US FX WRAP: Dollar gains to detriment of G10 peers as Pound and Swissy lag
Newsquawk Staff ·
The dollar and US yields were firmer together, reversing some of the WTD downside seen in response to softer-than-expected CPI & PPI reports. Today, US data showed initial and continuing claims dipping beneath expectations to unalarming levels, while Retail Sales and its core component matched expectations in June. Elsewhere, the focus was on geopolitics as oil prices proved volatile amid fresh threats surrounding the closure of the Bab El Mandeb strait by Yemen's Houthis in the event the US hits the power network. The development leaves tensions even more elevated, particularly after Trump said on Tuesday, "will hit Iran's power plants and bridges next week unless they come to the negotiating table". The geopolitical risk has limited further USD downside, allowing DXY to rebound to 100.77 from WTD lows of 100.37.
G10 FX reversed some WTD strength amid the dollar rebound today, with CHF and GBP the biggest laggards, while CAD was little changed. In the UK, GDP rose 0.1% M/M in May (in line/firmer than exp.), revisions saw April’s data remaining in contractionary territory; little reaction was seen, as focus remains on the political situation, in which confirmation of the next chancellor is awaited. Recent reports point towards Mahmood.
USD was the preferred haven on Thursday, meaning USD/JPY was modestly higher at 162.40. Bloomberg, citing options data, notes sizeable expiries are clustered in the 162-164 area, suggests traders see a move to the 165 handle as providing a possible trigger for the central bank to step in.
KRW outperformed despite USD strength, set for a third consecutive week of gains. Overnight, the BoK raised its 7-day Repo Rate by 25bps to 2.75%, as expected in a unanimous decision, for the first time since January 2023.. The central bank expects the growth rate this year to considerably surpass the May forecast of 2.6%, and will assess the timing of further increases in inflation pressure, the improvement trend in the economy and financial stability.
- [MARKET ANALYSIS] Crude benchmarks edge higher as the geopolitical environment remains tense
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