EUROPEAN FX UPDATE: USD firmer vs. peers (ex-JPY) as US inflation data looms

USD: DXY +0.1%; 104.38

• DXY is attempting to claw back some of yesterday's lost ground with the USD currently firmer vs. all peers (ex-JPY; see below section for details). Thursday's price action took place despite the autos tariff announcement from the Trump administration. As we mentioned in our commentary at the time, the pre-election tariff on = strong USD playbook appears to have been muddied and instead focus on the growth/confidence hit is the dominating factor, for now. For today, focus will return to the inflation picture with the release of US PCE metrics; Core M/M is set to hold steady at 0.3% and Y/Y tick higher to 2.7% from 2.6%. As it stands, markets don't fully price the next 25bps cut until July; a total of 63bps of loosening is seen by year-end. DXY is currently tucked within yesterday's 104.07-65 range.

EUR: EUR/USD -0.2%; 1.0778

• EUR is a touch softer vs. the USD after a surprising session of gains yesterday despite the US decision to impose 25% tariffs on all cars not made in America. ING writes resilience in the EUR and European equities may have been as a result of tariffs already being priced in or "the view that they would be negotiated away". That being said, the April 2nd "Liberation Day" which could see the bloc hit with a broad-based 20% tariff rate looms large. Within the Eurozone, ahead of Tuesday's EZ-wide inflation report, CPI metrics from France and Spain have printed softer-than-expected. Elsewhere, the ECB's Consumer Expectations Survey for February saw the 12-month inflation expectation remain unchanged at 2.6%. EUR/USD is tucked within yesterday's 1.0732-1.0820 range. If the lower bound, gives way, the 200DMA kicks in @ 1.0729.

JPY: USD/JPY -0.3%; 150.59

• JPY is the best performer across the majors in the wake of firmer-than-expected Tokyo CPI data, which is seen as a leading indicator for national price trends and effectively supports the case for further BoJ policy normalisation. As it stands, markets fully price the next 25bps hike in September with a total of 33bps of tightening seen by year-end. ING is of the view that the next rate increase will come as soon as May. USD/JPY has pulled back from the overnight peak @ 151.21 and made its way back onto a 150 handle. The next downside target comes via yesterday's low @ 150.05.

GBP: GBP/USD U/C 1.2947

• Flat vs. the broadly firmer USD as data-induced gains in Cable proved to be fleeting. GBP went bid on a better outturn for February retail sales (M/M 1.0% vs. Exp. -0.4%), sending GBP/USD to a session peak @ 1.2968. In the aftermath of the release, Pantheon Macro wrote "retail sales continue their post-Budget rebound and will drive a growth recovery in Q1". However, Cable swiftly faded upside with the release unlikely to have much bearing on the BoE with the MPC more concerned about services inflation and real wage dynamics.

Antipodeans: AUD/USD -0.1%; 0.6296. NZD/USD -0.4%; 0.5718

• Antipodeans are marginally softer alongside the mostly subdued risk appetite and absence of pertinent tier-1 data. AUD/USD is fractionally above its 50DMA @ 0.6295 and caged within yesterday's 0.6278-0.6318 range. NZD/USD is faring worse with the pair briefly matching yesterday's trough @ 0.5711.

28 Mar 2025 - 10:00- ForexData- Source: Newsquawk