BONDS: 10-year Gilt/Bund Spread Down 8bps From July 23 Closing Level

• After month/quarter end dynamics took the USD index back to 101.05 yesterday, the DXY has been steadily recovering since. While we remain around 40 pips off the recent highs, the bullish trend for the greenback remains firmly intact as we approach comments from Fed Chair Warsh later today, speaking at the ECB’s Forum in Sintra.
• Multiple factors contributed to USDJPY’s extension higher on Tuesday, with the pair then reaching a new high of 162.84 overnight. Primarily, the break above 161.95 and 162.00 took away the notion of any line in the sand for the MoF, then allowing higher core yields, an aggressive steepening of the JGB curve and firmer equities to provide additional bullish impetus. Scope is seen for an extension towards 163.61, the top of a bull channel drawn from Feb 12 low.
• Japan’s top FX official Mimura did not mention the threat of future intervention in his Bloomberg interview. Instead, he used the opportunity to counter the view that the intervention by the MoF in April/May was a failure.
• The general dollar bid and softer equities have weighed on AUD Wednesday, which after a strong bounce yesterday has returned sub-0.6900. Price has traded through a key support marked by the base of a bull channel drawn from Apr ‘25 low - currently at 0.6915. A clear channel breakout would strengthen the bear theme and highlight a stronger reversal. This would open 0.6833, the Mar 30 low and a key support.
• US ADP and ISM Manufacturing PMI highlight the data calendar alongside the busy schedule for central bank speakers. US June employment figures cross on Thursday.

“SENIOR IRANIAN OFFICIAL TO REUTERS: INDIRECT NEGOTIATIONS WITH U.S. THAT STARTED ON TUESDAY NIGHT IN DOHA CONTINUE” RTRS

“SENIOR IRANIAN OFFICIAL TO REUTERS: INDIRECT NEGOTIATIONS WITH U.S. IN DOHA ARE FOCUSED ON RELEASE OF TEHRAN'S FUNDS AND STRAIT OF HORMUZ” RTRS

Progressives scored wins in Colorado’s Democratic midterm primary elections, with democratic socialist Melat Kiros ousting 15-term Representative Diana DeGette (D-CO) in Denver and state AG Phil Weiser defeating moderate Senator Michael Bennet (D-CO) in the gubernatorial primary. Manny Runnel, a progressive state rep, also defeated moderate Shannon Bird in Colorado’s tightest swing district. However, Senator John Hickenlooper (D-CO) held off a progressive challenger in the Senate primary.

• There are concerns amongst the Democratic establishment that the shift to the left, part of a broader debate on the post-Biden direction of the party, could impact Democrats’ chances of flipping the Senate in November, with a recent NYT/Siena College survey in Maine appearing to support Senate Minority Leader Chuck Schumer’s (D-NY) argument that moderate candidates could better appeal to the median voter.
• The Times notes “many voters” said progressive Maine nominee Graham Platner, a political novice facing allegations of personal misconduct, “lacks the background to be an effective senator.”
• The next tests for the left are the Michigan primaries on August 4 and the Wisconsin primaries on August 11, both swing states where left-wing populists are challenging moderates in statewide races. The Michigan Senate primary will be closely followed, as it is one of the “core four” races that Democrats must win to flip the upper chamber.   
• While Democrats are still slightly favoured to sweep Congress, a Democratic House/Republican Senate has firmed in recent weeks, with Republican prospects in the Senate improving, per Polymarket.

Figure 1: Balance of Power: 2026 Midterms

Source: Polymarket