EUROPEAN FX UPDATE: USD awaits a data deluge, antipodeans lag and JPY eyes Akazawa's visit to the US

USD: DXY +0.1%; 98.20

• DXY is a touch higher after suffering yesterday in the wake of a larger-than-expected decline in US job openings, which further added to the narrative that the labour market is continuing to cool. Today sees further jobs metrics from the US with ADP, weekly claims and Challenger lay-offs all due on deck. ADP will likely be the highlight in the run-up to NFP. Ahead of the release, ING notes that the release could be of greater-than-usual importance given the recent revisions to the BLS report, which now suggest that the "data did have some decent predictive power for payrolls". Additionally, Fed Chair front-runner Waller has noted that "the weekly reports received from ADP showed continued deterioration". Elsewhere, ISM Services will be parsed for evidence of how tariffs are impacting the non-manufacturing industry and used as a proxy for Q3 growth. Fed speak today includes Williams, who will be speaking on the outlook for policy and the economy. Traders will also be mindful of Fed nominee Miran's appearance before the Senate Banking Committee. DXY delved as low as 98.07, holding above the 50DMA @ 98.03 and yesterday's trough @ 98.01. To the upside yesterday's high sits @ 98.63.

EUR: EUR/USD U/C 1.1658

• EUR is steady vs. the USD and holding below its 50DMA @ 1.1665 after a session of slight gains yesterday. Following a non-incremental Eurozone inflation release earlier in the week, newsflow for the Bloc has slowed down. We have heard from a slew of ECB speakers covering both the dovish and hawkish ends of the spectrum. However, the next course of action will be determined by yet-to-be-released Q3 and Q4 data prints as the impact of the US administration's trade policies are felt across the Eurozone. As such, next week's ECB meeting is widely expected to see an unchanged rate with greater attention on the accompanying macro projections. As it stands, markets price just a 28% chance of a cut by year-end. French political tensions also remain a part of the market narrative ahead of next Monday's confidence vote in PM Bayrou. A softer-than-expected outturn for EZ retail had little sway on price action. EUR/USD is currently caged within yesterday's 1.1607-82 range.

JPY: USD/JPY +0.1%; 148.19

• After clawing back some of its recent losses vs. the USD yesterday, the JPY is once again on backfoot with USD/JPY reverting back onto a 148 handle. Price action for the pair this week has been dictated by perceptions of the BoJ being non-committal to additional tightening and broader moves in the USD. Given the busy data slate stateside today, it is likely that the dollar will provide the greatest source of traction for the pair today. That being said, traders will be mindful of any US-Japan trade headlines with Japan's trade negotiator Akazawa scheduled to visit the US from today. Ahead of which, JPY saw some mild support following source reporting via Reuters that Japan and the US are in the final stage of talks to implement lower tariffs on Japanese auto imports; reductions could take effect within 10-14 days after a US presidential executive order. USD/JPY has ventured as high as 148.41 with the next upside targets coming via the 200DMA @ 148.81, the 149 mark and yesterday's peak @ 149.13.

GBP: GBP/USD +0.1%; 1.3456

• GBP is slightly firmer vs. the USD after a steady start to the session with little follow-through from yesterday's BoE TSC hearing, which saw policymakers broadly (ex-Taylor) reaffirm their cautious stance on additional easing given the risks surrounding the persistence of underlying inflation. Additionally, Governor Bailey also remarked that markets have understood his messaging on rates; markets currently price just a 20% probability of a November cut with the next 25bps reduction not fully priced until April 2025. Markets had been looking to see whether the Governor could offer any indications over a potential more aggressive curtailing to the Bank's QT schedule given the recent price action in longer-dated debt. However, this was not forthcoming with Bailey downplaying the impact of QT on the recent rise in borrowing costs. The August DMP report showed expectations for year-ahead CPI inflation rose by 0.1ppts to 3.3% in the three months to August. Focus remains on the fiscal agenda after the government's decision yesterday to announce November 26th as the date for the next budget. Bloomberg writes that Chancellor Reeves "faces challenges including an GBP 8bln increase in borrowing costs and a looming productivity downgrade by the OBR, and will need to raise around GBP 35bln, largely through taxes". Cable currently sits towards the top end of yesterday's 1.3333-1.3458 range. If yesterday's high is breached, the 50DMA sits @ 1.3482.

Antipodeans: AUD/USD -0.3%; 0.6524. NZD/USD -0.2%; 0.5863

• Both softer vs. the broadly firmer USD after gaining vs. the greenback yesterday. With little follow-through seen from a larger-than-expected Australian goods balance during APAC trade, broader moves in the USD will likely dictate the state-of-play for both pairs. AUD/USD is currently holding just above the 50DMA @ 0.6519. If breached, focus will be on a test of yesterday's low @ 0.6502 and the 0.65 mark. NZD/USD sits around the middle of yesterday's 0.5841-83 range.

04 Sep 2025 - 10:20- ForexEU Research- Source: Newsquawk