US FX WRAP: Dollar sees losses as high-beta FX outperforms

USD was pressured as the bid in global bonds and risk-on across equities resulted in greater risk-appetite for other major currencies. As such, haven alternatives, CHF and JPY also lagged, with marginal weakness vs USD. Behind the downside in global yields was in initially in part due to retreating energy prices as the IEA's planned strategic release is having its desired effect and Saudi's East-West pipeline is reportedly still flowing, and also in part to French fiscal concerns taking a step back, although French yields remain volatile. The data calendar was quiet, and with the US admin still quiet on the Iran topic, Fed speak was the next topic to watch. Today, Daly, a 2027 voter, expressed concerns that AI, tariffs, and higher energy costs could keep inflation stickier than previously thought, requiring more tightening. Meanwhile, the 2028 voter, Schmid, sees a way to go to combat inflation, arguing work still to be done on short-term rates despite higher long-term yields. DXY now trades around lows of 101.75. NZD, GBP, CAD, and AUD led G10 gains. However, for GBP, Morgan Stanley recommends shorting GBP/USD ahead of the UK Budget. "We recommend short GBP/USD at 1.3220 with a target of 1.2850 and stop of 1.3350". Back to EUR, French debt was already bid heading into RN leader Le Pen’s announcement of an alternative budget, which was seen as optimistic. That said, calls for reigning in public spending and some openness to a wealth tax were accompanied by a lack of funding details. EUR/USD rose to a peak of 1.12768 before trimming to ~1.1261.