US FX WRAP: Dollar gains as Middle-East tensions grow in Iran

The dollar was slightly firmer as mixed developments regarding the Middle-East conflict saw oil prices settle little changed. Early USD weakness on lower oil prices amid optimism over a breakthrough on Hormuz was swiftly undone after the Washington Post reported that a US intelligence assessment said Iran could withstand a US naval blockade of the Strait of Hormuz for 90–120 days, and possibly longer, according to WaPo citing sources. Further upside was seen on WSJ reports that the US is looking to restart Project Freedom to unblock the Strait of Hormuz, and explosions are being heard in parts of Iran. Later, a US official rejected the WSJ report. Elsewhere, US initial claims were little changed W/W, while Challenger Job Cuts accelerated in April as technology companies continued to announce large-scale cuts and are leading all industries in layoff announcements. Friday will be centred on NFP as well as a potential response from Iran. We are also awaiting confirmation on the reason behind several explosives heard, with sources suggesting the UAE targeted an Iranian pier. Others suggest there was an attack by the US military on an Iranian oil tanker in Hormuz. 

EUR, CAD, and NZD were little changed against USD on Thursday, while JPY underperformed. On EUR, the main news came late in the day, after US President Trump said a promise was made that the EU would deliver their side of the deal, and cut its tariffs to zero; however, the EU has until July 4th, or tariffs would immediately jump to higher levels. EUR/USD saw short-lived upside on the news.

JPY was weaker as oil prices climbed off lows, leaving USD/JPY firmer at 157.72 from earlier 156.02 lows.