EUROPEAN FX UPDATE: Choppy trade in the USD as traders zero in on the FOMC

USD: DXY -0.1%; 97.536

• Choppy trade with a negative bias and within a tight range, with weekend macro newsflow somewhat overlooked as traders zeroing in on the FOMC policy announcement due mid-week - with a 25bps cut priced in a 95% and a 50bps at 5%, and with ~70bps of cuts priced in through to year-end.


• Ahead of the Fed meeting, participants also await Fed nominee Miran's Senate confirmation vote set for Monday.


• Sticking with the Fed, weekend reports suggested that documents showed Fed Governor Cook declared her Atlanta property as a vacation home in documents, indicating it would not be her primary residence, which contradicts mortgage fraud allegations.


• Furthermore, there were some comments from US President Trump who reiterated criticism against the Fed Chair and stated that there are 3 people he likes a lot for Fed Chair.


• DXY resides in a narrow 97.497-97.702 range and just within Friday's parameter set between 97.491-97.864, while Thursday's low resides in 97.473.

EUR: EUR/USD U/C; 1.1738

• Underpinned by mild USD weakness with no obvious reaction seen on Fitch cutting France’s sovereign rating from AA- to A+, with the outlook revised to Stable from Negative.


• ING suggests the muted reaction is no surprise, with focus on the new French PM Lecornu as he faces the challenge of uniting a divided National Assembly around fiscal consolidation, starting by scrapping plans to cut two public holidays. "Expect FX market players to keep one eye on French debt, even though our core view is that this is not going to broaden into another eurozone crisis", says ING.


• Elsewhere, Fitch raised Portugal’s sovereign rating from A- to A: Outlook Revised to Stable from Positive, while S&P raised Spain’s sovereign rating from A to A+; Outlook Stable.


• Over in Germany, exit polls from the election in Germany’s bellwether state of North Rhine-Westphalia showed German Chancellor Merz’s Christian Democrats won with 34% of the votes, although support for the far-right AfD tripled with 16.5% of the votes, according to The Guardian.


• In terms of ECB speak, ECB's Nagel warned on Friday that more rate cuts could threaten price stability, while ECB's Kocher said the rate-cutting cycle is either over or very close to the end, and the central bank can keep its interest rates steady at 2% for the time being. Ahead, EUR focus could be on commentary from ECB's Schnabel at 12:30 BST/ 07:30 ET. Desks highlight that she has been sounding hawkish recently as she described the ECB's deposit rate as "mildly accommodative" and suggesting central banks could end up hiking rates sooner than investors forecast. "Her speech is a mildly positive event risk for EUR/USD and short-dated euro swap rates today", according to ING.


• EUR/USD resides in a 1.1716-1.1744 range at the time of writing, still tucked within Friday's 1.1701-1.1748 parameter.

JPY: USD/JPY -0.2%; 147.44

• USD/JPY is subdued against the backdrop of a fragile USD this morning, whilst overnight, there was an absence of Japanese participants due to Respect for the Aged Day.


• Political uncertainty lingered ahead of the LDP election on October 4th - it was reported that Japan's Chief Cabinet Secretary Hayashi will announce on Tuesday his intention to run in the leadership race, while a recent Kyodo News poll showed ex-economic security minister and former PM Abe protégé Takaichi was seen as the most suitable candidate to lead the ruling LDP.


• USD/JPY remains heavy with reports this morning suggesting China ruled that NVIDIA (NVDA) violated anti-monopoly laws after concluding a prelim investigation, which ups the pressure on Washington during sensitive trade negotiations in Spain.


• After the FOMC, traders will eye the BoJ rate decision on 19th September, with pricing in 96% chance of rates being maintained, whilst just under 15bps worth of hikes priced in for the year.


• USD/JPY trades on either side of its 21 and 50 DMAs (at 147.57 and 147.65 respectively) in a current 147.34-147.81 range and within Friday's 147.12-148.08 band.

GBP: GBP/USD +0.2%; 1.3595

• This morning, the high-beta is underpinned by the mostly positive risk tone across Europe, albeit with the FTSE 100 hampered by its domestic currency strength.


• Analysts unanimously expect the BoE to keep rates unchanged on Thursday, but before that, the UK jobs report is due tomorrow and CPI on Wednesday.


• Meanwhile, US President Trump's state visit to the UK this week, with the UK and the US reportedly to sign a ‘ground-breaking’ tech deal during Trump’s visit. Over the weekend, the UK government announced over GBP 1.25bln of inward investment from US finance companies which will create 1,800 UK jobs, while the deal lines up GBP 20bln in trade between the two countries, including an expected GBP 7bln commitment from BlackRock (BLK) to grow in the UK.


• On the domestic fiscal front, UK Chancellor Reeves plans to scrap VAT on energy to lower bills and told cabinet members that ‘all options were on the table’ for a budget giveaway to ease the cost of living, according to The Sunday Times.


• Cable tested 1.3600 to the upside (from a 1.3545 intraday low) while EUR/GBP slipped back under 0.8650 to test last Thursday's 0.8632 trough.

Antipodeans: AUD/USD +0.2% 0.6661; NZD/USD +0.1%; 0.5960

• Holding a mild upward bias amid the mostly positive risk tone in the market and USD weakness at the time of writing.


• AUD/USD resides in a 0.6635-0.6667 range, with Friday's upside at 0.6669.


• NZD/USD trades on either side of its 50 DMA (0.5960) in a current 0.5984-0.5966 range and within Friday's 0.5940-0.5979 range.

15 Sep 2025 - 10:05- ForexEU Research- Source: Newsquawk