US FX WRAP: Dollar slips as drop in oil offsets risk-averse tone
Informed source told Al Arabiya says Iran informed the mediators that it did not intentionally shoot down the American helicopter; Iran confirmed to the mediators its commitment to continuing on the diplomatic path
TREASURY WRAP: T-NOTE FUTURES (U6) SETTLE 6 TICKS HIGHER AT 109-07
US FX WRAP: Dollar slips as drop in oil offsets risk-averse tone
An Iranian informed source denied Sky News' claim about Iran's new offer to the US, Fars reports
US judge reportedly grants prelim approval for USD 38bln Swipe fee settlement for Visa (V), Mastercard (MA) and merchants
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The dollar was overall slightly weaker on Tuesday, likely on the inflation angle, with yields slightly lower amid another slump in oil prices as markets welcome the latest developments. Reports noted a draft agreement has been sent to the US side for review, with other reporting noting that all parties will reach an MOU this week. However, following US President Trump saying he would respond to the Iranian attack on a US helicopter, the Dollar saw strength, and US equities extended even further on their losses to intra-day troughs. Away from the Middle East, the NFIB Business Optimism Index unexpectedly dropped to 95.3 (exp. 96.0, prev. 95.9). Interestingly, a net 36% of small business owners raised average selling prices, the highest reading since March 2023, and a net 34% plan to increase prices, the highest reading since July 2022. At Citi, the Global FX strategy recommends shorts where the economy was already weak, a central bank that is unlikely to deliver hawkish market pricing, and terms of trade negative to the conflict; said SEK and NZD continue to flag as vulnerable. Today, DXY hit lows of 99.679 before paring to ~99.912, still below the high of 100.077.
NZD saw strength, capped by the jittery mood across markets, with equities once again facing a wave of pressure, albeit easing into the close. NZD/USD held onto gains while AUD/USD traded in the red at ~ 0.7030, with the Aussie hit by the broader risk off sentiment and losses in US equities. Overnight updates included strong trade data out of China (imports & exports beat) and Australia's NAB business confidence showed some improvement in April from May, though it remained negative amid persistent cost pressures and a weakening domestic backdrop.
USD/CAD is set for a fifth straight day of gains ahead of the BoC rate decision, as lower oil prices act as a headwind on GDP growth from energy exports. The BoC is widely expected to leave its policy rate unchanged at 2.25% for a fifth consecutive meeting as it balances trade uncertainty against lingering inflation risks. Click here for the full Newsquawk Preview.
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