EUROPEAN FX UPDATE: USD/JPY fails to sustain a move below 140, EUR/USD back on a 1.14 handle as USD bounces off lows

USD: DXY +0.1%; 98.41

• DXY flat with the USD showing a differing performance vs. peers (stronger vs. EUR and CHF, weaker vs. JPY). Yesterday was a notable down day for the USD after another outburst from US President Trump, attempting to strong-arm Fed Chair Powell into lowering rates and speculation over whether he will attempt to remove him before his term expires next year. So far, market participants expect Powell to keep his position, however, the rhetoric from Trump (alongside the ongoing trade war) continues to undermine the credibility of the USD with DXY yesterday hitting its lowest level since March 2022. Today's calendar is lacking in US data but heavy in speakers with Fed’s Jefferson, Harker, Kashkari, Kugler & Barkin all due on deck.

EUR: EUR/USD -0.2%; 1.1495

• EUR/USD a touch lower and back below 1.15 after early USD buying knocked the pair from its overnight peak @ 1.1547. This comes after the pair hit a multi-year high yesterday @ 1.1574. On the trade front, there has been little in the way of updates since last week's reporting that the EU expects tariffs to remain given a lack of progress in trade discussions. Closer to home, news updates have been lacking with markets awaiting tomorrow's EZ PMI metrics. Ahead of which, markets price a 75% chance of a rate cut in June and a total of 68bps of loosening by year-end. As it stands, despite today's reprieve for the USD, the EUR still remains a liquid alternative to the USD should investors continue to shun US assets.

JPY: USD/JPY -0.3%; 140.50

• JPY is top of the G10 leaderboard as the currency continues to benefit from its safe-haven appeal with USD/JPY briefly slipping below the 140 mark earlier in the session for the first time since September 2024. JPY is also underpinned by hopes over upcoming talks between the US and Japanese administrations. That being said, a Reuters sources piece noted that Japan will push back against any request to boost its currency. This prompted a slight pick-up in USD/JPY after failing to sustain a move below 140. From a policy perspective in Japan, source reporting suggests that the BoJ is likely to keep its rate-hike signal intact at its meeting next week despite Trump tariff risks.

GBP: GBP/USD U/C; 1.3378

• GBP flat vs. the USD with UK-specific newsflow on the light side. In an interview on Bloomberg TV, MPC member Greene remarked that the main issue from the trade war is whether the impact will be primarily on the demand or the supply side. Ultimately, the policymaker is of the view that US tariffs represent more of a disinflationary risk than an inflationary one for the UK. Note BoE's Breeden is due to speak at 19:00BST on "Monetary Policy and Financial Stability in Inflationary Times". As it stands, market pricing fully expects a 25bps cut next month with a total of 86bps of easing by year-end. Overnight, Cable hit a fresh YTD peak @ 1.3423 with attention now on the 2024 high @ 1.3434.

Antipodeans: AUD/USD -0.1%; 0.6412. NZD/USD +0.1%; 0.6007

• Mildly diverging fortunes vs. the USD after initially kicking the session off on the front foot. Upside was trimmed alongside a pickup in the USD in quiet newsflow. Overnight, AUD/USD hit a fresh YTD peak @ 0.6439 before returning to within yesterday's 0.6369-0.6437 range. If upside resumes, the 200DMA sits @ 0.6472. Similar price action for NZD/USD which hit a new high for the year @ 0.6029. The next upside target comes via the November 2024 peak @ 0.6039.

22 Apr 2025 - 10:00- ForexEU Research- Source: Newsquawk