EUROPEAN FX UPDATE: USD a touch softer ahead of a risk-packed week

USD: DXY -0.1%; 103.62

• USD net softer vs. peers in what has been a weekend lacking in incremental newsflow on the trade front aside from Trump reiterating that he has no intention of creating exemptions on steel and aluminum tariffs, adding that he will impose reciprocal and sectoral tariffs on April 2nd. Elsewhere, the US Senate voted 54-46 to pass the stopgap funding bill to keep the government funded through September 30th. For today's trade, US Retail Sales data for February is the main event to watch; headline retail sales are expected to rise +0.6% M/M in February (prev. -0.9%). Greater attention will be on this week's FOMC policy announcement with policymakers expected to stand pat on rates. Traders will be looking to the Fed statement, updated economic projections, and commentary from Chair Powell, amid the weaker economic activity data that has been coming out of the US of late. Given the increased focus on the risk environment, it is also worth noting comments from US Treasury Secretary Bessent who has downplayed the recent sell-off in equities. DXY is currently tucked within Friday's 103.57-104.09 range.

EUR: EUR/USD +0.1%; 1.0892

• EUR steady vs. the USD and tucked within Friday's 1.0830-1.0912 range. Incremental macro drivers over the weekend for the EZ are lacking and therefore markets are bracing for the outcome of tomorrow's vote in the Bundestag on the German reform package. ECB's de Guindos remarked that he believes inflation is converging on 2% and everything is going in the "right direction". However, this provided little traction for the EUR. Elsewhere, things are relatively light thus far. As it stands, markets assign a 58% chance of a 25bps ECB cut next month.


• EUR/USD opex: 1.0820-30 (1.1bln), 1.0840-50 (1bln), 1.0860-70 (909mln), 1.0890-1.0900 (1bln), 1.0905-10 (390mln), 1.0940 (451mln), 1.1000 (586mln).

JPY: USD/JPY +0.1%; 148.68

• JPY is the marginal laggard across the majors in an extension of the downside seen late last week following the latest Rengo wage announcement. Attention in Japan this week will be on Wednesday's BoJ policy announcement whereby 61 of 62 economists surveyed by Reuters look for the central bank to keep interest rates unchanged at 0.50%; markets price this outcome at 98%. Looking beyond this week's meeting, markets do not fully price the next 25bps increase until October. USD/JPY briefly breached Friday's peak @ 149.01 before returning to a 148 handle.


• USD/JPY opex: 148.45-50 (572mln), 149.00 (1.1bln).

GBP: GBP/USD +0.2%; 1.2955

• GBP a touch firmer vs. the USD following the mild downside on Friday that was triggered by disappointing monthly UK GDP metrics. Attention for the UK this week is on Thursday with the latest jobs data and BoE rate decision due on deck. On the former, attention will be on the resilience of wage growth and the rate of loosening in the labour market. However, this is unlikely to have much follow-through into the BoE's decision a few hours later. Markets are primed for an unchanged rate with consensus suggesting a 7-2 vote split. Cable is currently tucked within Friday's 1.2911-1.2959 range.

Antipodeans: AUD/USD +0.3%; 0.6342. NZD/USD +0.5%; 0.5774

• Both at the top of the G10 leaderboard after encouraging Chinese activity data in which Industrial Production topped forecasts and Retail Sales matched estimates. Furthermore, China unveiled a multi-part plan to increase household demand in the short run and improve the consumption environment in the long run (ING). AUD/USD has extended on Friday's rally with a current session peak @ 0.6343; next target comes via the March high @ 0.6363. NZD/USD has hit a new peak for the year @ 0.5576. Focus is now on a test of 0.58; not breached since 12th December.

17 Mar 2025 - 09:55- ForexData- Source: Newsquawk