[MARKET ANALYSIS] DXY firmer on higher energy/yields and a resurgence of EUR pressure

USD is stronger against most G10 peers this morning, with strength facilitated by higher energy prices and elevated yields. JPY holds towards the top of the pile, whilst the EUR underperforms. DXY is firmer this morning and trades within a 101.88 to 102.32 range; strength has been facilitated by higher energy prices and continued pressure in the EUR (more below). US-specific news flow has been lacking, but attention later will be on the FOMC Minutes. It will be eyed to see how members view the future path of tightening. Elsewhere, geopolitical updates remain light. The usual rhetoric from Trump on continued oil flows through the Strait, and ongoing strikes between Saudi Arabia and the Houthis remain the key drivers. EUR is once again on the backfoot this morning, after finding some reprieve in the prior session. To remind, French fiscal woes appeared to ease as Le Pen provided markets with a friendly alternative budget, but failed at expressing how she would achieve it. Therefore, it was mentioned in yesterday’s FX “Market Analysis” that the EUR pressure would likely return – and it has alongside a bout of USD strength. French fiscal concerns have re-emerged; for reference, OATs are underperforming today, and the OAT-Bund spread has widened back towards 138bps (vs yesterday’s close at 130bps).   JPY outperforms vs peers, but still resides flat/slightly lower. Strength which comes despite widening yield differentials, and after Yomiuri reported that Japan is considering a second supplementary budget. Sticking with the fiscal side of things, PM Takaichi said that she would review policies and spending amidst elevated yields – which could help ease debt concerns within the region. Nonetheless, JGBs remained fairly unchanged overnight, which means that the JPY action may be subject to other factors. That could potentially be the region’s Labour Cash Earnings data, which showed a deceleration but still printed firmer-than-expected. Overall, a report which keeps BoJ hikes on the table by year-end.