EUROPEAN FX UPDATE: DXY holds a downward bias with losses seen after China's latest move

USD: DXY -0.2%; 99.61

• Initially kicked off the session relatively contained with US (and global) tariff policy showing some stability after recent toing and froing. However, the index adopted more of a downside bias in early European trade.


• ING suggests the options market remains bearish on the Dollar, with yesterday's price action pointing to investor appetite to sell USD rallies, with the balance of risk remaining to the downside for the Buck, "regardless of broad stabilisation in the Treasury market".


• US Treasury Secretary Bessent yesterday rejected the speculation that foreign nations are selling USTs and attributed the recent losses to deleveraging.


• Ahead, there are notable releases for the Dollar during the European session, with the focus turning (in the absence of tariff updates) to Fed Chair Powell's speech tomorrow on the economic outlook.


• DXY briefly dipped under 99.50 following reports that China ordered a halt to Boeing (BA) jet deliveries as the trade war expands, according to Bloomberg citing sources.


• As it stands, DXY currently resides in a 99.47-99.97 band, within yesterday's 99.20-100.16 confines and well within Friday's 99.01-100.63 parameter.

EUR: EUR/USD U/C; 1.1356

• EUR ekes mild gains but sees a lack of macro catalysts this morning - traders await Thursday's ECB confab with markets pricing a 98% chance of a 25bps cut, with a total of three 25bps reductions priced in for this year (as it stands).


• In terms of tariff-related price action, ING highlights that the "USD slump remains largely a function of the loss of the USD's appeal as a reserve/safe-haven asset, and the euro’s high liquidity character should continue to absorb a lot of the rotation."


• German ZEW was mixed with Current Conditions missing forecasts and Economic Sentiment contracting. ZEW highlighted that erratic changes in US trade policy are weighing heavily on German expectations. EUR saw short-lived two-way action on the data before returning to pre-announcement levels.


• EUR/USD currently trades in a 1.1314-1.1378 range, well within yesterday's 1.1188-1.1473 parameter.


• Notable FX OpEx: 1.1250 (1.9bln).

JPY: USD/JPY -0.2%; 143.34

• A modestly softer start to the European session for the JPY thus far, but largely as a function of the positive risk environment as the traditional haven FX unwinds some risk premium - similar action seen in the CHF.


• JPY thereafter posted some gains following reports that China ordered a halt to Boeing (BA) jet deliveries as the trade war expands, according to Bloomberg citing sources.


• Newsflow from a domestic perspective has been light, although traders continue to monitor tariff updates and Treasury price action for direction.


• USD/JPY trades on either side of 143.00 in a 142.73-143.59 intraday band (vs Monday's 142.23-144.30 parameter).


• Notable FX OpEx: 144.00 (2bln).

GBP: GBP/USD +0.4%; 1.3233

• A positive session for Sterling as it remains underpinned by the softer Dollar, whilst trade updates on the US-UK front have been constructive.


• UK government sources via BBC have suggested that recent talks with the US on a trade deal have been making good progress. It is understood that any deal would focus on more than just lowering tariffs, and cover elements of trade in both goods and services.


• Elsewhere, UK jobs data was mixed and resulted in no immediate reaction for the Pound; to recap - UK Avg Earnings (Ex-Bonus) (Feb) 5.9% vs. Exp. 6.0% (Prev. 5.9%, Rev. 5.8%); UK Employment Change (Feb) 206k vs. Exp. 174k (Prev. 144k).


• Analysts at CapEco suggest "Overall, while wage growth remains too high, the growing downside risks to inflation and activity from higher US tariffs may mean the Bank of England starts to become less worried about the upside risks to inflation from pay growth and more worried about the downside risks to activity. The risk is that interest rates are cut a bit faster than the fall from 4.50% now to 4.00% this year that we expect."


• GBP/USD has topped the peak from 3rd April (1.3207) and trades in a current 1.3165-1.3227 range.

CAD: USD/CAD -0.1%; 1.3856

• The loonie is mildly firmer this morning as traders look ahead to the Canadian CPI prints later today which could shape expectations for tomorrow's BoC confab.


• Y/Y CPI is forecast at 2.6% (prev. 2.6%) whilst the Median and Trim metrics are seen ticking up to 3.0% from 2.9%.


• Market pricing currently stands at a 40% chance of a 25bps cut, and a 60% chance of a hold, with the first full rate cut priced in for July, and some 43bps of easing priced through to year-end.


• "If inflation doesn’t surprise on the downside, markets may consolidate the marginally prevalent view that the BoC will stay on hold tomorrow, which is also our call." says ING.


• The desk believes BoC and Canadian inflation should remain secondary to the tariff theme, alongside the loss of USD confidence - "we don’t think there will be a rapid unwinding of that risk premium, so USD/CAD can continue to trade below 1.40 for now. A hold by the BoC would help sustain CAD gains, even if it won’t be a gamechanger," says the Dutch Bank.

Antipodeans: AUD/USD +0.4%; 0.6357. NZD/USD +0.5%; 0.5906

• Both firmer benefitting from another leg lower in the Dollar coupled with hopes of Chinese stimulus to cushion the blow from US tariffs.


• The overall positive risk tone and the firmer PBoC reference rate setting also underpins the high-beta FX.


• The latest RBA minutes provided little fresh clues as it stated it was not yet possible to determine the timing of the next move in rates and it was not appropriate at this stage for policy to react to potential risks.


• AUD/USD resides in a 0.6313-0.6377 range (the next upside level is the 3rd April peak at 0.6388); NZD/USD trades in a 0.5862-0.5928 parameter, and topped its 200 DMA at 0.5885 as it eyes highs last set in November 2024.

15 Apr 2025 - 10:20- ForexData- Source: Newsquawk