EUROPEAN FX UPDATE: DXY is a little firmer ahead of US data, JPY hit post-BoJ/Ueda

USD: DXY +0.1%; 99.77

• DXY is incrementally firmer vs most peers, after briefly topping the 100.00 mark in early morning trade. ING writes that "the slightly more positive environment has seen some more of the risk premium come out of the dollar". On the trade front, the White House administration continues to talk up the possibilities of imminent trade deals. Reports suggest that the US reached out to China recently for tariff talks. However, Chinese press notes that China is to hold off on entering serious trade discussions with the US while it waits to see which of US President Trump’s advisers will have his ear and how other countries will respond to the 90-day pause on tariffs. Focus today is on the data slate after yesterday's deluge. Challenger layoffs, weekly claims and ISM manufacturing PMI are all due. The latter potentially carries the greatest level of interest and will be scoured for how Trump tariffs are impacting the sector. DXY ventured as high as 100.08 but failed to hold above the 100 mark. More recently, the USD has continued to give back some of the earlier morning upside.

EUR: EUR/USD U/C; 1.1327

• EUR is essentially flat vs. the USD with most of Europe away from the market on account of Labour Day. In terms of macro updates for the region, Bloomberg reported that the EU is to present trade proposals to the US next week. Plans will focus on reducing trade and non-tariff barriers, increasing European investments in the US and purchasing US goods such as LNG and tech. Market pricing for the ECB sees the odds of a 25bps rate cut next month at around 85%. EUR/USD hit a trough overnight @ 1.1288 before returning to the 1.13 handle.


• EUR/USD opex: 1.1200 (1.6bln), 1.1250 (1.2bln), 1.1270 (1.8bln), 1.1285 (337mln), 1.1300 (331mln), 1.1330 (1.2bln), 1.1350 (627mln), 1.1375-85 (1.3bln).

JPY: USD/JPY +0.9%; 144.20

• JPY is the clear laggard across the majors after the BoJ opted to stand pat on rates (as expected) whilst cutting its Real GDP and Core CPI estimates in its quarterly outlook report; the FY 2025 GDP estimate saw a sizable downgrade to 0.5% from 1.1%. Within the policy statement, it cautioned that a prolonged period of high uncertainty could lead firms to focus more on cost-cutting, and as a result, moves to reflect price rises in wages could also weaken. At the follow-up press conference by Governor Ueda, USD/JPY continued its ascent to a peak @ 144.75 with Ueda noting that the timing to attain the underlying 2% inflation target will be delayed. However, upside was trimmed after he stated that a delay in the timing of the price goal doesn't mean a delay in hikes.


• USD/JPY opex: 143.00-10 (2bln), 143.50 (1.1bln), 144.00 (1.1bln), 144.50 (437mln), 144.75-80 (1.5bln), 145.00 (1.5bln).

GBP: GBP/USD U/C; 1.3328

• Flat vs. the USD with incremental macro drivers remaining light. On the trade front, USTR Greer said the US is working closely with the UK and moving quickly with countries ready to move forward on trade. Local elections are taking place in the UK today with a focus on the extent of Conservative losses, the performance of Labour and how much ground the Reform Party can make; not expected to be a market mover. The next major macro event for the UK comes via next week's BoE meeting with markets fully pricing in a 25bps rate cut. Cable has delved as low as 1.3275 but has since stabilised around the 1.33 mark.


• UK Manufacturing PMI printed a touch above expectations, but ultimately had little impact on the GBP. The inner report highlighted that increased costs related to National Insurance/minimum wages, reinforce a "rising costs, declining demand backdrop".Elsewhere, Mortgage Lending saw a massive increase in March, topping the most optimistic of analyst expectations.

Antipodeans: AUD/USD -0.3%; 0.6384. NZD/USD -0.2%; 0.5925

• Both softer vs. the broadly firmer USD and tracking losses in global peers. AUD saw little follow-through from mixed trade data as Australian monthly exports returned to growth but imports contracted. Elsewhere on the trade front, focus remains on Australia and New Zealand's largest trading partner, China. Reports suggest that the US reached out to China recently for tariff talks. However, Chinese press notes that China is to hold off on entering serious trade discussions with the US while it waits to see which of US President Trump’s advisers will have his ear and how other countries will respond to the 90-day pause on tariffs. AUD/USD currently sits towards the middle of yesterday's 0.6356-0.6417 range. NZD/USD trades towards the mid-point of yesterday's 0.5898-0.5948 bounds.

01 May 2025 - 09:45- ForexData- Source: Newsquawk