EUROPEAN FX UPDATE: DXY wanes following its tariff-related boost; havens trim losses

USD: DXY +0.2%; 100.03

• The dollar is extending recent gains, buoyed by yesterday’s legal ruling that curtailed the scope of President Trump’s tariff powers (analysis available on Newsquawk.com), whilst the FOMC minutes did little to shift the dial. Broder market sentiment is also supported by NVIDIA earnings.


• The US court’s decision on Trump's Liberation Day tariffs is viewed as a constraint on future tariff escalation and has been welcomed by risk assets, with support in the USD amid reduced uncertainty and with a hurdle for blanket trade escalations.


• The court suggested President Trump cannot impose sweeping tariffs without Congressional approval. The ruling does not apply to the sectoral tariffs.


• Goldman Sachs noted that the ruling on Liberation Day tariffs gives the administration 10 days to halt tariff collection but does not affect sectoral tariffs and the admin can impose across-the-board tariff and country-specific tariffs under other legal authorities.


• DXY touched a high of 100.48 overnight before waning and returning back to 100 at the time of writing (vs low 99.98).


• Note, Citi's month-end rebalancing model points to a net selling of USD vs. all of the major currencies with the strongest signals vs. JPY and GBP

EUR: EUR/USD -0.2%; 1.1273

• EUR/USD is softer following the US court ruling that limits Trump’s tariff powers – a development that marginally improves US growth prospects and supports the dollar by narrowing its risk premium.


• EUR/USD currently resides in a 1.1209-1.1297 range at the time of writing, with the 50 DMA seen at 1.1183.


• "We think global asset managers did have a shock in April and are seriously looking at their dollar hedge ratios. But the newsflow is mildly supportive for the dollar and there is a scenario where EUR/USD can make it back to the 1.1050 area – consistent with our baseline views for this year that EUR/USD traces out a 1.10-1.15 range." says ING.


• The eurozone calendar is quiet today, though markets will start looking ahead to June 25th, when Germany may announce a new fiscal package – a potential medium-term positive for the euro.

JPY: USD/JPY +0.3%; 145.21

• JPY weakens amid an unwind in risk premium following the aforementioned US court ruling on US President Trump's Liberation Day tariffs.


• Japan's Finance Minister Kato overnight said they will monitor financial market moves including super-long bond trade, and see large movement in super-long bond yield at the moment, but will conduct through communications with market players. On FX, Kato said they are able to deepen discussions with US Treasury Secretary Bessent about a basic understanding of FX policy, and they did not discuss FX levels at all in the previous discussion with Bessent.


• USD/JPY trades on either side of its 50 DMA (145.35) in a 144.73-146.28 intraday range.

GBP: GBP/USD U/C 1.3468

• More resilient to the dollar strength, potentially amid reports that the UK is seeking to accelerate the implementation of trade deals with the US when Business Secretary Reynolds meets with US Commerce Secretary Lutnick next week, according to FT.


• Aside from that, updates from the UK are quiet, whilst BoE's Breenden and BoE's Bailey are poised to speak later in the session.


• GBP/USD resides in a 1.3409-1.3474 range at the time of writing, with yesterday's range between 1.3447-1.3522.

Antipodeans: AUD/USD +0.3; 0.6441. NZD/USD -0.1%; 0.5964

• Diverging with the AUD benefitting despite a miss in Capex data, but the currency is boosted by the aforementioned trade developments.


• NZD/USD is subdued following yesterday's RBNZ-induced gains.


• AUD/USD sits in a 0.6408-0.6449 range, with the 200 DMA at 0.6442. NZD/USD trades in a 0.5926-76 range.

29 May 2025 - 10:00- ForexEU Research- Source: Newsquawk