EUROPEAN FX UPDATE: DXY rises following prior day's losses and risk aversion

USD: DXY +0.3%; 98.63

• On a firmer footing and continuing to gain this morning amid a weaker EUR (see below) and following the prior day's marginal losses owing to Fed independence concerns after President Trump moved to fire Fed Governor Cook who will be challenging the attempt in court. On top of that, it was also reported that the Trump administration is reviewing options for exerting more influence over the Federal Reserve’s regional banks that would potentially extend its reach beyond personnel appointments in Washington.


• Analysts at ING suggest "The real consequences of FOMC politicisation are likely to appear post-Powell – after May 2026 – assuming Trump doesn’t remove him earlier. By then, a new chair with dovish leanings would need committee support to move on cuts, but that’s too far out for markets to price in."


• Markets currently price in some 84% chance of a 25bps cut at the upcoming September meeting, with another 25bps cut priced in by December.


• The US Day sees the release of weekly MBA mortgage applications data, and another round of comments from the Fed's 2027 voter Barkin.


• DXY trades in a 98.24-98.70 range vs yesterday's 98.08-98.56 parameter, with the 50 DMA at 98.06 and the 100 DMA at 98.85.

EUR: EUR/USD -0.4%; 1.1585

• Pared recent gains amid a lack of fresh catalysts from the bloc and with France facing political uncertainty.


• Losses accumulated for the EUR despite a lack of headlines around the European equity open, with market contacts noting of potential stops tripped under 1.1600 after the pair found support near the level in the prior two session.


• German GfK Consumer Sentiment did little to sway the EUR at the time [(Sep) -23.6 vs. Exp. -22.0 (Prev. -21.5, Rev. -21.7)] - the release noted German consumers’ inflation expectations rose for the second month in a row in August, whilst income and economic expectations declined significantly.


• EUR/USD currently sits in a 1.1578-1.1651 range (vs yesterday's 1.1660-1.1601 range) with the 50 DMA at 1.1654.


• Trader's look ahead to tomorrow's ECB minutes for any indications of a bigger hawkish front.


• Notable EUR/USD FX Option Expiries for today include: 1.1500 (3.7bln), 1.1550-60 (2.8bln), 1.1650 (3.2bln), 1.1660-65 (1.8bln).

JPY: USD/JPY +0.3%; 147.80

• USD/JPY steadily advanced towards the 148.00 handle as the dollar regained poise with newsflow on the lighter end but the pair influenced by a rebound in the Buck.


• USD/JPY trades in a 147.29-147.97 range vs yesterday's 146.98-147.91 parameter, with the 50 DMA seen at 146.91.

GBP: GBP/USD -0.2%; 1.3444

• Softer amid the firmer Dollar but losses cushioned by a weaker EUR.


• On the inflation front, UK's Ofgem raises energy price cap by 2% for Oct-Dec (vs exp. 1% by forecaster Cornwall Insight). The price cap limits the amount suppliers can charge per unit of energy and is revised every three months.


• Aside from that, domestic reports are doing the rounds of a controversial minister (who campaigned to scrap the pensions triple lock and hike taxes on the middle classes) has been appointed to aid Chancellor Reeves write the Budget.


• Cable trades in a 1.3431-1.3482 parameter and sandwiched between its 50 DMA (1.3493) and 100 DMA (1.3436), whilst yesterday's range printed between 1.3434-1.3494.

Non-US Dollars: AUD/USD -0.2%; 0.6473. NZD/USD -0.4%; 0.5833, USD/CAD +0.1%; 1.3846

• Non-US Dollars are softer with broader-based strength from the Buck alongside an indecisive risk tone and softer commodity prices.


• AUD/USD failed to sustain the initial knee-jerk uplift seen following hot Monthly CPI data and stronger-than-expected Construction Work which feeds into Australia's GDP data. Money markets pricing briefly rose to around an 81% probability that the RBA pauses on rates at the next meeting in September vs 73% chance of a pause prior to the data, with the probability currently at 75% at the time of writing.


• For CAD, BoC Governor Macklem said the Bank will not revisit its 2% inflation target for the monetary policy framework review next year. Macklem also stated that steep new US tariffs and the unpredictability of US policy have reduced economic efficiency and increased uncertainty, as well as noted that headwinds that limit supply could mean more upward pressure on inflation going forward.

27 Aug 2025 - 10:20- ForexData- Source: Newsquawk