Dollar Back To Mid July Highs

The USD has continued to strengthen, with the DXY at +0.20% above NY closing levels, putting the index at 107.70, fresh highs back to around mid-July.

• We highlighted earlier that DXY trends this past week have generally been outperforming US yield momentum. However, as the session has progressed we have seen yields moving higher in this space. The US 2yr is up nearly 4bps to 3.24% at the time of writing. The 10yr is +2bps to 2.91%.
• Aggregate US data surprises continue to trend higher, while there is also focus on next week's Jackson Hole Symposium, where Powell will speak on Friday (the 26th of August).
• Japan inflation data came in close to expectations, with a modest upside surprise to core (ex energy) +1.2%, versus +1.1% expected. There was no reaction in JPY though. USD/JPY spiked above 136.00 in early trade and has stayed above this level for the session (last 136.20).
• Some USD strength was attributed to plans for Xi and Putin to attend the G20 meeting in Indonesia, later this year. The meeting could serve to bolster the Sino-Russian power axis, although price action today in terms of higher USD/JPY levels is not consistent with such a backdrop.
• AUD and NZD are both lower, although more so Kiwi, as the trade position remained comfortable in deficit. NZD/USD fell to sub 0.6230 before support kicked in. The AUD/NZD cross has pushed higher to 1.1080, but can't gain a foothold above this level. AUD/USD's dip sub 0.6900 was supported (last at 0.6910).
• Looking ahead, UK and Canadian retail sales data round off the week. There is no US data on Friday which should keep any FedSpeak and geopolitical developments in focus.