EUROPEAN FX UPDATE: Havens lead, activity currencies lag as the Trump trade agenda continues to dominate

USD: DXY -0.1%; 102.82

• USD net softer vs. the majors but showing a mixed performance vs. peers (weaker vs. havens but stronger vs. activity currencies). Trump's tariff agenda very much remains the key driving force in the market with the President not looking to back down from the measures announced last week. The next phase of the saga will focus on retaliatory measures taken by global peers or if some nations are able to less stringent trade terms. The impact of Trump's tariff measures have been met with an unambiguously negative view on the US economy with JP Morgan now expecting a recession as part of its baseline scenario. From a monetary policy perspective, a June rate cut is now fully priced with 113bps of loosening seen by year-end vs. 80bps seen at the start of last week. Asides from the tariff agenda, US macro focus this week will be on FOMC minutes, US CPI, PPI and UoM. However, these releases will likely play second-fiddle to whatever announcements come out of the White House this week. DXY has picked up in recent trade and is towards the top end of Friday's 101.54-103.18 range.

EUR: EUR/USD +0.3%; 1.0982

• EUR is firmer vs. the broadly softer USD and remains underpinned despite the current risk environment. ING attributes the support to the EUR's "role as a liquid alternative to the dollar and the fact that the euro runs a 3% current account surplus". However, the open and trade-focused nature of the Eurozone economy clearly remains a risk. On which, officials will be meeting in Luxembourg today to discuss their response to the US tariffs. Ahead of which, the EU Industrial Commissioner Sejourne reaffirmed that the EU response to the US will be united and proportionate, adding that Europe also has cards up its sleeve to put pressure on America. The moves in global bond yields has continued to shape ECB easing expectations with an April cut now fully priced and a total of 84bps of cuts price and a terminal expectation for the Deposit Rate just above the 1.50% mark. EUR/USD has ventured as high as 1.1050 but failed to sustain a move above the 1.10 mark.


• EUR/USD opex: 1.0950 (898mln), 1.0970-75 (520mln), 1.1000 (1.5bln), 1.1055 (447mln), 1.1070 (403mln), 1.1100 (593mln).

JPY: USD/JPY -0.6%; 145.98

• JPY firmer vs. the USD and one of the best performers across the G10 complex. Support for JPY has been provided by the risk-aversion across the market with Japanese stocks hit particularly hard overnight (Nikkei 225 -7.7%). Elsewhere, commentary out of Japan has seen PM Ishiba state that he is set to hold talks with US President Trump, potentially as early as tonight, whilst Kyodo News reported that the PM is reportedly instructing the compilation of an extra budget as soon as this month. Furthermore, the Japanese business lobby chair has stated that it needs to be examined whether reducing rates could be effective with real interest rates remaining still far from neutral. USD/JPY has sunk as low as 144.83 but stopped shy of the YTD trough @ 144.55.


• USD/JPY opex: 145.00 (547mln), 146.00 (2bln), 146.50 (623mln)

GBP: GBP/USD U/C; 1.2884

• GBP steady vs. the broadly softer USD with UK-specific newsflow on the light side aside from weekend calls between PM Starmer are other world leaders over the trade situation. Many desks are looking to see how the UK positions itself between the US and EU with Starmer noting last week that discussions on an economic deal with the US are "well advanced". The move in global bond yields has placed further pressure on BoE easing expectations with a May cut now fully priced and 86bps of easing seen by year-end vs. just 52bps seen at the beginning of last week. Cable delved as low 1.2826, stopping shy of its 200DMA @ 1.2811 before stabilising at levels closer to 1.29.

Antipodeans: AUD/USD -0.7%; 0.5997. NZD/USD -0.6%; 0.5563

• Both softer vs. the USD and at the bottom of the G10 leaderboard alongside the risk-off price action in the market. AUD/USD has extended on the downside seen on Friday in the wake of China's retaliation to the US tariff measures, which sank the pair to its lowest level since April 2020. AUD has been unable to materially benefit from a Bloomberg report that China is considering frontloading stimulus in order to counter the tariff hit. AUD/USD has delved as low as 0.5934 but has since stabilised closer to the 0.60 mark. NZD/USD has slipped onto a 0.55 handle and is at its lowest level since 3rd February which is the current YTD trough (0.5516). Domestic attention this week for NZD will be on the RBNZ rate decision; markets price in 30bps of loosening.

07 Apr 2025 - 10:00- ForexEU Research- Source: Newsquawk