US FX WRAP: Dollar gains amid oil rise with geopolitical progress absent

DXY was marginally firmer as high-beta FX took a step back amid the continued rise in energy prices. Geopolitical updates pointed towards US President Trump being unlikely to accept the latest Iran plan, given its delay on nuclear issues. CNN reports that Iran is expected to submit a revised peace proposal soon in the next few days to end the war. Elsewhere, Fed speakers remain in blackout ahead of the FOMC meeting on Wednesday. The Conference Board's Consumer Confidence reading rose in April, with consumers' outlook for their income prospects becoming slightly more optimistic and their views on the labour market showing moderate improvement. The Fed are expected to hold rates at tomorrow's meeting (click here for full preview) with volatility after the close expected given 4 of the Mag7 (MSFT, AMZN, META, GOOGL) are to report earnings. DXY hit highs of 98.87 before retreating to ~98.64.

G10FX performance vs USD saw CHF, CAD and NZD underperform. AUD, EUR, and JPY saw relative outperformance, trading flat/slightly weaker at pixel time. Newsflow in the space was centred around the JPY following the BoJ maintaining its short-term interest rate at 0.75% as expected. The decision was met with 3 hawkish dissenters calling for a 25bps hike, citing upward risks to prices, up from 1 seen at the last meeting (Bloomberg sources last week pointed towards "some" dissenting). A stronger day for JPY limited by Governor Ueda expressing uncertainty over the Middle East and continuing to abstain from giving guidance for a hike at the June meeting. USD/JPY hit lows of 158.96 in the aftermath of the decision, before trimming shortly after to around 159.60.

USD/CAD erased Monday's losses, trading around the 1.3692 highs. On Wednesday, the BoC is expected to keep rates at 2.25%, giving time to further assess the economic impacts from the Middle-East conflict. The MPR will likely incorporate upside revisions to inflation forecasts and downward revisions to growth.