EUROPEAN FX UPDATE: A choppy start to the week with USD failing to bounce back from last week's selling

USD: DXY -0.1%; 103.78

• DXY commenced the session on the front foot in what appeared to be an attempt to atone from recent losses that saw the index dragged lower from a 107.56 opening price last week to a YTD trough on Friday @ 103.45. The main catalysts for the downside in USD has been via a combination of EUR strength and a recent run of soft US data. For the US, a lot focus remains on the trade front with President Trump on Friday (regarding Canada) stating that he may do reciprocal tariffs as early as Friday or Monday, while he added the EU has been a terrible abuser of tariffs. On Wednesday focus will return to the inflation front with CPI due for release; M/M is expected at 0.3% on a headline and core basis. Other notable releases this week include JOLTS on Tuesday, PPI on Thursday and UoM on Friday.

EUR: EUR/USD +0.1%; 1.0838

• Marginally firmer vs. the USD in what has been a choppy start to trade whereby EUR sold off as equities were dragged lower before reversing course. Last week was a monumental one for EUR with EUR/USD rallying from 1.0388 seen at the start of the week to a YTD peak @ 1.0888 on Friday. A bulk of the heavy lifting was provided by the stimulus announcement from Germany. On which, leaders of Germany’s CDU/CSU and SPD said they have completed preliminary talks on forming a coalition government. For now, ECB policymakers are providing little insight into how this and recent announcements by the European Commission will play into its thinking. Markets are currently leaning towards a pause in April with the next 25bps cut not priced until June.


• EUR/USD opex: 1.0750 (651mln), 1.0815-25 (1.3bln), 1.0830-35 (391mln), 1.0850-60 (897mln), 1.0875-80 (1bln), 1.0900-10 (909mln), 1.0925 (935mln)

JPY: USD/JPY -0.5%; 147.30

• JPY is the best performer across the majors on account of the selling seen across global equity markets in early European trade. From a domestic perspective, lower-than-forecast growth in Labour Cash Earnings had little material impact on the JPY, with greater attention on global risk dynamics. USD/JPY has delved as low as 147.20 but is yet to test Friday's YTD trough @ 146.93. Markets fully price the next 25bps BoJ hike in September with a total of 35bps of hikes seen by year-end.

GBP: GBP/USD -0.1%; 1.2902

• GBP softer vs. the USD and at the bottom of the G10 leaderboard after a solid showing for Cable last week which saw the pair rally from a 1.2577 opening level last Monday to a YTD peak @ 1.2944. GBP/USD moved lower in early European trade as equities began to tumble. Fresh fundamental drivers for the UK were lacking last week and this could remain the case until Friday which sees the release of monthly GDP metrics. Albeit, focus remains more on the inflation/fiscal front; Spring statement due on March 26th. As it stands, markets price a total of 56bps of loosening this year.

Antipodeans: AUD/USD +0.3%; 0.6325. NZD/USD +0.6%; 0.5737

• Both remain afloat but with the upside capped amid the soft risk appetite and weakness in the yuan following deflationary Chinese data; CPI slipped into negative territory for the first time in over a year. For now, AUD/USD is lingering just above the 0.63 mark and is caged within Friday's 0.6281-0.6337 range. NZD/USD has gained a firmer footing on a 0.57 handle and sits towards the top end of Friday's 0.5692-0.5741.

NOK: EUR/NOK -0.9%; 11.6514

• NOK higher in the aftermath of hotter-than-expected Norwegian inflation data. EUR/NOK fell from 11.7463 to a current session trough @ 11.6410; crossed below the 50 and 200DMAs in the process. Next target comes via the 28th Feb low @ 11.6353. Nordea writes "this inflation figure was so much higher than anticipated that Norges Bank need to think twice about cutting rates at all this year. The March cut is definitely off."

10 Mar 2025 - 09:55- ForexData- Source: Newsquawk