US FX WRAP: Dollar sold as Trump postpones Iran attack to benefit of G10s

The Dollar Index was weaker to start the week, to the benefit of all G10 peers as the Middle East dominated the tape, and led the way for sentiment throughout. The most recent, and arguably most important, just came from US President Trump on Truth supported risk-on trade, seeing the Dollar plummet and stocks reverse afternoon losses. Recapping, the President said he has instructed Hegseth to hold off on the Iran attack that was initially planned for tomorrow after Saudi, the UAE and Qatar requested him to do so as serious talks are now taking place. Trump added that he instructed them to be prepared to go forward with a full, large-scale assault of Iran on a moment's notice, in the event an acceptable deal is not reached. Whilst that was the big mover on Monday amongst other geopolitical headlines, it was a day that lacked tier 1 US data or Fed speak. On the latter, Kevin Warsh is to be sworn in as the next Fed Chair on Friday.

Ex-JPY, G10s were firmer vs. the Buck, and benefited from the aforementioned weakness and risk tone, as opposed to anything currency specific. However, for the Pound, focus continues to surround the political picture and PM Starmer’s future. Meanwhile, the potential challenger Andy Burnham fully ruled out changing Chancellor Reeves’ fiscal rules if he becomes PM. Reminder, at the weekend his team had left it open whether he might change them in future, but tonight his spokesperson told Bloomberg he is explicitly ruling out any changes to the existing fiscal rules. Crucially, Burnham is now also ruling out exempting defence spending from the fiscal rules to spend more on the military.

As mentioned, JPY was flat with USD/JPY trading between 158.61-159.08 as participants remain wary of possible intervention. On that, Finance Minister Katayama remarked that they are seeing speculative moves in the financial market and need to closely monitor the financial markets. The Finance Minister gave no comment on whether Japan intervened in the FX market, but added will take appropriate action against Forex volatility.