EUROPEAN FX UPDATE: USD firmer vs. peers, antipodeans lag, USD/JPY briefly topped 150 post-BoJ

USD: DXY +0.3%; 103.57

• USD is firmer vs. all peers in the run up to the Fed policy announcement with the FOMC unanimously expected to stand pat on rates. Expectations ahead are more uncertain, however. The current dot plot signals two more rate cuts in 2025; Governor Waller has suggested that this is still his base case. Fed Chair Powell spoke just before the blackout period, and largely reiterated his stance from January and February. Given the uncertainty presented by the Trump administration's tariff regime, the overall messaging is likely to be cautious. Elsewhere, fresh macro drivers are light, however, markets remain attentive to the pressure facing US equity markets. DXY hit a 103.71 peak in early European trade but stopped shy of Monday's high @ 103.81.

EUR: EUR/USD -0.4%; 1.0904

• EUR/USD was dragged lower in European trade amid selling in EUR/JPY as BoJ Governor Ueda spoke and as risk sentiment in Europe took a hit. From a fundamental perspective, the main piece of newsflow yesterday came via the German Bundestag passing the fiscal reform bill. This provided little in the way of surprises for EUR but helped to underpin sentiment. The bill will now be passed onto the Bundesrat on Friday; almost certain to pass. Elsewhere, with monetary developments on the light side, markets are watching geopolitical events following the Trump and Putin call yesterday. US President Trump said he and Russian President Putin agreed to an immediate ceasefire on all energy and infrastructure; however, reports suggest that Russia has since attacked a Ukraine power system in the Dnipropetrovsk region on Wednesday morning.

JPY: USD/JPY +0.3%; 149.72

• JPY choppy but ultimately softer in the wake of the BoJ's unsurprising decision to keep rates on hold. JPY managed to claw back some losses vs. the USD as the risk sentiment in Europe soured and as Governor Ueda spoke. Overall, the BoJ Governor was cautious on trade risks but ultimately reaffirmed the Bank's tightening bias with some members flagging the risks of overshooting on inflation, adding that strong momentum of wage hikes is spreading to smaller companies. Additionally, the governor, when asked about tariff impacts, said the BoJ wants to conduct policies before it is too late. Market pricing for the BoJ is relatively unchanged with the next 25bps hike not fully priced until October and 31bps of tightening seen by year-end. USD/JPY briefly made its way onto a 150 handle with a session peak @ 150.01.

GBP: GBP/USD -0.2%; 1.2970

• Cable is on the backfoot following cross-related selling in GBP/JPY as BoJ Governor Ueda spoke. Accordingly, Cable has pulled away from yesterday's YTD peak above the 1.30 mark @ 1.3010 to a current session trough @ 1.2958. Attention for the UK this week is on Thursday with the latest jobs data and BoE rate decision due on deck. On the former, attention will be on the resilience of wage growth and the rate of loosening in the labour market. However, this is unlikely to have much follow-through into the BoE's decision a few hours later. Markets are primed for an unchanged rate with consensus suggesting a 7-2 vote split.

Antipodeans: AUD/USD -0.5%; 0.6327. NZD/USD -0.6%; 0.5785

• Both are extending on the downside seen yesterday with the latest leg lower coinciding with selling in European equity futures ahead of the cash open. From a fundamental perspective, little reaction was seen from the relatively stable Australian Leading Index and softer-than-expected New Zealand Current Account data. After hours, New Zealand’s Q4 GDP is expected to rise by 0.4% Q/Q (prev. -1.0%). AUD/USD has delved as low as 0.6322 vs. yesterday's peak @ 0.6390. The next target to the downside comes via Monday's low @ 0.6317. NZD/USD has pulled away from yesterday's YTD peak @ 0.5831 to a 0.5780 base; Monday's low is still some way off @ 0.5745.

19 Mar 2025 - 10:00- ForexGeopolitical- Source: Newsquawk