EUROPEAN FX UPDATE: Choppy trade in the USD as markets await Fed's Cook's hearing and before that, PCE

USD: DXY U/C; 97878

• DXY is choppy after softening yesterday alongside a lower yield environment and despite the several encouraging data releases stateside, including the upward revisions to headline US GDP and GDP Sales for Q2, while Core PCE Prices were revised lower and jobless claims fell.


• There were comments from Fed's Waller last night who stuck to a dovish script as he noted the time has come to move policy to a more neutral stance and he would support a 25bps cut at the September meeting, as well as anticipates additional rate cuts over the next 3–6 months.


• The dollar sees tentativeness ahead of Fed Governor Cook's hearing (10:00EDT/15:00BST) and with Fed's preferred monthly PCE data due later - headline PCE is expected to rise by +0.2% M/M (prev. +0.3%), with the annual rate unchanged at 2.6% Y/Y; the core PCE rate is seen rising +0.3% M/M (prev. 0.3%), while the annual rate of core PCE is seen rising to 2.9% Y/Y from 2.8%. In his remarks last week, Fed Chair Powell said that the latest data indicate 12-month PCE rose to 2.6% in July, while the core rate will rise to 2.9% Y/Y. (Full Preview available on the Newsquawk headline feed).


• DXY currently resides in a narrow 97.85-98.04 parameter at the time of writing, with the 50 DMA seen at 95.58.

EUR: EUR/USD -0.1%; 1.1670

• EUR/USD gradually eased back from Thursday's peak, with the single currency thwarted by resistance near the 1.1700 level.


• In terms of data this morning, German retail sales fell by -1.5% M/M in July (exp. -0.4%), which saw a tick higher in Bund futures, while German import prices fell by -0.4% M/M in July (exp. -0.3%). French prelim HICP printed 0.8% Y/Y in August (exp. 0.9%, prev. 0.9%), resulting in fleeting EUR downside; Spain's HICP printed 2.7% Y/Y (exp. 2.7%, prev. 2.7%), but notable that the Core Spanish CPI saw an uptick to 2.4% from 2.3% - little EUR movement. Back to Germany, state CPIs printed in line with what is expected from the mainland metric at 13:00 BST - an uptick in the Y/Y and a downtick in the M/M. Furthermore, ECB SCE saw consumers keep inflation expectations stable.


• ECB pricing, despite all the above, remains very little changed, with a 97% chance of a hold still priced in for September.


• Elsewhere, in geopolitics, German Chancellor Merz said there will be no meeting between Russian President Putin and Ukrainian President Zelensky, likely capping further upside for the EUR for now.


• EUR/USD resides in 1.1657-1.1682 range at the time of writing after briefly dipping under its 50 DMA 1.1661.

JPY: USD/JPY +0.1%; 146.99

• Lacks direction as participants digested several data releases from Japan, which were ultimately mixed, whilst macro newsflow remained light in the European morning.


• The mixed bag of data releases included Tokyo CPI, which mostly matched estimates, and the Unemployment Rate surprisingly declined, although Industrial Production and Retail Sales disappointed.


• USD/JPY trades on either side of its 50 DMA (146.99) in a current 146.77-147.19 range.

GBP: GBP/USD -0.3%; 1.3474

• GBP/USD fell further below the 1.3500 focal point, with Sterling lagging despite light pertinent catalysts for the UK, although there were reports yesterday that PM Starmer plans a cabinet shake-up and is expected to appoint a new economic advisor ahead of the Autumn Budget. Some focus also on the UK think tank IPPR (widely described as left-wing), which recommended that Chancellor Rachel Reeves impose a windfall tax on commercial banks to reclaim profits earned from taxpayer-backed deposits at the Bank of England. A senior banker, speaking with the FT, said, “Politically it is an easy target… No one likes banks, they are seen as a whipping boy for the government”.


• Aside from that, data and speakers remain on the quieter side for GBP, with GBP/USD currently in a 1.3470-1.3511 range, with the 21 DMA at 1.3451 and 100 DMA at 1.3445.

Antipodeans: AUD/USD U/C 0.6531. NZD/USD +0.1%; 0.5891

• Antipodeans remained afloat after recent advances, and as the PBoC continued to strengthen the yuan reference rate setting.


• Little new to mention for the antipodeans with the high-beta FX largely tentative ahead of risk events.

29 Aug 2025 - 10:10- ForexData- Source: Newsquawk