EUROPEAN FX UPDATE: USD gives back some of Friday's NFP-induced gains

USD: DXY -0.2%; 98.90

• DXY has kicked the week off on the backfoot after being boosted on Friday post-NFP. Focus at the start of the week has been on the trade front ahead of an anticipated meeting between US-China officials in London to discuss the trade situation; note, Chinese Foreign Ministry spokesman avoided a question on the matter at a briefing today. If there is to be a readout, focus will be on how committed both sides are to implementing the Geneva agreement and signs of additional progress. Elsewhere, whilst the Fed is in its blackout period, US President Trump has teased over a potential imminent decision on who will replace Fed Chair Powell when his term expires next year. Today's calendar is light with focus on this week's CPI and PPI releases due on Wednesday and Thursday respectively. On the former, MS believes "May is the starting point of a sequence of increasingly strong core inflation prints" and forecasts "the tariff push will peak in 3Q25 and start to fade in 4Q25". DXY has delved as low as 98.84 but is holding above Friday's trough @ 98.65.

EUR: EUR/USD +0.3%; 1.1428

• EUR/USD has moved back onto a 1.14 handle following last Friday's NFP-induced selling. Fresh macro drivers for the Eurozone are lacking following the hawkish reaction to last week's ECB policy announcement. We have seen further commentary from Bank officials over the weekend with Nagel noting that the central bank has maximum flexibility on rates, whilst Schnabel stated we should not expect a sustained decoupling between the ECB and the Fed. As it stands, markets price around 25bps of cuts by year-end. Note. today's EZ calendar is light (as is the case for the remainder of the week) and volumes across the region will likely be light on account of Whit Monday. EUR/USD has ventured as high as 1.1429 but is yet to approach Friday's 1.1457 peak.

JPY: USD/JPY -0.5%; 144.05

• JPY is firmer vs. the USD and towards the top of the G10 leaderboard after suffering in the wake of last Friday's US jobs report. Newsflow out of Japan has been on the light side aside from an upwards revision to Q1 GDP and Japanese Economy Minister Akazawa continuing to urge the US again to reconsider tariff measures, whilst suggesting that further progress has been made in trade talks with the US. Note, it was also reported that Akazawa is arranging a sixth visit to the US for tariff talks. USD/JPY has crossed back below its 50DMA @ 144.43 and is currently holding above the 144 mark. If breached, Friday's low kicks in @ 143.45.

GBP: GBP/USD +0.3%; 1.3562

• As is the case across G10 FX, GBP is firmer vs. the USD in a reversal of the price action seen post-NFP on Friday. Over the weekend, BoE's Greene remarked that the disinflation process is ongoing and expects inflation to continue to come down to the target over the medium-term. However, greater attention is on Wednesday's UK spending review. The review is a precursor to the Autumn Budget, ahead of which Reeves has once again ruled out a major tax increase for “working people", and more generally that she has “no intention of raising taxes again on the scale of the 2024 budget”. Elsewhere on this week's agenda is UK labour market metrics due out tomorrow. Currently, markets do not fully price a 25bps cut until November with a total of 40bps of loosening seen by year-end. Cable remains on a 1.35 handle but sub-Friday's 1.3585 peak.

Antipodeans: AUD/USD +0.4%; 0.6531. NZD/USD +0.6%; 0.6060

• Both firmer vs. the USD and towards the top of the G10 leaderboard. Newsflow for Australia and New Zealand has been light over the weekend, with the former away from market. Of note for both however, was the latest round of Chinese trade which saw both imports and exports fall short of expectations on account of the trade war. AUD/USD has breached last Friday's peak @ 0.6517 and is now eyeing last week's YTD high @ 0.6538. Similar price action for NZD/USD which is also eyeing its recent YTD peak @ 0.6080.

09 Jun 2025 - 09:50- ForexData- Source: Newsquawk