EUROPEAN FX UPDATE: DXY and CNY surge on US-China trade; JPY and CHF underperform

USD, CNH: DXY +1.0%; 101.59, USD/CNH -0.4%; 7.2105

• All focus on US-China relations, with immediate upside seen on the release of the US-China joint statement following trade talks over the weekend, with the two sides agreeing to slash reciprocal tariffs by 115ppts each for a period of 90 days, marking a 30% levy on China (from 145%), and a 10% levy on the US (from 125%).


• Overall, the announcement was better than expected as US President Trump on Friday floated an 80% tariff on China from 145%.


• The joint statement also suggested that future talks may be undertaken on an alternating basis in China and the US ahead, or with agreement in a 3rd party, whilst the two sides are committed to a process of further talks.


• US Treasury Secretary Bessent said there was no discussion on currency with China; USTR Greer said the Fentanyl issue remains unchanged as it stands.


• Trade aside, the week ahead entails several notable datapoints for the US economy (US CPI and US Retail Sales), albeit possibly somewhat stale given the most recent trade developments between the two largest nations.


• From a Chinese standpoint, weekend CPI was mixed with the Y/Y metrics, continuing to show deflation, although M/M CPI printed positive and slightly better than expected.


• DYX has spiked to a 101.81 intraday peak at the time of writing from a 100.50 base overnight, with the index eyeing its 50 DMA (101.94) ahead of 102.00


• USD/CNH slumped under its 200 DMA (7.2213) to a 7.1983 trough from a 7.2400 intraday peak before paring around a third of the move.

EUR: EUR/USD -1.0%; 1.1140

• Bearing the brunt of the dollar's strength, alongside some loss of the appeal it gained during the loss of US confidence earlier this year.


• Furthermore, US Treasury Secretary Bessent noted that talks with the EU on trade are slow.


• EUR/USD slipped to a 1.1083 low from a 1.1242 peak, eyeing its 50 DMA (1.1074) to the downside.


• FX Option Expiries: 1.1150-55 (1.11bln), 1.1185-90 (1.22bln), 1.1190-00(2.4bln), 1.1200-10 (915mln), 1.1220-30 (743MLN), 1.1240-50 (3.2bln), 1.1270-80 (578mln), 1.1290-00 (600mln), 1.1315-25 (820mln), 1.1350-55 (1.4bln), 1.1360-70 (1.2bln).

JPY, CHF: USD/JPY +2.0%; 148.20; USD/CHF +1.8%; 0.8456

• Traditional havens slumped amid a broader outflow from safety and into risk assets following the aforementioned constructive US-Sino updates.


• USD/JPY shot above its 50 DMA (146.30) to a 148.22 peak (vs 145.71 low), with the 200 DMA seen at 149.69.


• USD/CHF rose from 0.8310 to a peak at 0.8468, with the 50 DMA seen at 0.8528.


• US Treasury Secretary Bessent, the UK and Switzerland have moved to the front of the queue.


• FX Option Expiries: USD/JPY: 145.00 (3.0bln), 145.65 (1.1bln), 146.00 (312mln), 146.25-30 (745mln), 146.45 (335mln), 147.00-05 (551mln); USD/CHF: 0.8315 (698mln), EUR/CHF: 0.9350 (241mln).

GBP: GBP/USD -1.0%; 1.3335

• Hit by the Dollar strength on the aforementioned US-China news, with no reaction seen to BoE's Lombardelli, who suggested it is sensible to continue the gradual pace of cutting rates, but caution remains appropriate.


• Several BoE speakers due today with BoE's Greene on monetary policy with a text release at 11:30 BST, BoE's Mann with a text release at 13:50 BST, and BoE's Taylor at 17:00 BST.


• GBP/USD fell from 1.3299 to a 1.3156 low at the time of writing, with the 50 DMA seen at 1.3081.

Antipodeans: AUD/USD -0.1%; 0.6402. NZD/USD -0.4%; 0.5881

• Subdued by the surge in the Dollar, but losses are largely cushioned by the antipodeans' high-beta properties and amid optimism as China receives a 115ppts reprieve on reciprocal tariffs.


• AUD/USD fell from levels near its 200 DMA (0.6455) to a 0.6393 low, while NZD/USD fell from a 0.5940 high to 0.5876.

12 May 2025 - 10:00- ForexEU Research- Source: Newsquawk