EUROPEAN FX UPDATE: USD looks to build on yesterday's advances, EUR overlooks strong GDP, AUD supported by hot CPI

USD: DXY +0.2%; 99.41

• DXY is currently building on yesterday's gains in quiet trade. The two main drivers for price action yesterday were relief on the tariff front (autos) and soft US data (JOLTS and Consumer Confidence). ING notes that these offer opposing forces for the USD but ultimately the dollar opted to follow the upside in equities. Data will likely provide some impetus for the Greenback today with Q1 GDP/PCE and monthly PCE due on the docket. Q1 GDP may be seen as stale in some quarters given its precedes the announcement of US tariffs. However, if it comes in soft and is followed up by a firm PCE release, stagflationary calls will increase. Note, ADP is also due today in the run up to Friday's NFP print; MS writes that it will take a lot of job growth to offset concerns over the economic hit from tariffs. DXY has ventured as high as 99.44 with Monday's peak @ 99.83.

EUR: EUR/USD -0.1%; 1.1373

• EUR softer vs. the USD in what has been a busy morning of data which kicked off with steady French GDP, hot French inflation and in-line German GDP which saw the nation avoid a technical recession, but ultimately showed a Y/Y contraction. Thereafter, Eurozone GDP exceeded expectations (Q/Q 0.4% vs. Exp. 0.2%) but failed to have any sway on the EUR given that it doesn't capture the impact of Trump's tariffs (aside from some potential front-loading of orders). From a policy perspective, a 25bps cut in June is currently priced at 85% with the Deposit terminal rate seen around 1.5%. EUR/USD remains on 1.13 handle with a session low @ 1.1356; Monday's trough sits @ 1.1329.

JPY: USD/JPY +0.4%; 142.96

• USD/JPY is higher after Japanese Industrial Production and Retail Sales disappointed overnight, prompting concerns over a negative outturn for Q1 GDP. Participants are now awaiting a hold from the BoJ when it concludes its 2-day policy meeting on Thursday with markets pricing only a 60% chance of a 25bps rate hike by year-end. Attention will also be on the quarterly outlook report which is expected to see a downgrade to growth forecasts and a potential upgrade to inflation on account of recent hot Tokyo CPI data which serves as a leading indicator of nationwide price trends. USD/JPY is north of yesterday's high @ 142.75 but is yet to test the 143 mark.

GBP: GBP/USD -0.2%; 1.3365

• GBP is slightly softer vs. the USD and EUR with fresh macro drivers on the light side. Tier 2 data via the Lloyds Business Barometer and Nationwide House Index had little sway on GBP. On the trade front, the Guardian reports that US officials have split trade negotiations into three phases; the UK has reportedly been placed in either phase two or three. UK officials are also concerned that any EU-UK deal could make negotiations with the US more challenging. Cable is currently contained within yesterday's 1.3381-1.3444 range.

Antipodeans: AUD/USD +0.2%; 0.6394. NZD/USD -0.1%; 0.5926

• AUD is the only of the majors stronger vs. the USD. This follows firm Australian inflation metrics overnight (Q/Q 0.9% vs. exp. 0.8%, Y/Y 2.4% vs. exp. 2.3%). That being said, as highlighted by Oxford Economics, the trimmed-mean gauge fell back within the RBA's target range. As such, Oxford Eco notes the RBA has greater scope to help the economy through the current shock and cut rates by 25bps (followed by two more in H2 2025). AUD/USD rose as high as 0.6417 before returning to a 0.63 handle with upside trimmed by a firmer USD and soft Chinese PMI data. NZD/USD has breached yesterday's low @ 0.5926 with the next major target coming via the 200DMA @ 0.5884.

30 Apr 2025 - 10:20- ForexData- Source: Newsquawk