EUROPEAN FX UPDATE: USD gives back some of yesterday's PPI-induced gains as retail sales looms

USD: DXY -0.2%; 97.94

• The USD is giving back some of yesterday's PPI-induced gains, which briefly lifted DXY back above its 200DMA @ 98.10. The data has been viewed by many as showing some material evidence of Trump's trade policies beginning to be felt in the economy with Oxford Economics noting that "tariff-exposed goods are rising at a rapid clip, indicating that the willingness and ability of businesses to absorb tariff costs may be waning". Today's data docket is a busy one with Retail Sales for July the main highlight. Expectations are for the headline M/M metric to slow to 0.5% from 0.6% with the control group metric (used as an input for GDP trackers) set to slow to 0.4% from 0.5%. Elsewhere, traders will also get to digest UoM, Industrial Production and Import & Export prices. Markets are also bracing for any headlines stemming from the Trump-Putin meeting in Alaska; however, these will likely not hit until after-hours. Attention will also be pivoting to next week's Jackson Hole Symposium and Powell's keynote speech, which will set the stage for Fed policy in the coming months. DXY has retreated back onto a 97 handle with a session trough @ 97.89 vs. yesterday's low @ 97.63.

EUR: EUR/USD +0.3%; 1.1682

• EUR/USD is higher on the session with the USD in the driving seat for the pair, as has been the case throughout the week with macro drivers for the Eurozone lacking. Today's docket is also a quiet one for the Eurozone. Price action on Monday for EUR may be in part dictated by the fallout from the Trump-Putin meeting. However, expectations for the meeting have been tempered by Trump's remarks that it is a "feel-out-meeting" and that there may not be a second meeting if he feels it is inappropriate or if he does not get the answers he wants. Next week's highlight for the Eurozone comes via PMI metrics. Ahead of which, Investec pencils in a "level of 51.2 for the composite PMI index, but a sustained improvement looking ahead would take a strengthening in services activity as well". EUR/USD is currently contained within yesterday's 1.1632-1.1715 range.

JPY: USD/JPY -0.6%; 146.96

• After the post-PPI snapback yesterday in USD/JPY, the pair has once again reversed lower with firm Japanese GDP metrics sending the Yen to the top of the G10 leaderboard. Q2 prelim Q/Q GDP printed at 0.3% vs. Exp. 0.1% (prev. 0.1%). Pantheon Macroeconomics observed that the upside surprise was driven by net trade and investment, partially offset by a slower rate of inventory accumulation. As such, this may embolden policymakers at the BoJ to tighten policy further later in the year. Market pricing has moved in a slightly more hawkish direction throughout the week with 17bps of hikes seen by year-end vs. circa 14bps on Monday. USD/JPY has delved as low as 146.91 but is still north of the 200DMA @ 146.47 and yesterday's low @ 146.21.

GBP: GBP/USD +0.2%; 1.3554

• Newsflow for the UK is pretty thin this morning in a week that has been characterised by a not as bad as feared labour market report and hotter-than-expected GDP metrics. Next week will see even more data with inflation, flash PMIs and retail sales all due on deck. Given the contentious August BoE rate cut, which saw a higher-than-expected level of dissent on the MPC due to inflationary development, the CPI release will take centre stage. Morgan Stanley expects headline inflation to tick higher to 3.7% from 3.6% with the services metric set to rise to 4.8% from 4.7%. As it stands, markets price just a 28% chance of a cut in November with the next reduction not fully priced until March next year. Cable remains within yesterday's 1.3520-95 range.

Antipodeans: AUD/USD +0.3%; 0.6511. NZD/USD +0.2%; 0.5926

• Both are firmer vs. the broadly weaker USD and managing to overlook disappointing Chinese activity data overnight, which showed retail sales fell short of the most pessimistic of analyst forecasts. AUD/USD has made its way back onto a 0.65 handle with a current session peak @ 0.6514 vs. yesterday's best @ 0.6568. Interim resistance is provided by the 200DMA @ 0.6520. NZD/USD sits towards the bottom end of yesterday's 0.5908-91 range.

15 Aug 2025 - 09:50- ForexData- Source: Newsquawk