EUROPEAN FX UPDATE: DXY holds an upward bias post-PMIs yesterday and pre-Powell today

USD: DXY +0.1%; 98.75

• Firmer on Friday in the run-up to Fed Chair Powell's speech at 15:00BST /10:00 EDT, which is expected to see a text release. Attention will focus on whether Chair Powell’s Jackson Hole remarks indicate any shift in views since recent US data and if he signals a September rate cut, which markets price at ~70% probability (Full primer available on the Newsquawk headline feed)


• Fed officials plan to abandon the policy framework introduced in 2020, which focused on low interest rates and inflation risks, WSJ's Timiraos reported. The approach is now seen as outdated amid high and volatile inflation, prompting a formal reset of the Fed’s strategy to better address current economic conditions. WSJ says that Chair Powell will outline the Fed’s updated framework on Friday, his final speech at the conference; the revisions, part of a months-long review, abandon key 2020 innovations but won’t affect near-term policy, focusing instead on guiding the Fed’s approach to inflation and labour market goals.


• The speech comes against the backdrop of yesterday's US Flash PMI data, which saw hawkish commentary: S&P Global wrote that "The resulting rise in selling prices for goods and services suggests that consumer price inflation will rise further above the Fed’s 2% target in the coming months. Indeed, combined with the upturn in business activity and hiring, the rise in prices signalled by the survey puts the PMI data more into rate hiking, rather than cutting territory according to the historical relationship between these economic indicators and FOMC policy changes".


• Some Fed speakers support a cut (Bowman, Waller), while others (Musalem, Schmid) are reluctant. Markets will watch if Powell reiterates July comments, potentially tempering expectations of a reduction.


• A lack of pushback from other FOMC voters could cement the cut, regardless of August CPI and employment. Focus also includes the next Fed Chair appointment, with President Trump potentially appointing up to three Governors if Powell steps down and Cook resigns or is removed.


• DXY trades in a 98.58-98.83 intraday range after finding support at the 50 DMA (at 98.09 today) earlier in the week, whilst the 100 DMA resides at 98.99.

EUR: EUR/USD -0.1%; 1.1593

• Softer in tandem with the firmer Dollar, whilst EUR remains subdued by the diminishing optimism surrounding Russia-Ukraine, in which US President Trump said "we will know in about two weeks regarding Russia-Ukraine". Meanwhile, Ukrainian President Zelensky said Russia's overnight attacks show that Moscow is trying to avoid the need for meetings aimed at ending the war.


• On the data front, German GDP for Q2 was revised lower across the board, albeit this prompted little EUR move at the time, with eyes turning to Fed Chair Powell's speech at 15:00 BST for a dollar-induced impulse.


• EUR/USD currently sits in a 1.1583-1.1668 range after dipping under the 50 DMA yesterday ( at 1.1645 today), whilst also dipping under yesterday's trough (1.1662) in early trade.


• Note, ECB President Lagarde will partake in a panel discussion with BoE Governor Bailey and BoJ Governor Ueda on Saturday at Jackson Hole.

JPY: USD/JPY -0.1%; 147.57

• Choppy trade overall in which the pair initially extended on yesterday's advances overnight after returning to the 148.00 territory and was unfazed by the Japanese inflation data, in which Core CPI printed firmer-than-expected.


• Inflows into the JPY were seen around 15 minutes before the European equity cash open, in tandem with some broader risk aversion despite a lack of fresh catalysts at the time, although potentially prompted by European players entering the fray and positioning for no dovish signals from Powell later.


• USD/JPY trades in a 148.27-148.77 parameter after topping yesterday's high at 148.40, with little in the way of resistance ahead of the 1st August peak at 150.92.


• Note, BoJ Governor Ueda will partake in a panel discussion with ECB President Lagarde and BoE Governor Bailey on Saturday at Jackson Hole.

GBP: GBP/USD +0.1%; 1.3518

• Not much in the way of Sterling-specific catalysts nor newsflow, with Cable moving in tandem with the Dollar ahead of a long weekend (UK bank holiday on Monday).


• Recent tailwinds from strong UK Services and Composite PMI data proved to be short-lived.


• GBP/USD dipped under its 100 DMA (1.3414) after falling under its 50 DMA (at 1.3492 today) on Wednesday, with the pair currently notching a narrow intraday range between 1.3390-1.3423.


• Note, BoE Governor Bailey will partake in a panel discussion with ECB President Lagarde and BoJ Governor Ueda on Saturday at Jackson Hole.

Non-US Dollars: AUD/USD +0.1%; 0.6423. NZD/USD -0.1%; 0.0.5809, USD/CAD U/C 1.3911

• Mixed/flat trade across the non-US dollars with a slight divergence seen across the antipodeans as the AUD/NZD cross rises above 1.1050 (vs 1.1036 low)


• CAD meanwhile, sees opposing forces from the stronger dollar alongside firmer oil prices.

22 Aug 2025 - 09:55- ForexData- Source: Newsquawk