US FX WRAP: Dollar rally ends as US yields and oil prices pullback

USD WTD strength saw gains trimmed on Friday as a pullback in short-end and belly yields added pressure. The moves came amid potentially investors stepping in after the monster sell-off this week, considering current levels attractive. Also, allowing for a bid in Treasuries was lower crude prices in response to reports that US-Iran negotiations moved into more technical stages. A senior Iranian official said no nuclear talks with the US until Iran's conditions are met, and it will make no concessions on its nuclear programme. The latter runs contrary to remarks from the Iranian President.

US data showed August Durable Goods, and the ex-aircraft component top expectations, while ex-transport fell short of forecasts. Final UoM revisions saw upticks in Consumer Sentiment, albeit 1yr inflation expectations are elevated from the prior month. Following recent data, the Atlanta Fed GDPnow Q3 estimate was revised lower to 5.0% from 5.1%. US data had a muted reaction on price action, as did Fed speak, which saw Hammack reiterate her hawk stance.

The main driver for downside in DXY was JPY strength amid jawboning from Japanese officials. Koyodo reported that US President Trump raised concerns over a weak Yen with Japan PM Takaichi, who also called it undervalued. Furthermore, Japanese Finance Minister expects excessive Yen selling to be corrected. DXY now trades at 100.98 against earlier 101.35 highs. USD/JPY hit lows of 156.938.

In G10FX, CHF and CAD underperformed their peers, trading little changed vs the buck. GBP, AUD, and EUR benefited from lower energy prices. GBP is looking ahead to the Labour conference next week, for insight from PM Burnham and Chancellor Healey into the Autumn Budget.