EUROPEAN FX UPDATE: USD fades initial tariff-related upside

USD: DXY U/C, 106.86

• DXY started the session on the front foot on account of Trump's latest tariff announcements on Canada, Mexico and China. However, USD upside eventually waned with no clear macro driver. However, some contacts note month-end flows could be playing a role here. As a reminder, both Deutsche Bank and Barclays month-end models suggest USD selling. The US docket for the session ahead includes, FOMC minutes and US Consumer Confidence. The former will likely be deemed as somewhat stale by the market. given recent data and commentary. DXY is back below the 107 mark with a session low @ 106.80 vs. yesterday's trough @ 106.58.

EUR: EUR/USD +0.1%; 1.0500

• EUR a touch firmer vs. the USD after a shaky start to the session. Although Trump didn't mention the EU in his posts, the tough stance on tariffs will likely have negative implications for global trade and the EU is likely to still remain a target of the Trump administration. Given the US holiday later in the week, some contacts have suggested that month-end flows could be providing some reprieve for the pair. There has been a slew of ECB speak with more to come as Muller, Kazaks and Centeno are due later in the session. As it stands, markets are still split on whether to expect a 50bps cut next month. EUR/USD is back on a 1.05 handle but south of yesterday's 1.0530 peak.


• EUR/USD opex: 1.0415 (1.7bln), 1.0475 (1.7bln), 1.0500 (2.1bln), 1.0545-50 (1.1bln), 1.0600 (1.3bln).

JPY: USD/JPY -0.1%; 153.98

• JPY is fairing marginally better than peers vs. the USD given the current risk-environment. From a macro perspective, markets digested firmer-than-expected Services PPI data which supports the case for the BoJ to resume policy normalisation. As it stands, markets assign a 63% chance of policy tightening at the BoJ's December meeting. USD/JPY has chopped around the 154 mark throughout the session and is contained with yesterday's 153.55-154.72 range.

GBP: GBP/USD -0.1%; 1.2551

• GBP is a touch softer vs. both USD and EUR with macro updates for the UK on the light side ahead of expected comments from BoE's Pill due @ 15:00GMT who is expected to reiterate the MPC's gradual approach to policy loosening. CBI Trends data is due @ 11:00GMT. Cable delved as low as 1.2508 overnight but managed to hold above last Friday's trough @ 1.2488.

Antipodeans: AUD/USD -0.3%; 0.6485. NZD/USD U/C; 0.5842

• Both softer vs. the broadly stronger USD with AUD feeling the brunt of the pessimism surrounding China after Trump's tariff threat overnight. AUD/USD has slipped back onto a 0.64 handle, delving as low as 0.6435 overnight before trimming a fair amount of its downside. NZD/USD is lower but to a lesser extent after briefly slipping to a 0.5798 low before returning to unchanged levels vs. the USD.

CAD: USD/CAD +0.8%; 1.4098

• CAD is the major laggard across the G10 FX space given President-elect Trump's announcement that he will charge Canada a 25% tariff on all products coming into the US. Recent declines in energy prices are also acting as a drag. USD/CAD has eclipsed last week's multi-month peak @ 1.4105 and has traded at levels not seen since April 2020; current session peak @ 1.4177. BoC's Mendes is due at 13:05GMT.

26 Nov 2024 - 10:10- ForexData- Source: Newsquawk