EUROPEAN FX UPDATE: GBP lags post-UK jobs data, USD ekes out mild gains

USD: DXY +0.2%; 99.17

• USD has kicked the session off on the front foot with support stemming from the positive readout of the US-China trade talks which saw US Treasury Secretary Bessent state that it was a 'good meeting' with China, whilst Commerce Secretary Lutnick said talks were "fruitful". Note, talks are set to resume in London today at 10:30BST; markets are expecting to see a relaxation of US chip export restrictions in a bid to secure rare earth minerals from China. Today's data docket is light and the Fed is in its blackout period. As such, FX traders may place greater-than-usual attention on today's US 3yr note offering. Markets are awaiting this week's CPI and PPI releases due on Wednesday and Thursday, respectively. On the former, MS believes "May is the starting point of a sequence of increasingly strong core inflation prints" and forecasts "the tariff push will peak in 3Q25 and start to fade in 4Q25".

EUR: EUR/USD -0.2%; 1.1401

• EUR is a touch softer vs. the broadly firmer USD with fresh macro drivers lacking for the Eurozone. Markets continue to be drip-fed ECB speak with known hawk Holzmann noting the pause in cutting rates could last a while. However, if economic data worsens, there could be more cuts. Elsewhere, France's Villeroy remarked that the Bank has successfully normalised policy, adding that policy and inflation are now in a favourable zone. However, being in a favourable zone does not mean the Bank is static. Given the quiet EZ docket this week, the USD leg of the equation will likely provide the greater source of direction for the pair. EUR/USD continues to pivot around the 1.14 mark and is currently contained within yesterday's 1.1386-1.1439 range.

JPY: USD/JPY +0.1%; 144.66

• JPY is fractionally lower vs. the USD, albeit off worst levels which saw the pair hit a new high for the month during APAC trade @ 145.29. The price action took place alongside the broad pick-up in the USD and mostly positive risk appetite, which eventually faded. In terms of Japanese-specific newsflow, BoJ Governor Ueda reaffirmed the familiar rate hike signal but also stated the BoJ has limited room to underpin growth with rate cuts if the economy and prices come under strong downward pressure. He also noted the BoJ is keeping real interest rate negative, so underlying inflation achieves 2%. On the trade front, Japanese Economy Minister Akazawa is reportedly to visit the US and Canada from June 13th-18th for tariff talks. USD/JPY has returned to a 144 handle but is holding above its 50DMA @ 144.34.

GBP: GBP/USD -0.4%; 1.3490

• GBP is sat at the foot of the G10 leaderboard in the wake of the latest UK jobs which report which showed an expected uptick in the unemployment rate to 4.6% from 4.5%, a 109k slump in the HMRC payrolls change metric for May (largest decline since May 2020) and a further cooling of average earnings. Surmising the data, ING cautions that the HMRC payrolls figure is often revised higher, however, the desk is of the view that the "cooling in the UK jobs market is gathering pace". ING adds that "While the bar for the Bank of England to speed up rate cuts seems to be set fairly high, this data helps cement cuts in August and November". Market pricing has moved in a dovish direction with a 25bps cut now fully priced by September (pre-release was November) and a total of 48bps of cuts seen by year-end (vs. circa 39bps pre-release). Attention will begin pivoting to the fiscal agenda ahead of tomorrow's spending review, which will bring increased scrutiny on the government's finances. Cable has slipped onto a 1.34 handle for the first time since June 2nd with a current session low @ 1.3457 (June 2nd low was @ 1.3451).

Antipodeans: AUD/USD -0.1%; 0.6506. NZD/USD -0.1%; 0.6037

• Both are slightly softer vs. the USD with price action choppy during APAC hours on account of mixed Business Sentiment data from Australia and the overall constructive risk tone. However, of greater interest for both will likely be the outcome of the US-China trade talks in London today given that China is both nation's largest trading partner. AUD/USD is just about holding above the 0.65 mark and has traded in a 0.6491-0.6529 range thus far. NZD/USD is currently tucked within yesterday's 0.6013-65 range.

10 Jun 2025 - 09:55- ForexData- Source: Newsquawk