EUROPEAN FX UPDATE: DXY a touch higher, antipodeans lead, JPY gives back yesterday's gains

USD: DXY +0.1%; 109.57

• DXY has trimmed the softness seen overnight following a Bloomberg report that US President-elect Trump's team is reportedly studying month-by-month tariff hikes of 2%-5%; this is seen as less onerous than expected. It is worth noting that the article caveats that Trump is yet to review or approve the plan. Today's docket presents the first of this week's inflation data with PPI metrics due on deck. Whilst CPI typically garners more attention, it is worth noting that PPI feeds directly into forming expectations of PCE (the Fed's preferred inflation gauge). Elsewhere, today's speaker slate includes appearances from Fed's Schmid and Williams. DXY is currently contained within yesterday's 109.34-110.17 range.

EUR: EUR/USD +0.1%; 1.0254

• EUR a touch firmer vs. the USD with incremental newsflow from the Eurozone on the light side aside from a slew of ECB commentary. ECB hawk Holzmann has been on the wires this morning stating that he does not think ECB can lower rates too quickly with core inflation still closer to 3% than 2%. Ultimately, with the EZ calendar a quiet one this week, most of the heavy lifting for the pair will likely be dictated by the USD. EUR/USD has gained a firmer footing on a 1.02 handle with a current session peak @ 1.0277.

JPY: USD/JPY +0.3%; 157.89

• JPY has reversed yesterday's gains vs. the USD as Japanese participants return to market. In terms of Japanese newsflow, BoJ Deputy Governor Himino stated they will likely hike rates if economic forecasts are realised and that while the direction is for further rate hikes, they must carefully watch various upside and downside risks at home and abroad. Furthermore, he added it is not possible to telegraph the January monetary policy decision as the outcome of the policy meeting depends on discussions at the meeting. USD/JPY has broken above the top end of yesterday's 156.90-157.96 range with a current session peak @ 158.02.

GBP: GBP/USD -0.1%; 1.2192

• GBP slightly softer vs. the USD and EUR. Fresh incremental drivers for GBP at the start of the week have been lacking with markets instead opting to look ahead to tomorrow's CPI metrics. On which, ING notes the possibility of a potential GBP negative reaction regardless of the outcome whereby a soft report means more BoE easing and a hot one triggers further upside in UK rates and further shrinks Chancellor Reeve's headroom. Cable briefly made its way onto a 1.22 handle vs yesterday's 1.21 base (lowest since November 2023).

Antipodeans: - AUD/USD +0.3%; 0.6195. NZD/USD +0.6%; 0.5616

• Both at the top of the G10 leaderboard in the wake of reporting by Bloomberg that US President-elect Trump's team is reportedly studying month-by-month tariff hikes of 2%-5%. This is seen as a more piecemeal approach than originally expected and as such has provided some reprieve for the antipodes. AUD/USD has clambered further off yesterday's multi year low @ 0.6130 and has been as high as 0.6207. Similar price action for NZD/USD which has picked up from yesterday's base @ 0.5541 to a peak @ 0.5631.

14 Jan 2025 - 09:55- ForexData- Source: Newsquawk