Dollar Steadies as Hormuz Risk Meets CPI Day and Warsh's First Testimony

The Dollar Index sits at 101.04, unchanged on the broker's snapshot as Sydney's Tuesday morning opens; the real story sits in Monday's completed New York session, where safe-haven dollar demand built on fresh US-Iran escalation. US Treasury yields backed up across the curve: the 10-year added 4.5bp to 4.614%, the 30-year 3.1bp to 5.102%, and the 5-year 5.7bp to 4.365% -- a +1.32% relative move that stands out as one of the day's more significant repricings. The Nasdaq Composite fell 1.21% while the VIX held at 17.58. With Fed Chair Warsh's first testimony and US CPI both due today, the dollar's bid looks tied to Fed hike-odds repricing as much as to Middle East risk flows.

The Fed funds target remains 3.50-3.75%, and the live policy question is whether the Fed hikes further, not whether it cuts. The Fed's Waller said "Now is not the time to use forward guidance," and warned that "If there is another hot reading on core inflation this week, the Fed will need to consider raising rates" -- a direct line to today's 22:30 Core CPI (forecast 0.2% m/m, 2.8% y/y) and headline CPI (forecast -0.1% m/m, 3.8% y/y). Headlines note US 2-year yields touched their highest since February 2025. Fed Chair Warsh testifies to the House Financial Services Committee roughly 90 minutes after CPI, with FOMC members Barr, Goolsbee and Bowman also speaking today.

EUR/USD: 1.1386, having slipped toward 1.1400 Monday as US-Iran escalation revived dollar safe-haven demand; the ECB's June 11 hike to a 2.25% deposit rate hasn't offset the pressure, with the next decision not until July 23. GBP/USD: 1.3358, holding near three-week highs after touching 1.343 Monday, supported by BoE rate-hike bets even as oil-driven Middle East crosscurrents kept the pair little changed on the day; Governor Bailey speaks today. USD/JPY: 162.46, up roughly 0.44% Monday to a 162.41 close as fading verbal-intervention impact and oil-driven dollar demand pushed the pair back above 162. USD/CAD: 1.4147, having risen toward 1.4165 in Asian trade Monday before settling near 1.4160, reversing a four-session CAD-strengthening run despite firmer oil.

USD/CAD trades at 1.4147, flat on the snapshot but the real move came Monday: the pair rose toward 1.4165 in Asian trade before settling near 1.4160 in European hours, reversing a four-session run of CAD strength. The driver was safe-haven US dollar demand after fresh US strikes on Iran targeting its capacity to interfere with Hormuz shipping, followed by IRGC retaliatory strikes on US allies including Kuwait. Oil itself moved in CAD's favour -- WTI is quoted at 77.58 after Iran threatened to close the Strait of Hormuz -- but safe-haven dollar flows dominated the pair anyway. This followed a Friday pullback after Canada added 18,200 jobs in June, roughly double expectations, and the jobless rate fell to 6.5%. The Bank of Canada held its policy rate at 2.25% on June 10, citing weak activity and elevated oil prices; no Canadian data is due today, and the next BoC decision falls Wednesday.

US Core CPI m/m and y/y (forecast 0.2% and 2.8%) and headline CPI m/m and y/y (forecast -0.1% and 3.8%) are due at 22:30, followed roughly 90 minutes later by Fed Chair Warsh's first semiannual testimony. Also on the docket: the NFIB Small Business Index (20:00, forecast 95.8), ADP Weekly Employment Change (22:15), and TIC Long-Term Purchases (06:00, forecast 128.5B). FOMC members Barr, Goolsbee and Bowman speak between 02:40 and 04:55. Bank of England Governor Bailey appears twice on the calendar (18:45 and 06:00). China releases a full data slate at 12:00 -- GDP q/y (forecast 4.5%), retail sales, industrial production and the unemployment rate -- alongside M2 money supply and new loans at 18:03.