EUROPEAN FX UPDATE: USD firmer vs. peers but still very much lower post-NFP

USD: DXY +0.4%; 99.04

• DXY has mildly extended on yesterday's attempted recovery, albeit upside is modest in comparison to the hefty sell-off seen post-NFP on Friday. The rally in the USD remains tempered by the recent downside in the US rates space as markets continue to price in the likelihood of a September rate cut. Note, markets still await Trump's replacement for Fed's Kugler and the head of the BLS. On the Fed, non-voter Daly stated that she is of the view that the FOMC cannot wait to be certain there is no inflation persistence and need to make a call based on what's most likely. Daly added that two rate cuts this year seems to be appropriate. On the trade front, ING makes the observation that "Trump has now turned his attention to disassembling the BRICS political grouping. India, Russia and Brazil are squarely in focus currently". For today's docket, the main data highlight is the July ISM services report with the headline expected to rise to 51.5 from 50.8. But before that, POTUS is due to make an appearance on CNBC. DXY has just made its way onto a 99 handle with clean air until the 100 level.

EUR: EUR/USD -0.4%; 1.1530

• EUR/USD lower with the pair continuing to primarily be led by fluctuations in the USD. Incremental macro drivers for the Eurozone remain on the light side aside from commentary by an EU official that it is already seeing the implementation of the EU-US framework trade deal, which is providing an all-inclusive tariff rate of 15%. As a caveat, the official reiterated the EU's line that the joint statement is not legally binding. Eurozone PPI data printed in-line with analyst consensus and left EUR/USD unmoved. EUR/USD remains on a 1.15 handle with the pair currently capped by its 200DMA @ 1.1586.

JPY: USD/JPY +0.3%; 147.57

• JPY softer vs. the broadly firmer USD and back on a 147 handle after USD/JPY delved as low as 146.63 overnight. On the trade front, Japanese trade negotiator Akazawa is to leave for Washington today, looking to press US President Trump into signing an executive order that would bring an agreed cut to tariffs on Japanese auto imports into effect, according to Reuters. BoJ minutes passed with little in the way of fanfare given they were from the June meeting. Near-term direction for the pair is likely to remain at the whim of US-Japan trade differentials.

GBP: GBP/USD U/C; 1.3280

• GBP steady vs. the USD as newsflow surrounding the UK remains light with an upward revision to services and composite PMI data unable to stoke a reaction in GBP. That will change on Thursday with the latest BoE policy announcement and MPR, which is 95% priced for a 25bps reduction. Within the vote split, Morgan Stanley expects a 1:7:1 outcome with Mann voting for a hold and Dhingra voting for a 50bp cut. Additionally, the desk expects unchanged messaging and an uplift to near-term inflation forecasts. Cable remains tucked within yesterday's 1.3254-3331 range.

Antipodeans: AUD/USD -0.2%; 0.6456. NZD/USD -0.3%; 0.5889

• Both are on the backfoot vs. the USD after an indecisive session yesterday. The USD is providing the greatest source of traction for AUD/USD and NZD/USD amid the absence of tier-1 data from Australia and New Zealand, while the latest Chinese PMI data was somewhat mixed. Note, NZ jobs data is due out after-hours. AUD/USD has slipped below yesterday's 0.6459 trough with a current session low @ 0.6452. NZD/USD has returned to a 0.58 handle with a session low @ 0.5886.

05 Aug 2025 - 10:20- ForexEU Research- Source: Newsquawk