EUROPEAN FX UPDATE: USD extends its losing streak to a 5th session. US data delayed

USD: DXY -0.2%; 97.61

• DXY is currently lower for a 5th session in a row with yesterday's selling pressure stemming from the unexpectedly negative ADP print. Given that the NFP report is not scheduled to be released tomorrow on account of the government shutdown, the release took on outsized importance and led to a dovish repricing of Fed rate cut bets; a 25bps reduction this month is now fully priced. On the US government shutdown, Punchbowl reports that Senate Majority Leader Thune and Senate Minority Leader Schumer 'might' meet in the next day or two. At this stage, it looks like the current shutdown may be a protracted one. On which, S&P has warned that the shutdown could reduce GDP growth by 0.1–0.2 ppts per week. Aside from the economic hit, the closure means that weekly claims, factory orders and durable goods revisions will not be released today, diminishing the Fed's visibility on the economy. As such, today's Challenger layoff data will likely be subject to greater scrutiny than usual. DXY has delved as low as 97.53 but is holding above yesterday's trough @ 97.46.

EUR: EUR/USD +0.2%; 1.1755

• EUR is a touch firmer vs. the USD after a choppy session yesterday. Incremental macro drivers from the Eurozone are lacking after yesterday's expected uptick in inflation had few implications for the ECB with the Bank on hold for the near-term. This sentiment is expected to be echoed by upcoming remarks from ECB's Villeroy, de Guindos and Makhlouf. On the data slate Eurozone unemployment rate saw a modest uptick to 6.3% from 6.2%, remaining just above its historic low. EUR/USD is currently contained within yesterday's 1.1715-79 range.

JPY: USD/JPY -0.2%; 146.71

• USD/JPY is extending its downside, which has seen the pair pull back from a 149 handle to a low yesterday of 146.59, taking out its 200 and 50DMAs in the process. The Yen saw some strength in early European trade alongside comments from BoJ's Uchida who noted that the Bank will keep hiking rates if the economic outlook is realised. USD/JPY hit a session low @ 146.91 before returning to a 147 handle with some desks flagging some slightly more cautious follow-up comments flagging the uncertainties from US trade policy. Thereafter, the pair slipped back below the 147 mark in choppy trade. Traders increasingly expect the BoJ to hike rates by 25bps later this month.

GBP: GBP/USD +0.1%; 1.3502

• Marginally firmer vs. the USD and flat vs. the EUR as macro newsflow from the UK remains light aside from ongoing speculation over the contents of the November 26th budget. The latest BoE DMP report showed firms year-ahead own-price inflation was unchanged at 3.7%, whilst expectations for year-ahead CPI inflation rose by 0.1 percentage points to 3.4% in the three months to September. Expected year-ahead wage growth remained unchanged in September at 3.6% on a three-month moving-average basis. Cable has moved back onto a 1.35 handle but is yet to approach yesterday's best @ 1.3527.

Antipodeans: AUD/USD +0.2%; 0.6621. NZD/USD +0.4%; 0.5838

• Both are firmer vs. the USD but with NZD outpacing its antipodean peer. Newsflow from Australia and New Zealand is light with both currencies instead seemingly tracking the broader risk environment in the market. AUD/USD has gained a firmer footing on the 0.66 handle but is unable to breach yesterday's peak @ 0.6629. NZD/USD is eyeing a test of its 200DMA @ 0.5845 with the next upside target thereafter coming via the 24th September high @ 0.5866.

02 Oct 2025 - 10:15- ForexData- Source: Newsquawk