EUROPEAN FX UPDATE: Antipodeans hit on risk, GBP slipped post-Reeves, DXY briefly returned to a 100 handle

USD: DXY U/C; 99.90

• DXY is net steady with the USD showing a divergent performance vs. peers; stronger vs. risk-sensitive currencies, weaker vs. JPY. The DXY briefly made its way above the 100 mark overnight (and this morning) in a continuation of the move seen last week amid the thawing in US-China relations and the hawkish FOMC release. Recent commentary (with the exception of Miran) has largely echoed the stance taken by Powell, with the likes of Cook noting that risks to both sides of the mandate are elevated and Daly underscoring the need to keep policy modestly restrictive. The level of caution on the FOMC is largely in part due to the lack of visibility on the US economy amid the government shutdown. Today's docket will provide little in the way of additional clues. However, tomorrow markets will be presented by the latest ADP employment change and ISM services print. Note, tomorrow will see the commencement of the hearing on the legality of US President Trump's Reciprocal Tariff Policy. After a venture above the 100 mark, DXY has since moved back to flat levels around the 99.90 mark.

EUR: EUR/USD -0.1%; 1.1505

• EUR softer vs. the USD with the Eurozone macro narrative once again unchanged after last week's neutral ECB policy announcement. Policymakers continue to reiterate that rates are in a "good place" and stress no urgency to lower rates further. The next potential inflection point will likely be the December ECB meeting with source reporting suggesting that there will likely be a "showdown" on the next steps for the Bank when the next round of staff projections are unveiled. Insight into the skew of these projections is not something that is going to be gleaned in the near-term. As such, USD remains in the driving seat for the pair. Within the Eurozone, attention remains on French politics with the Socialist Party giving the government additional time to come up with a budget it deems acceptable. EUR/USD briefly made its way onto a 1.14 handle with a session low @ 1.1499. If EUR/USD slips back below the 1.15 mark, there is clean air until 1.14.

JPY: USD/JPY -0.6%; 153.36

• JPY is the best performer across the majors as Japanese investors return from the long weekend. The bid in the JPY is being driven by a combination of the risk-aversion in the market triggered by selling in global equities and ongoing jawboning from Japanese officials with Finance Minister cautioning against one-sided rapid moves and noting that she is closely watching FX moves with a high sense of urgency. One way to engineer a firmer JPY would be for the BoJ to recommence its rate hike cycle. However, markets are unconvinced that they will follow suit at this stage with just a 27% chance of a December hike currently priced. USD/JPY hit a new multi-month high overnight @ 154.48 before slipping onto a 153 handle and making a current session low @ 153.34.

GBP: GBP/USD -0.5%; 1.3070

• GBP is on the backfoot vs. the USD and EUR with attention in the UK fixated on the fiscal backdrop following a pre-budget press conference by UK Chancellor Reeves. For weeks, speculation has mounted over how Reeves intends to fill her circa GBP 25-30bln blackhole in her budget with press reports suggesting that some combination of tax increases and spending cuts will be required. Politically for Reeves, the issue is that in her election manifesto she vowed to "not increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT”. The mood music in recent weeks has suggested that it is inevitable this pledge will need to be broken. As such, Reeves used today as an opportunity to pitch roll such a decision. That being said, Reeves stopped shy of confirming that the manifesto will be broken and refrained from unveiling specific policy pledges. As such, other than an attempt to reassure markets that she will not breach her fiscal rules, the speech has offered markets little new to go on other than the upcoming fiscal event will likely be one that constrains growth. Within her comments, Reeves noted that the high level of interest rates in the UK are a constraint. However, this will have little bearing on the outcome of this week's BoE rate decision with policy settings set to be left unchanged. Albeit, likely subject to a split vote. The negativity surrounding Reeves remarks has weighed on the GBP with Cable back below the 1.31 mark and at its lowest level since mid-April with a current session trough @ 1.3060. Elsewhere, EUR/GBP has reclaimed 0.88 to the upside.

Antipodeans: AUD/USD -0.6%; 0.6498. NZD/USD -0.7%; 0.5665

• Both are weaker vs. the USD primarily on account of the broad risk-aversion triggered by selling in global equity markets. AUD has also digested the latest RBA policy announcement, which was overall leaned hawkishly. As expected, the RBA opted to keep rates unchanged on hold following last week's hotter-than-expected outturn for Q3 inflation. Within the release, the RBA noted that some of the factors driving the upside were deemed to be temporary. However, markets have focused on the RBA's forecast, which sees just one cut in 2026 vs. the two seen in August. Additionally, the RBA sharply raised forecasts for core inflation out to the second quarter of 2026. Nonetheless, the aforementioned risk-averse moves have seen AUD slip onto a 0.64 handle with a current session low @ 0.6493. Next downside target comes via the 24th October low @ 0.6492. Ahead of overnight NZ jobs data, NZD/USD has hit its lowest level since April 10th with a current session trough @ 0.5661.

04 Nov 2025 - 10:15- ForexEU Research- Source: Newsquawk