Asia Summary and Highlights 15 July
U.S. forces hit dozens of Iranian military sites near Strait of Hormuz
Asia Session
It is reported that U.S. forces hit dozens of Iranian military sites near Strait of Hormuz. As per previous commentary, it looks like a full scale escalation (excluding energy infrastructure) rather than tit-for-tat strikes. Such will see near term risk of Strait traffic increasing significantly. AUD/USD is trading 0.15% higher as USD remain soft after CPI. NZD/USD is trading 0.08% higher while USD/CAD slips 0.08% with oil little changed.
USD/JPY continues to consolidate at recent high. The push and pull between rising geopolitical tension and softer than expected CPI seems to have neutralize each other on Wednesday. JGB yields are performing individually across the curve but mostly improving throughout the session. USD/JPY is trading 0.02% lower at 162.20. Else, EUR/USD is up 0.14% and GBP/USD is up 0.09%.
North American session
The USD fell sharply on a much softer than expected June CPI, -0.4% overall and unchanged ex food and energy, though retraced a significant proportion of the losses in subsequent trade. USD/JPY, after slipping to 161.75 from around 162.20 largely erased its losses. AUD/USD and USD/CAD however largely sustained their reactions to the data, if respectively supported by 1.l405 and resisted by 0.70. EUR/USD bounced above 1.1450 from near 1.14 before settling in mid-range.
Fed’s Warsh did not give much away on policy at his testimony but stated the CPI did not mean mission was accomplished on inflation. Trump eased Middle East concerns by backing away from plans to change a 20% toll on the Strait of Hormuz, looking to trade and investment deals with the Gulf states.