US FX WRAP: Dollar edges slightly higher as 2026 rate hike expectations little changed amid oil slump

DXY was slightly bid, with strength against major peers offsetting continued weakness against JPY. Despite the drop in oil prices, easing geopolitical risk, and a risk-on trade in equities, the dollar remained bid as the US 2yr yield was relatively little changed compared with the decline in oil prices. Elsewhere, the ISM Manufacturing PMI beat in July, driven by increases in production and new order indices. Later, the Atlanta Fed's GDP now Q3 estimate was revised up to 6.2% from 5.0%.JPY strength continued to start the week. USD/JPY made a new low today of 155.226 since the latest round of intervention began. Overnight USD/JPY downside coincided with remarks from top FX diplomat Mimura. He noted "they will not hesitate to conduct further joint intervention" and "will respond to FX in coordination with monetary policy". JPMorgan sees little chance coordinated intervention would drive a sustained rally that pushes the pair below 150.CHF and NOK were the worst performers, the latter weighed by lower oil prices. EUR/USD was modestly firmer, with little reaction to the final EZ PMIs, which were stale in a fluid environment. The Eurozone calendar is quiet for the week ahead. ING doubts any US selling of EUR/JPY will have any lasting impact on the euro.