EUROPEAN FX UPDATE: EUR firmer post-German election, USD mixed vs. peers, GBP eyes BoE speakers

DXY: DXY -0.1%; 106.53

• DXY is a touch lower and showing a diverging performance vs. peers (softer vs. cyclicals, firmer vs. havens) following a shaky performance last week as soft US data points acted as a drag on the USD. In terms of US newsflow, tariff actions remain in focus with President Trump's team reportedly pushing Mexico towards tariffs on Chinese imports. However, markets place greater weight on the April 1st tariff report deadline. Geopolitical headlines remain aplenty with Ukrainian President Zelensky stating he is willing to quit the presidency if it means peace in Ukraine which he said could be exchanged for NATO membership. However, the path to a lasting ceasefire/peace deal remains a complex one. Today's US docket is lacking in highlights with focus on monthly PCE and the second read of GDP later in the week. As a side note, Barclays FX Month-End rebalancing model points to weak USD buying vs. most peers, with moderate signal against the EUR and JPY. DXY printed a fresh YTD low overnight @ 106.12 but has since returned within Friday's 106.38-106.74 range.

EUR: EUR/USD +0.1%; 1.0480

• EUR is one of the better performers across the majors in the wake of the German election which will likely deliver a Grand Coalition (CDU/CSU + SPD). However, such an outcome would deliver a slim majority of 328/630 seats (316 required) and fall short of the Bundestag's two-thirds majority which is required for constitutional reform (i.e. the debt brake). Even the inclusion of the Green Party would not deliver the required numbers and leaves a blocking-minority of AfD and Die Linke. Nonetheless, the outcome has been viewed as broadly positive by the market with newsflow for the EZ light asides from a soft German IFO print which has been dismissed by the market as it doesn't encapsulate sentiment post-election. Geopolitics also remains a focus for the region with EU leaders to hold an emergency summit next month. EUR/USD ventured as high as 1.0528 but stopped shy of the 1.0532 YTD peak and eventually returned to a 1.04 handle.


• EUR/USD opex: 1.0430 (542mln), 1.0450 (1.4bln), 1.0460-70 (5.4bln), 1.0475-80 (1.2bln), 1.0500 (1.4bln), 1.0525 (1.1bln), 1.0550 (740mln).

JPY: USD/JPY +0.2%; 149.54

• USD/JPY printed a fresh YTD low overnight @ 148.85 but has since struggled for direction amid the mixed risk appetite in Asia and the absence of Japanese participants for a holiday. To the upside, focus is on a potential reclaim of 150 to the upside. If downside resumes, the December 2024 low kicks in @ 148.63.

GBP: GBP/USD +0.1%; 1.2639

• Firmer vs. the USD but softer vs. the EUR. UK-specific newsflow has been light over the weekend and this week's UK data calendar is a particularly slim one. However, today sees a busy speaker slate with BoE’s Lombardelli, Pill, Ramsden and Dhingra all due on the docket and speaking at the Bank of England’s 2025 BEAR Conference. The subject matter of the conference is "The Future of the Central Bank Balance Sheet". Focus will be on any further divisions on the MPC given dovish dissent from Dhingra and Mann at the February rate decision. Cable printed a fresh YTD peak overnight @ 1.2690 before fading upside.

Antipodeans: AUD/USD +0.2%; 0.6369. NZD/USD +0.2%; 0.5749

• Both a touch higher with not much in the way of fresh newsflow for either of the antipode nations. That being said, some positivity surrounding the Chinese property market overnight (Chinese state-backed developers beginning to buy land at a premium again) is helping to underpin sentiment. AUD/USD is higher on the session but unable to launch a test of the 0.64 mark or Friday's 0.6408 YTD peak. Similar price action for NZD/USD which has stopped shy of testing Friday's YTD high @ 0.5772.

24 Feb 2025 - 09:55- ForexGeopolitical- Source: Newsquawk