EUROPEAN FX UPDATE: USD looks to claw back recent losses. EUR/USD pulls back from multi-year high

USD: DXY +0.1%; 98.05

• DXY is a touch higher following yesterday's selling pressure which was triggered by an easing in geopolitical tensions and comments by Fed Chair Powell. On the former, ING believes that "the negative impact of the reduced geopolitical risk on the dollar has largely played out". On Powell, whilst his initial remarks endorsed the Bank's wait-and-see approach to policy making, the market placed great weight on comments that he would expect to see meaningful inflation effects from tariffs in June, July, and August. He added that if those effects failed to materialise, it could lead to an earlier rate cut; this follows dovish remarks on Monday from Waller and Bowman re. a potential July cut. Markets now fully price a September cut (vs. October at the start of the week). Today's calendar is light in terms of data. However, investors are still mindful of the trade front after FBN's Gasparino revealed last night that Team Trump said it was close to announcing a handful of trade deals. On the fiscal front, US Treasury Secretary Bessent said the Senate is on track for a vote on Trump's tax bill on Friday. As we head closer to month-end, modelling from Barclays and Citi suggests modest USD selling. DXY is currently contained within yesterday's 97.70-98.27 range.

EUR: EUR/USD U/C; 1.1608

• After hitting a multi-year high yesterday @ 1.1641, the rally in EUR/USD has paused for breath with the pair returning to a 1.15 handle. Fresh macro drivers for the Eurozone are on the light side following a raft of ECB speak at the start of the week, which suggested that recent geopolitically-driven gains in the energy space are not affecting the Bank's outlook for inflation. Today sees global leaders gather in The Hague for the NATO summit. This will bring attention to the Bloc's defence spending plans but is unlikely to have a material sway on the EUR unless there is a dramatic fallout between the region and US President Trump. As such, the USD leg of the equation may provide the greater source of direction in the near-term. EUR/USD has ventured as low as 1.1591 but is holding above yesterday's trough @ 1.1574.


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  EUR/USD opex: 1.1450-55 (1.04bln), 1.1475 (1.23bln), 1.1495-00 (5.0bln), 1.1510-15 (560mln), 1.1530-35 (346mln), 1.1550 (789mln), 1.1570 (510mln) 1.1600-10 (1.2bln), 1.1625-35 (1.3bln), 1.1650 (1.7bln) 1.1710 (3.0bln), 1.1725 (444mln), 1.1800 (299mln).

JPY: USD/JPY +0.4%; 145.48

• JPY is seeing some give back vs. the USD following a strong session of gains, which brought the pair down from a 146.17 peak to a 144.51 trough. Yesterday's downside in USD/JPY was attributed to declines in oil prices (benefits Japan) and reports that Japanese Economy Minister Akazawa was arranging to visit the US as early as June 26th for tariff talks. Overnight initially saw downside in USD/JPY following hawkish remarks from BoJ taper-dissenter Tamura, who reiterated that 0.5% is not a barrier for BoJ rate hike. The currency was also underpinned after FBN’s Gasparino flagged progress between the US and Japan on trade talks. However, these moves were reversed in early European trade as the USD looked to claw back some of its recent losses. Today's session peak @ 145.51 is still some way off yesterday's best.


• 
  USD/JPY opex: 143.45-50 (824mln), 143.90-00 (1.5bln), 144.20 (1.13bln), 144.50 (2.21bln), 144.65-70 (419mln), 145.00-10 (1.6bln), 145.40-45 (551mln), 145.80-85 (460mln), 146.00 (1.04bln), 146.15-20 (400mln), 146.35 (275mln), 146.50 (430mln), 147.00 (511mln), 148.00 (2.0bln).

GBP: GBP/USD U/C; 1.3616

• GBP is flat vs. the USD with incremental macro drivers from the UK lacking. Yesterday saw a slew of BoE speak with Bailey, Ramsden and Greene all on the docket. Comments from Governor Bailey noted that he views the impact of tariffs on inflation is more ambiguous than on growth. He added that he thinks we are starting to see a softening in the labour market and wage settlements are likely to come off. Ultimately, the path for rates is lower. On today's docket, we have been awaiting comments from Lombardelli and Pill. Greene and Lombardelli (again) are due to speak later. Markets fully price the next 25bps BoE cut in September with a total of 50bps of loosening seen by year-end. Cable remains on a 1.36 handle and at the top end of yesterday's 1.3521-1.3648 range; top of which was a multi-year high.

Antipodeans: AUD/USD +0.1%; 0.6495. NZD/USD +0.3%; 0.6020

• Antipodeans are marginally outperforming amid the recent upside in global equities and a broader rise in commodity prices. AUD/USD saw an immediate knee-jerk lower on the sub-forecast monthly CPI metric, which ultimately did little to change the current course of the RBA; a July cut is still priced at 92%. Elsewhere, NZD was unreactive to May trade data, which saw a slightly narrower trade surplus than previous. AUD/USD is sat just below the 0.65 mark and within yesterday's 0.6450-0.6518 range. NZD/USD has gained a firmer footing on a 0.60 mark and is contained within yesterday's 0.5970-0.6041 parameters.

25 Jun 2025 - 10:20- ForexGeopolitical- Source: Newsquawk