US FX WRAP: Dollar tracks yields and oil higher

USD was firmer on Thursday, back to tracking US yields and oil higher, as new YTD highs in all durations of notes/bonds issued strong support for the dollar. Oil prices dominated price action across assets, as Houthis' expansion into Yemen and the Red Sea leaves it posing a greater threat towards Saudi vessels in the key waterway. Elsewhere, a mixed PPI places greater significance on Friday's CPI report to dictate the Fed decision in September - Core Y/Y and headline M/M matched exp., core M/M slightly cool, headline Y/Y slightly hot. Initial and continuing claims were little changed W/W, signalling a continuation of the low fire/hire labour market. DXY hit highs of 99.199 before trimming to around 99.057

EUR/USD traded lower on the rally in Brent and TTF futures. As mentioned, broad USD strength and a rise in global yields weighed on G10FX. Meanwhile, the ECB's decision to hike rates by 25bps was met with a limited reaction, given the decision was expected. The statement didn't provide any clear forward guidance, but on inflation, it stated that it will remain well above target for an extended period. In the press conference, Lagarde stated that there was no debate of any kind on the future rate path, and that the decision to hike was unanimous. Overall, the ECB announcement and following commentary were as expected, and the downside seen in EUR/USD throughout the event was a result of USD strength, as the pair fell to a 1.1592 low before rebounding to around 1.1610.

USD/NOK wiped out the last two days of losses, helped by said USD strength and a softer-than-expected Norway inflation report. Core inflation M/M fell 0.5% (exp. -0.4%), with the headline figure Y/Y in line with expectations.