EUROPEAN FX UPDATE: DXY extends its losing streak for a fifth session as PCE looms

USD: DXY -0.1%; 97.17

• DXY has extended its losing streak to a fifth session as a combination of easing geopolitical tensions, declining yields, concerns over Fed independence and ongoing fiscal concerns act as a drag on the greenback. Over the past 24 hours, the trade agenda has reasserted itself in the market narrative after US President Trump said he signed a deal with China on Wednesday; it was later clarified that the US and China have agreed to an additional understanding to implement the Geneva agreement. Focus is also on the data slate with monthly PCE metrics for May due; expectations are for core M/M CPI to come in at 0.1%. Such an outturn could heighten calls for a July cut (currently priced at 21%), particularly if followed up by dovish inflation metrics in the (final) UoM release. However, given the looming July 9th tariff pause deadline, any re-pricing is likely to be limited in nature. ING writes "the balance of risks for the dollar remains tilted to the downside". DXY is currently contained within yesterday's 96.99-97.60 range. If the bottom end gives way, the next target comes via the 28th Feb 2022 low @ 96.54.

EUR: EUR/USD +0.2%; 1.1712

• EUR is firmer vs. the USD amid some encouragement on the trade front for the EU. This comes after the WSJ reported that the EU is reportedly considering lowering tariffs on US imports in a bid to woo US President Trump. Furthermore, US Commerce Secretary Lutnick said that although Europe had a sluggish start, it is now performing excellently and there is optimism about a deal with the EU. That being said, European Commission President von der Leyen said the EU is prepared for both a deal and a no-deal outcome, stating all options remain on the table. As such, in a week where the pair has mainly been guided by USD softness, outright EUR strength could propel the pair even higher. Note, the more EUR gains, the more it will act as a headwind for Eurozone exporters and suppress inflation in the region; 24bps of ECB loosening is priced by year-end.

JPY: USD/JPY -0.1%; 144.28

• JPY is still struggling to make much headway vs. the USD relative to other peers with Japanese data overnight acting as a headwind for the Yen. National inflation data for June came in soft on a headline and core basis (retail sales were also weak) and as such has heightened calls that the next BoJ rate hike will need to be delayed as policymakers await clarity on the trade front and how damaging US policies will be to the nation's all-important export sector. As it stands, Japanese Economy Minister Akazawa said Japan will continue tariff talks with the US ahead of reciprocal tariffs due on July 9th, but cannot accept the 25% auto tariff. USD/JPY is currently tucked within yesterday's 143.75-145.26 range and sat just above its 50DMA @ 144.32.

GBP: GBP/USD +0.1%; 1.3741

• GBP is a touch firmer vs. the USD and steady on a 1.37 handle. It has been a week lacking in fresh macro drivers for the UK and that remains the case. That being said, there has been some attention on the political scene with UK PM Starmer facing a possible rebellion from his own MPs over proposed welfare cuts. As such, Chancellor Reeves will need to find circa GBP 1.5bln to fill a budget black hole, according to Politico. Subsequently, expectations of tax rises in the Autumn have continued to increase. Should the Chancellor resist such calls, questions over the UK's finances will be raised. That being said, the rise in GBP remains unperturbed and back-end yields are steady. Cable is currently tucked below yesterday's multi-year high @ 1.3770.

Antipodeans: AUD/USD +0.1%; 0.6551. NZD/USD +0.2%; 0.6072

• Both marginally stronger vs. the USD alongside the positive risk tone and subsequently shrugging off a contraction in Chinese Industrial Profits. Both currencies are also likely being underpinned by the aforementioned developments between the US and China on the trade front. Albeit, details remain light at this stage. AUD/USD is currently contained within yesterday's 0.6505-63 range; top end of which is the YTD high. NZD/USD is also eyeing its YTD peak @ 0.6087.

27 Jun 2025 - 10:00- ForexEU Research- Source: Newsquawk