EUROPEAN FX UPDATE: USD attempts to claw back some of yesterday's lost ground as attention pivots to NFP

USD: DXY +0.4%; 102.38

• After a steady start to the session, the USD picked up pace as losses in European stocks extended. Yesterday was a woeful session for the USD on account of concerns over the US' growth outlook post-tariffs with the DXY falling from an opening level @ 103.37 to a trough @ 101.26. There hasn't been a great deal to change the macro narrative surrounding the US since yesterday as traders brace for retaliatory measures from global peers and therefore it remains to be seen how much legs today's "recovery" has, particularly given the defiance of the US administration. Attention today will (potentially only briefly) return to the data slate with US NFP due on deck. The headline print is expected to slip to 135k from 151k with the unemployment rate set to hold steady at 4.1%. Of potential greater importance is Fed Chair Powell's speech @ 16:25BST which will be the Chair's first appearance post-tariff announcement. Markets currently fully price 4 x 25bps cuts this year.

EUR: EUR/USD -0.4%; 1.1003

• EUR/USD has been weighed on in recent trade by the pickup in the USD but is still firmly above yesterday's opening level @ 1.0848. Analysts at ING attribute the recent resilience in the EUR not to a positive reappraisal of the Eurozone's growth outlook but more as a result of the "alternative liquidity offered by the euro". The EU is a key player in the global trade war and focus is on how severe any potential retaliation is with officials set to decide on the matter on Monday. The key deadline for the EU is April 9th's reciprocal tariff implementation and it remains to be seen if there will be a period of negotiation between the EU and US ahead of this date. From a monetary policy perspective, odds of an April cut stand at around 75% with a total of 74bps of easing seen by year-end.


• EUR/USD opex: 1.1000 (1.1bln), 1.1030-35 (1bln), 1.1050-55 (2bln), 1.1100 (250mln), 1.1120 (601mln), 1.1150 (251mln).

JPY: USD/JPY +0.1%; 146.15

• Marginally softer vs. the USD and faring better than peers on account of the JPY's safe-haven appeal. BoJ speak overnight saw Governor Ueda remark that US tariffs are likely to exert downward pressure on Japan and global economies, however, it is hard to say now how US tariffs will affect Japan's price moves. Elsewhere, Deputy Governor Uchida noted that rates will be raised if underlying inflation heightens against the background of continued improvements in the economy. Note, the moves in global bond yields have seen market pricing for the BoJ wipe out a full 25bps hike by the Bank in 2025 with just 15bps of tightening seen by year-end. USD/JPY has made its way back onto a 146 handle but is still far away from yesterday's opening level @ 149.21.

GBP: -GBP/USD -0.9%; 1.2979

• After a solid showing vs. the USD yesterday which sent Cable from a 1.2968 base to a 1.3207 peak, the recent resurgence of the Dollar briefly sent the pair back onto a 1.29 handle with a session low @ 1.2976. As it stands, the main update on the trade front for GBP since Trump's tariff announcement has been the UK government's decision to launch a process to retaliate against said tariffs in the event that it does not secure a trade deal with the US. Markets fully price the next 25bps cut from the BoE in June with a total of 3 x 25bps cuts seen by year-end.

Antipodeans: AUD/USD -1.9%; 0.6209. NZD/USD -1.9%; 0.5686

• After a session of slight gains for both yesterday, the jump in the USD has acted as a severe headwind for AUD and NZD. Gains yesterday were limited by the high-beta status of both currencies, which is the main driver of today's underperformance as internal macro drivers for Australia and New Zealand remain light. AUD/USD has slipped below yesterday's trough 0.6225 with the next support level kicking in @ 0.6186. NZD/USD has slipped below its 50DMA @ 0.5704 and made its way back onto a 0.56 handle, matching yesterday's low @ 0.5681.-AUD/USD opex: 0.6180 (951mln), 0.6200 (1.6bln), 0.6240 (515mln), 0.6300 (1.4bln), 0.6350 (2.3bln), 0.6400 (550mln).

04 Apr 2025 - 09:55- ForexEU Research- Source: Newsquawk