EUROPEAN FX UPDATE: Price action contained in quiet trade. Markets await Trump at Davos

USD: DXY U/C; 108.29

• DXY flat with price action in the FX space contained amid quiet newsflow. In a week devoid of tier 1 macro data releases and the Fed in its blackout period, markets continue to second-guess Trump's economic agenda with a particular focus on trade policy. Trump refrained from announcing any tariff action on day one of his Presidency, however, he has since threatened Canada, Mexico, China and the EU. Markets may get some further colour on the matter during Trump's appearance at Davos today at 16:00GMT. However, the bulk of Trump's tariff agenda will likely not be clear until the April 1st deadline to review current trade practices has elapsed. Today's data highlight comes via weekly claims data (covers the NFP survey week). DXY currently sits in a narrow 108.18-43 range.

EUR: EUR/USD U/C 1.0408

• Flat vs. the USD with EZ-macro drivers light other than an ongoing drip feed of rhetoric from various ECB speakers who have added little to the debate on the GC given that a 25bps cut next week is nailed on. Greater attention lies on tomorrow's EZ PMI metrics which are expected to show minor deviations from the priors. If the data were to surprise to the downside, the narrative surrounding the ECB may see greater attention on the growth outlook after inflationary concerns spurred by the December HICP report. EUR/USD is back below its 50DMA @ 1.0437 but maintaining a footing above the 1.04 mark after delving as low as 1.0391 in early trade.


• EUR/USD opex: 1.0295-1.0305 (3.7bln), 1.0320 (1.2bln), 1.0335 (861mln), 1.0365 (886mln), 1.0400-05 (3.3bln), 1.0435-40 (1.2bln), 1.0450-60 (1.6bln), 1.0500-15 (2.5bln).

JPY: USD/JPY U/C; 156.54

• JPY flat vs. the USD as mostly better-than-expected Japanese trade data did little to spur a reaction in the currency. Greater attention lies on tomorrow's BoJ policy announcement and Governor Ueda press conference. Policymakers are set to pull the trigger on a 25bps hike with such an outcome priced at around 95% following a slew of recent source reports suggesting that this is the case. The BoJ will also release its latest Outlook Report containing Board Members’ median forecasts for Real GDP and Core CPI. USD/JPY is currently contained on a 156 handle within a 156.29-75 range.


• USD/JPY opex: 155.00 (2.2bln), 156.00 (1bln), 156.15 (732mln), 156.50-60 (782mln), 156.80 (347mln), 157.00 (711mln).

GBP: GBP/USD -0.1%; 1.2302

• Trivially softer vs. the USD and EUR with fresh macro drivers for the UK on the light side aside from messaging out of the UK government which is attempting to kickstart its growth agenda. Greater attention lies on tomorrow's PMI metrics. Analysts at Investec expect a further deterioration in the data series with commentary to reflect ongoing themes of "fragile consumer confidence, in part related to Budget measures, and headwinds from lacklustre economic conditions overseas". As it stands, a 25bps cut next month is priced at 81%. Cable is currently pivoting around the 1.23 mark.

Antipodeans: AUD/USD -0.2%; 0.6261. NZD/USD -0.2%; 0.5654

• Both marginally softer vs. the USD and towards the bottom of the G10 leaderboard with downside coinciding with a downward drift in European equities. Fresh macro developments for Australia and New Zealand remain light. AUD/USD is currently tucked within yesterday's 0.6252-95 range; the upper bound of which was a touch below the current YTD peak @ 0.6301. NZD/USD sits towards the bottom end of yesterday's 0.5649-87 range.

NOK: EUR/NOK +0.2%; 11.7547

• The Norges Bank policy meeting provided no surprises, they opted to keep rates unchanged at 4.50%, and in the statement, Governor Bache reiterated "The policy rate will likely be reduced in March". Being an interim meeting, the central bank did not release forecasts or rate path adjustments. CapEco thinks the path of inflation will allow the Bank to move "a bit more quickly", cutting by 25bps once per quarter until the policy rate reaches 3% in the middle of 2026. EUR/NOK saw modestly choppy trade after the announcement, slipping to lows of 11.7269 from pre-announcement levels of around 11.74.

23 Jan 2025 - 10:20- ForexData- Source: Newsquawk