EUROPEAN FX UPDATE: USD broadly firmer vs. peers, AUD bucks the trend post-RBA

USD: DXY +0.2%; 106.93

• With trade headlines seemingly ratcheting lower ahead of the April 1st tariff report deadline, focus for the US is currently elsewhere (for now). US officials are currently meeting with Russian counterparts to discuss a path towards ending the Russia-Ukraine conflict. Given the absence of Ukraine and Europe in the discussions, it remains to be seen how much progress can be made. Comments from Fed's Waller yesterday leaned in a dovish direction, noting that the Fed cannot let uncertainty about policy paralyse action. However, he added that it is appropriate to keep rates on hold for now. Waller is due up again today with appearances from Daly and Barr also scheduled. ING is of the view that, for this week, "the dollar correction has run its course, and we still favour chasing a USD rebound against other G10 currencies." DXY has ventured as high as 107.05 but failed to hold a move above the 107 mark.

EUR: EUR/USD -0.2%; 1.0466

• EUR weaker vs. the USD and to a lesser extent GBP. Focus in Europe remains on discussions between European leaders over the Russia-Ukraine conflict. The likely need for greater bond issuance to fund additional defence spending commitments has placed upside pressure on yields, however, this has failed to provide support for the EUR since the beginning of the week. Elsewhere, comments from ECB arch-hawk Holzmann have been largely dismissed given that he doesn't represent anything close to the consensus on the Governing Council. From a data perspective, this morning's German ZEW report exceeded expectations but failed to bolster EUR. After venturing as high as 1.0506 yesterday, EUR/USD has moved back onto a 1.04 handle with the pair delving as low as 1.0453 and eyeing last Friday's trough @ 1.0447.


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  EUR/USD opex: 1.0400 (1bln), 1.0425-30 (946mln), 1.0440-50 (1.7bln), 1.0500 (1.3bln), 1.0525 (441mln).

JPY: USD/JPY +0.2%; 151.71

• USD/JPY has regained some composure after the recent declines but has failed to hold above the 152.00 level with gains potentially capped by the recent stronger-than-expected Japanese economic growth. Comments from BoJ Governor Ueda proved to be non-incremental this morning, noting that the Bank is aware of views that guidance was not clear enough. If USD/JPY is able to reclaim 152, yesterday's peak kicks in at 152.39 with the 200DMA @ 152.64.

GBP: GBP/USD -0.1%; 1.2609

• Softer vs. the USD but to a lesser degree than peers on account of the latest UK jobs data. The release saw the unemployment rate unexpectedly hold steady at 4.4% (vs. exp. 4.5%), whilst employment change was higher-than-expected and headline earnings growth a touch above expectations. Capital Economics writes that "overall, today’s data release provides little evidence that the Bank will deviate from its current gradual approach to interest rate cuts". Elsewhere, focus is on the fiscal front with The Telegraph writing that Chancellor Reeves will have to raise taxes by an extra GBP 12bln if she wants to boost defence spending to 2.5% of GDP and avoid a fresh round of austerity. Comments from BoE Governor Bailey have thus far been non-incremental, noting that "we are in a period of heightened uncertainty" but disinflation is continuing. Cable ventured as high as 1.2625 post-data before fading gains; currently sits within yesterday's 1.2579-1.2635 range.

Antipodeans: AUD/USD +0.1%; 0.6362. NZD/USD -0.5%; 0.5707

• Diverging fortunes for the antipodes with AUD resilient vs. the broadly firmer USD following a cautious cut from the RBA overnight. RBA Governor Bullock also suggested that further rate cuts implied by markets are not guaranteed. Markets near-enough fully price the next 25bps cut in July with a total of 42bps of easing seen by year-end. AUD/USD currently trades towards the top end of yesterday's 0.6344-73 range; upper bound of which is the YTD peak. NZD/USD underperforms but is holding above the 0.57 mark ahead of tomorrow's RBNZ meeting with the central bank heavily priced by markets to deliver another 50bps cut.

18 Feb 2025 - 10:20- ForexData- Source: Newsquawk