US FX WRAP: Dollar little changed ahead of CPI

USD was little changed on Tuesday as markets await US CPI & PPI over the next couple of days. Key data was absent, leaving the focus on Fed speak and geopolitics. The former continued to show that combating inflation is the main Fed priority; meanwhile, optimism over a reopening of the Strait of Hormuz continues to fade as fresh attacks are seen on ships in both key waterways in the region. Iran maintains that its demands must be met for the Strait to be reopened, posing a greater challenge for the US this time to find a resolution when compared to the commitments needed for the brief reopening seen in June. However, given the increasing correlation between the dollar and short-term Treasury yields, CPI and PPI will hold great influence over USD moves this week. AUD was slightly firmer vs the buck, helped by a hawkish tilt from the RBA Governor. The central bank kept rates unchanged at 4.35%, as expected. Initial AUD weakness was seen before reversing after Governor Bullock noted they will raise rates if needed and that only a hike or hold was discussed at the meeting. The board judged policy to be somewhat restrictive while inflation remains too high. AUD/USD hit lows of 0.7039 before recovering to 0.7059. Aside from USD and AUD, currency-specific newsflow was quiet. CAD was slightly firmer, supported by higher oil prices; meanwhile, CHF was slightly weaker. Ahead, the calendar is to remain light; UK GDP due on Thursday and EZ GDP 2nd Est on Friday.