US FX WRAP: Dollar gains as Pound hit by UK political turmoil

The Dollar was firmer, to the detriment of G10 FX peers, following a constructive Trump/Xi summit, whereby the overall tone was positive, as well nothing too incrementally new on Iran. On that footing, reports suggested Washington informed Tel Aviv of the possibility that Trump might order strikes inside Iran, and echoed earlier reports from Axios which reported that Trump's team is now discussing options for military escalation to break the deadlock. However, no one expects any dramatic action until Trump returns from China. Regarding data, initial jobless claims rose, but still indicating a stable-to-improving job market, while import/export prices jumped, showing more signs energy costs are feeding through to other parts of the economy. Retail sales headline M/M was in line, although Oxford Economics highlights that the details were stronger and upward revisions to past months mean real consumer spending is now tracking close to 2% annualized in H1, which is unspectacular, but solid.As mentioned, G10 FX was lower across the board vs. the Buck, with the Pound the clear laggard and weighed on by UK political turmoil surrounding PM Starmer. The main point today was the potential leadership challenger, Streeting, resigning from his post as Health Secretary. If Streeting does launch a contest, PM Starmer has made clear he will challenge it. In addition, Andy Burnham confirmed he'll try to run for Parliament after Labour MP Simons said he'll resign to make way for him, and BBC understands Starmer will not seek to block Burnham from becoming the Labour candidate in Makerfield. Elsewhere in the UK, and despite being overlooked, there was a stellar UK GDP report.All others saw similar weakness, although USD/JPY noticed a sharp drop from 158.15 to 157.25 just after the US cash open, which swiftly reversed, as some touted potential intervention or rate check. Overnight, the Yen saw strength amid hawkish remarks from BoJ's Masu, who said the central bank needed to raise rates "at the earliest stage possible". Masu, at the last BoJ confab, was not one of the three hawkish dissenters, meaning the vote split could theoretically be 5-4 should former dissenters maintain their votes.