FX Update: The dollar and yen traded moderately lower
FX Update: The dollar and yen traded moderately lower during the Tokyo session, ahead of the London interbank open. USD-JPY has oscillated in the lower 110.0s, holding in a consolidation below the 13-week high that was posted yesterday at 110.45. The intraday low so far is 110.07. Sterling rallied on reports that the UK government will agree to staying in the EU's customs union, which is a last resort "backstop" plan to avoid the imposition of a hard Irish border, while above-forecast Australian employment data gave the Australian dollar a lift. The euro managed to recover some of ground lost yesterday, which was seen amid unsettling political news in Italy. EUR-USD yesterday clocked a low of 1.1763, a five-month nadir, in what is now the fifth consecutive weekly decline the pairing has seen, before rebounding to a 1.1817 today, and then turning lower once again, back under 1.1800. Geopolitical developments (primarily relating to Iran and North Korea), along with the political evolutions in Italy, and incoming data will remain determinants of market direction. Our core view is that the dollar will remain a trend-following, buy-on-dips trade, with the Fed's tightening path to remain some way ahead of other major central banks.