EUROPEAN FX UPDATE: DXY slumps as China increases tariffs on the US

USD: DXY -1.3%; 99.22

• Another downbeat session for the Dollar following yesterday's detrimental losses which saw the index slip from a 102.95 peak to a 100.69 trough on Thursday, before extending downside to a 99.71 low in APAC hours - falling beneath 100 for the first time since July 2023.


• Losses come as participants move away from US assets amid uncertainty due to President Trump's tariff flip-flopping and with the greenback not helped by softer-than-expected CPI data, while participants now look ahead to PPI data.


• "The dollar collapse is working as a barometer of 'sell America' at the moment. The rotation to other traditional safe-havens like CHF, the Japanese yen or even the euro is justified by the loss of USD safe-haven appeal. But the USD drop against high-beta currencies (including the China-sensitive AUD and NZD) is a signal that markets are heavily building positioning for a broad-based dollar decline.", ING writes.


• The index then took another dive lower after China raised its tariffs on the US to 125% from 84% in a retaliatory move.


• DXY has dived to an intraday 99.01 low from a 100.63 intraday high at the time of writing - taking out the lows from the 18th July 2023 at 99.59 and the 14th July 2023 at 99.58.

EUR: EUR/USD +2.0%; 1.1431

• Bolstered by the collapse of the Dollar coupled with its status as a liquid reserve currency, and the market belief that the EU will not escalate the US trade war - with US tariffs on the EU trimmed to 10% from 20% whilst the EU also paused its tariffs in tandem.


• Further, the EU and China have struck a more sanguine tone in recent days and weeks, as the sides attempt to cushion blows from US tariffs.


• Further upside is seen after China raised its tariffs on the US to 125% from 84% in a retaliatory move, which took EUR/USD to north of 1.1400.


• German Final CPI data this morning was unrevised as expected and had no impact.


• Analysts at ING believe EUR/USD is overvalued at these levels, by some 4% according to their calculations, but "note that relatively similar conditions in the summer of 2020 led to an overvaluation peak of 6% in EUR/USD. In current terms, that would roughly equal a move to 1.15. "


• EUR/USD trades within a 1.1188-1.1473 range after rising from a 1.0942 low set on Thursday.

JPY: USD/JPY -1.4%; 142.40

• Benefitting from the softer Dollar and ongoing tit-for-tat tariffs between the world's two largest economies.


• JPY was further bolstered by China raising its tariffs on the US to 125% from 84% in a retaliatory move.


• USD/JPY resides towards the bottom of a 142.08-144.60 range, with participants looking for further trade updates for impetus.

GBP: GBP/USD +1.0%; 1.3105

• Bolstered by the softer Dollar, the UK's favourable relationship with the US, and above-forecast GDP metrics.


• UK GDP printed firmer across the board, with the MM metric printing at 0.5% (exp. 0.1%), albeit the data is for February and is thus stale given the US tariffs imposed since, including 25% steel & aluminium, 25% auto imports and auto parts, and 10% broader tariffs.


• GBP/USD rose from a 1.2961 low to a peak at 1.3133.

Antipodeans: AUD/USD -0.3%; 0.6204. NZD/USD +1.0%; 0.5791

• Mixed trade across the antipodeans with the Aussie hampered by the fallout of US tariffs on the Chinese economy and in turn demand for Australian natural resources, whilst the Kiwi benefits via the AUD/NZD cross.


• AUD/USD is subdued in a 0.6179-0.6258 range while NZD/USD resides in a 0.5733-0.5800 range.

11 Apr 2025 - 10:05- ForexData- Source: Newsquawk