USD Index Near Week Highs, NZD/USD Falters As NZ-US 2yr Spread Breaks Sub 0bps

The USD index has mostly been supported in the first part of Friday trade, although overall moves have been fairly modest. The index, above 1254, sits close to weekly highs (although is still sub pre US CPI levels from the prior week). NZD/USD has been the weakest performer, off around 0.3%.

• US front end yields have ticked higher today, last near 4.49% for the US 2yr Tsy. This has provided some support for the USD. The Fed's Daly spoke earlier, she acknowledged the improvement in inflation, but that we still have a way to go. Her comments were largely in line with other Fed speakers, there was no reaction from the market.
• US equity futures are modestly higher, but the regional backdrop has been softer, with tech related indices underperforming. Headlines are coming out around China's Third Plenum, with focus on boosting domestic demand, but details are light at this stage.
• NZD/USD last tracks sub 0.6030. the NZ-US 2yr swap spread is now sub 0bps, fresh multi year lows. The NZ 2yr swap has maintained a fairly step downtrend, last sub 4.23%. The earlier bounce in the week due to stickier domestic inflation pressures proved to be fleeting. At the margins, NZD/USD is the worst performer in the G10 FX space this past week (down nearly 1.5%).
• Such trends have also aided a further move higher in the AUD/NZD cross, which is up above 1.1100 although still sub recent highs. AUD/USD has seen some support sub 0.6700.
• USD/JPY dipped sub 157.10 in early trade but had no follow through. We last track near 157.45, little changed for the session. June National CPI was a touch below expectations, not adding anything to the June rate hike case. 76% of economists surveyed by RTRS expects a steady rate hand at the meeting.
• Looking ahead, we have UK retail sales, followed by more Fed speak later on.