haven status leaves it outperforming G10 peers
TREASURY WRAP: T-NOTE FUTURES (U6) SETTLE 20 TICKS HIGHER AT 110-00
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USD was broadly higher as risk-taking remained subdued. Equity volatility continues to support the dollar, with choppy trade continuing ahead of Micron earnings after the close. Domestic updates were light with New Home Sales dropping 7.3% in May, despite expectations for an uptick. Geopolitical developments were light, with emphasis on the pace of Hormuz oil flows to pre-war levels. Crude prices tumbled to their lowest levels since the war began, allowing for US yields to retreat lower; however, the jittery mood amongst global equities kept the greenback bid. DXY hit highs of 101.80 before slipping to 101.60.
Barclays FX month- & quarter-end rebalancing: overall, USD neutral against all majors. Month-end: Moderate USD buying against most, with a weak sign on USD/JPY. Quarter-end: Strong USD selling against all majors.
In Europe, the German Ifo Business Climate showed improvement to 85.6 from 85.0, helped by firms' expectations being less sceptical, perceiving the environment as less uncertain, and viewing the current business situation. At the ECB, Schnabel views more hiking as needed to get to 2% inflation, arguing rates are not yet restrictive and that the ceasefire is not a signal for the ECB to ease vigilance. EUR/USD now trades back at June 2025 levels around 1.1355.
Aussie inflation overnight was mixed. CPI in May cooled below expectations, and the trimmed mean firmed in line with most forecasts to 0.4% M/M and 3.6% Y/Y. Housing was the main inflation pressure point, and Westpac analysis notes price pressures are broadening, particularly within services. AUD/USD is now in a third consecutive day of losses, bringing the April 2026 low of 0.6833 into view (currently at 0.6890).
JPY and CAD were the relative G10 outperformers, trading modestly lower against the buck. JPY haven's characteristic added support. In Canada, BoC Minutes showed the governing council at the June meeting (held as expected) agreed that the economy was weak, operating in excess supply, and there was slack in the labour market, but the economy was not in recession; no reaction was seen in USD/CAD.
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