US FX WRAP: Dollar gains as crude rallies amid mixed geopolitical reporting

The Dollar was firmer on Monday amid punchy geopolitical rhetoric, as Tasnim reported Iran has stopped exchanging messages with the US via mediators, and that it is to "completely" block the Bab al-Mandab Strait and Strait of Hormuz. Following this, there was more encouraging US/Iran reporting, such as Trump saying talks with Iran are continuing at a rapid pace and that he had a very productive call with Netanyahu. He said Israel agreed there will be no troops going to Beirut and that Hezbollah agreed that all shooting will stop, implementing a ceasefire between the two. There was no Fed speak on Monday, although Powell spoke overnight, with the tier 1 data release being ISM Mfg. PMI - the headline rose to 54.0 from 52.7, above the expected 53, with prices encouragingly dropping to 82.1 from 84.6, and also beneath the forecasted 85.5. Back to former Fed Chair Powell, he warned that the Fed would lose credibility if any President could dismiss its officials over policy disagreements. Powell, who remains on the Fed’s Board of Governors until January 2028, made his first public remarks since being succeeded by Chair Kevin Warsh, as the Supreme Court deliberates the fate of Fed Governor Lisa Cook, whom President Trump has sought to fire.

G10 FX was predominantly in the red, and weighed on by weakness in the Greenback, with only the Pound managing to eke out marginal gains. For the Pound, earlier strength was attributed to reporting over the weekend, suggesting unofficial UK PM candidate Burnham was eyeing right-leaning Home Secretary Shabana Mahmood as potential Chancellor. Mahmood has previously defended efforts to reduce the amount spent on welfare, and is known for a right-leaning stance on immigration. In terms of European S&P Global Mfg. PMI's, French, German, EU, and UK Final May prints were better than expected.

Swissy and Kiwi were the laggards, with the latter hit as domestic participants are away on holiday, but also hit again on gains in energy and pressure in the metals space.

JPY saw losses with USD/JPY hitting a peak of 159.77 as participants look at the round 160 as a potential level for Yen intervention.