EUROPEAN FX UPDATE: DXY attempts to claw back recent losses, EUR/USD lingers around 1.05

USD: DXY +0.2%; 106.42

• USD is attempting to claw back yesterday's losses which were in part triggered by the ongoing pullback in US yields with the latest leg lower led by a disappointing Consumer Confidence print. Elsewhere, events on Capitol Hill are increasingly in focus after the US House passed the Republican budget blueprint for advancing the Trump agenda and sent the measure to the Senate. If passed, this could arrest some of the pessimism surrounding the US economy. Albeit, the threat of Trump's tariff agenda looms large. That being said, if declines in the stockmarket become more pronounced, Trump may feel the need to water down his ambitions. The next inflection point for the equity complex comes via NVIDIA earnings after-hours. Elsewhere on today's US docket, New Home Sales, Fed’s Barkin & Bostic are due. DXY has ventured as high as 106.55 vs. yesterday's 106.78 peak. Note, if DXY reverses course, the YTD low sits @ 106.16.

EUR: EUR/USD -0.1%; 1.0498

• Marginally softer vs. the USD. Aside from ongoing focus for the bloc on efforts to fund the EU's increased defence needs, macro drivers are relatively light. This morning's GFK consumer sentiment data fell short of expectations, however, this has been largely shrugged off given the need to see how the coalition building process in Germany develops. ECB's Stournaras, who sits at the dovish end of the spectrum on the GC has flagged a potential terminal rate at 2% which is broadly in-line with market expectations but higher than you'd expect a dove to forecast (some desks look for terminal in the 1.5-1.75% range). EUR/USD is currently pivoting around the 1.05 mark after venturing as high as 1.0524 overnight (YTD peak sits @ 1.0528).


• Deutsche Bank month-end model: a reasonable shift towards USD buying, most pronounced vs European equities and as such points toward EUR/USD supply.


• EUR/USD opex: 1.0420-30 (3.1bln), 1.0435-45 (1.8bln), 1.0450 (3.2bln), 1.0465-75 (1.7bln), 1.0495-1.0500 (2.7bln), 1.0510-20 (2.7bln), 1.0525-30 (4bln), 1.0550 (2.3bln), 1.0570-85 (1.9bln), 1.0600 (3.6bln).

JPY: USD/JPY +0.2%; 149.31

• USD/JPY hit a fresh YTD low overnight @ 148.56 in the aftermath of yesterday's risk-averse moves in the US which acted as a drag on US yields. Fresh macro drivers out of Japan are lacking and therefore the USD leg of the equation may remain the driving force for the pair in the near-term. USD/JPY has ventured as high as 149.63 with focus on a potential reclaim of the 150 level.


• USD/JPY opex: 149.00 (1bln), 149.45-55 (720mln), 149.75-80 (872mln), 150.00 (1.8bln), 150.25 (774mln).

GBP: GBP/USD -0.1%; 1.2648

• GBP marginally softer vs. the USD and flat vs. the EUR. Fresh macro drivers for the UK are lacking aside from yesterday's announced increase in defence spending which is ultimately not set to move the dial on the fiscal front given that money from elsewhere will be reassigned to fund it. BoE's Dhingra is due on the docket today but given her well-known dovish credentials and that we already heard from her on Monday, her remarks are likely to prove inconsequential. Cable is currently contained within yesterday's 1.2606-78 range.

Antipodeans: AUD/USD -0.2%; 0.6328. NZD/USD -0.3%; 0.5710

• Both softer vs. the broadly stronger USD. AUD/USD is now down for a fourth consecutive session after printing a YTD peak on Feb 21st @ 0.6408. Overnight data saw disappointing Construction Work data (which feeds into Australia's GDP) and an in-line print for monthly CPI (Weighted CPI YY 2.50% vs. Exp. 2.50%, Prev. 2.50%). The next 25bps cut from the RBA is not priced until July with a total of 52bps of easing seen by year-end. AUD/USD next downside target comes via the 14th Feb low @ 0.6309. NZD/USD also lower for a fourth session in a row after printing a YTD peak on Feb 21st @ 0.5772; next target comes via the 20th Feb low @ 0.5693.

26 Feb 2025 - 10:00- ForexEU Research- Source: Newsquawk