EUROPEAN FX UPDATE: DXY takes a breather to the benefit of other G10s

USD, CNH: DXY -0.2%; 101.53, USD/CNH -0.1%; 7.1945

• DXY gives back some of yesterday's trade-induced gains following Monday's rally from a 100.50 base to a peak at 101.97, finding resistance around its 50DMA (at 101.94 yesterday) and stopping shy of the 102 mark.


• Desks flag the uncertainty rising from the 90-day period in which both the US and China slashed their respective retaliatory tariffs by 115bps each.


• Further, some punchier rhetoric was released from China this morning in which China's Foreign Ministry, on US fentanyl tariffs, said China has repeatedly stated it is a US issue, adding that the US is ignoring China's goodwill and the responsibility lies with the US.


• Elsewhere on the docket, the highlight will be US CPI, whereby analysts expect US headline CPI to rise +0.3% M/M in April (prev. -0.1%), with the annual rate seen unchanged at 2.4% Y/Y. The core rate is also expected to rise +0.3% M/M (prev. +0.1%), with the annual rate of core CPI seen unchanged at 2.8% Y/Y.


• "After an unexpected slide in March, the monthly change in the CPI in April is likely to rebound to its six-month trend," Wells Fargo says; the bank is slightly below consensus in expecting a +0.2% M/M headline print, which could see the annual rate fall to a four-year low of 2.3% Y/Y (prev. 2.4%).


• DXY currently resides in a narrow 101.46-101.73 range, well within yesterday's range, with the 50 DMA today at 101.86.


• Yuan was choppy overnight but ultimately flat at the time of writing, with USD/CNH in a 7.1789-7.2029 range.

EUR: EUR/USD +0.2%; 1.1110

• Relatively stable and moving in tandem with the Dollar with little action seen on ECB commentary in which Makhlouf said given effects of size, scale and more persistent nature of fragmentation-induced shocks, and their impact on prices, monetary policy responses will need careful calibration, meanwhile, ECB's Escriva said they must be humble in assessing the current situation, and ECB's Nagel said they shouldn't overreact to individual announcements.


• Reuters sources overnight suggested the ECB strategy review will largely endorse past policies, including QE, despite some policymakers’ criticisms, while the ECB is to keep reference to ‘forceful action’ when rates and inflation are low following the review.


• No lasting move was seen from the mixed German ZEW survey.


• FX Option Expiries: EUR/USD: 1.1000 (742mln), 1.1010-20 (338mln), 1.1060 (448mln), 1.1100-05 (448mln), 1.1145-50 (1.5bln), 1.1175 (295mln), 1.1200 (366mln), 1.1225 (695mln), 1.1290-00 (2.4bln), 1.1325 (650mln).


• EUR/USD found support yesterday near its 50 DMA (at 1.1083 today), with the intraday range currently at 1.1085-1.1124 after yesterday's fall from 1.1242 to 1.1064.

JPY, CHF: USD/JPY -0.4%; 147.88; USD/CHF -0.6%; 0.8404

• Haven FX are clawing back some lost ground as markets take a breather following yesterday's US-China euphoria, and following the aforementioned punchier language from China this morning, coupled with the accompanying uncertainty provided by the 90-day de-escalation.


• USD/JPY resides towards the bottom of a 147.65-148.48 range, with the 50 DMA seen at 146.27 today.


• USD/CHF trades well within yesterday's 0.8310-0.8476 parameter with some CHF strength this morning, taking the pair back under 0.8400.


• FX Option Expiries: USD/JPY: 143.00 (2bln), 145.50 (351mln), 146.00-10 (528mln), 146.75 (567mln), 147.00 (251mln); USD/CHF: 0.8235 (469mln).

GBP: GBP/USD +0.3%; 1.3210

• Buoyed by the softer Dollar, with FX markets gaining some composure after yesterday's surge in the Buck.


• UK jobs data this morning did little to shift the dial, with no reaction in GBP seen post-release. Overall, the labour market continues to soften but at a relatively moderate rate. The most interesting part of the series is the slowdown in the level of wage growth, though by less than market consensus and still likely at levels rate setters will see as inconsistent with the inflation target.


• UK Chancellor Reeves also made an appearance on Bloomberg TV this morning but said little of note.


• GBP/USD currently trades in a 1.3166-1.3216 range, well within yesterday's 1.3137-1.3299 parameter.

Antipodeans: AUD/USD +0.6%; 0.6407. NZD/USD +0.6%; 0.5888

• High-beta benefits from the broadly softer Dollar despite a more cautious risk tone across the markets.


• AUD/USD trades in a 0.6359-0.6419 range (vs yesterday's 0.6355-0.6460 range) while NZD/USD resides in a 0.5845-0.5899 range (vs yesterday's 0.5845-0.5940 range).

13 May 2025 - 10:15- ForexData- Source: Newsquawk