EUROPEAN FX UPDATE: DXY in the doldrums as the clock ticks down to the FOMC

USD: DXY -0.3%; 97.081

• Another weak start of the session for the index which remained subdued in APAC hours after weakening yesterday alongside softer US yields and with the greenback not helped by a drop in the NY Fed Manufacturing Survey.


• Participants now await Industrial Production and Retail Sales data scheduled later today, while the FOMC will also begin its 2-day policy meeting which will be attended by Fed's Cook and Miran, after a US Appeals Court denied the Justice Department's request to put on hold a judge's ruling temporarily blocking Trump from removing Cook, and the US Senate confirmed Miran to join the Fed board.


• Desks suggest the softening thus far this week could partially be a function of positioning ahead of tomorrow's FOMC announcement, with the market still pricing in a 97% chance of a 25bps cut and a 3% chance of a 50bps move.


• On that note, it's worth noting that US President Trump will be speaking on Fox at 20:00 BST on Wednesday - during Chair Powell's press conference - amplifying headline risk around that time.


• Back to today's trade, DXY extended on losses early European hours, down to 97.02 at the time of writing (vs high 97.39), with the next downside level the 7th July low at 96.891.


• Ahead, analysts expect US retail sales to rise +0.2% M/M in August (prev. 0.5%), while the ex-autos measure is seen rising +0.4% M/M, matching the July reading, and the Retail Control group is seen +0.4% M/M (prev. +0.5%) - although this is almost certainly unlikely to sway tomorrow's FOMC decision.

EUR: EUR/USD +0.3%; 1.1792

• The single currency mildly benefits from recent dollar weakness and after ECB officials reiterated that interest rates are in a good place.


• In data, EUR held onto gains following mixed German ZEW survey (Economic Sentiment beat and surprisingly improved but Current Conditions missed and deteriorated), whilst the EZ metrics improved.


• In geopolitics, the 19th EU sanctions package against Russia is no longer expected to be presented on Wednesday, via Politico citing an EU diplomat; no detail on when the sanctions would be unveiled.


• It's worth keeping an eye on some large FX OpEx for the pair: 1.1700-15 (3bln), 1.1750-60 (3.5bln), 1.1800-05 (2.4bln).


• EUR/USD eventually eclipsed 1.1800 to a current high at 1.1809 with next upside levels at 1.1810 (2nd and 3rd July), and then the YTD peak at 1.1831.

JPY: USD/JPY -0.3%; 146.92

• USD/JPY is softer amid USD weakness and broader JPY strength, with analysts at ING attributing some of the JPY upside to "the more moderate Shinjiro Koizumi is entering the LDP leadership race against Sanae Takaichi, who is seen as yen bearish for her views on loose monetary and fiscal policy."


• The pair breached through the previous day's trough overnight amid a softer dollar and as lower US tariffs for Japan took effect.


• In terms of notable USD/JPY OpEx: 145.90-146.00 (2.1bln), 146.50-60 (1bln).


• USD/JPY found resistance near its 21 DMA (147.65) to trade in a current range between 146.69-147.54, with the next downside level the 9th September low (146.31).

GBP: GBP/USD +0.2%; 1.3595

• Benefitting from broader dollar weakness and ahead of US President Trump's state visit to the UK, with a presser (likely joint) due on Thursday before the US leader's departure.


• UK jobs data this morning were largely in line, but a slightly above-forecast employment change prompted a couple of pips of upside in cable, but nothing to write home about. Pricing remains unchanged with markets firmly expecting no change at the BoE this Thursday, with some 97% chance of a hold. UK CPI tomorrow will also likely not change the rates outcome for Thursday.


• Cable trades in a 1.3598-1.3642 range at the time of writing, with the next upside level the 7th July peak at 1.3662.

Antipodeans: AUD/USD +0.2% 0.6661; NZD/USD +0.1%; 0.5960

• Antipodeans trade rangebound with a slightly softer bias and following an uneventful APAC session.


• Comments from RBA's Hunter and Hauser provided little to shift the dial - the former noted they are close to getting inflation to the target and that risks around the outlook are balanced, whilst the latter suggested the AUD has remained a well-functioning "natural" hedge for global risky assets.


• In terms of notable OpEx for AUD/USD: 0.6590-0.6600 (1.1bln).


• AUD/USD trades in a 0.6660-0.6676 range after briefly topping yesterday's high (0.6675).


• NZD/USD trades on either side of its 100 DMA (0.5960) in a current 0.5955-0.5980 range.

16 Sep 2025 - 10:15- ForexData- Source: Newsquawk