US FX WRAP: Dollar little changed on a series of gepolitical updates sending mixed signals

DXY was little changed as geopolitical reporting was rampant, sending mixed signals on the progress of talks. The main move in FX was USD weakness on reports that a final draft of the US-Iran agreement has been reached with the mediation of Pakistan. That said, the moves were offset by other reports that the Pakistani army chief will not travel to Tehran tonight, a prospect, if realised, would diminish the chances of an imminent agreement being announced. Conflicting reports were seen on Iran's stance on enriched uranium being transferred out of the country. Ultimately, events over the day were taken as a positive with crude settling ~USD 2/bbl lower. USD strength was initially present on the Reuters report that Iranian Supreme Leader Khamenei ordered enriched uranium to stay in Iran; however, as oil faded due to claims of a US-Iran agreement, the dollar joined in the downside. In other news, initial and continuing claims were little changed from the prior week, Philly Fed Mfg showed an unexpected negative reading, and S&P Flash PMIs were mixed (mfg beat, svs miss); little reaction was seen to any of the data. DXY traded between 99.06-99.52

EUR was modestly weaker after dismal French PMIs. EUR/USD saw a move c.24 pips lower on the French figure, which marked the steepest contraction since late 2020, though pared some downside as German/EZ figures were not as bad as feared according to the indications from France. EUR/USD now trades around 1.1620, well off the 1.1576 lows, supported by USD weakness on said themes. ING earlier wrote, “The pair likely requires a persistent stream of positive Middle East headlines to stay supported”.

AUD/USD traded flat with upside limited after soft PMI and Labour market data. Employment showed a surprise contraction on the headline, and an uptick in the Unemployment Rate. In response, NAB later announced that it pushed back its next RBA rate hike forecast to August from June.