EUROPEAN FX UPDATE: USD marginally firmer, JPY softer and GBP knocked lower by disappointing retail sales

USD: DXY +0.1%; 109.08

• DXY marginally higher with the dollar gaining some strength at the hands of a softer GBP and JPY. From a macro perspective, today's calendar is a light one in the US and instead, markets will be digesting the fallout from a busy week which has largely been characterised by a soft outturn for inflation data, mixed retail sales and a dovish interjection yesterday by Fed's Waller who stated that 3-4 cuts are possible this year (vs. current market pricing or circa 42bps of loosening). Yesterday’s Senate hearing of Treasury Secretary nominee Scott Bessent proved to be non-incremental as attention shifts towards Monday's inauguration of incoming President Trump. DXY remains within yesterday's 108.82-109.38 trading band.

EUR: EUR/USD U/C; 1.0298

• EUR flat vs. the USD in quiet EZ-specific newsflow other than comments from dovish GC member Stournaras noting that easing should continue with a series of cuts and news that French PM Bayrou survived a no-confidence motion against the government. Next week sees the release of PMI metrics which, if soft, could see attention return to the EZ growth outlook after concerns have mounted in recent weeks over sticky inflation in the bloc. EUR/USD is currently contained within yesterday's 1.0259-1.0314.


• EUR/USD opex: 1.0175-85 (1.3bln), 1.0200 (4.4bln), 1.0220-25 (778mln), 1.0240-50 (1.5bln), 1.0255-65 (557mln), 1.0270-80 (3.83bln), 1.0285 (2.6bln), 1.0300-10 (5.0bln), 1.0325-35 (1.92bln), 1.0340-50 (2.1bln), 1.0355-60 (1.12bln), 1.0370-80 (1.1bln), 1.0390-00 (4.2bln), 1.0425-30 (1.3bln), 1.0500 (2.3bln).

JPY: USD/JPY +0.4%; 155.70

• JPY softer vs. the USD after two hefty sessions of gains. Source reporting surrounding the BoJ continues to indicate that a 25bps hike is likely on the horizon. The Nikkei reports that a majority of BoJ board members are poised to approve a rate hike next week with the final decision set to come after Trump's inauguration. Market pricing sees around an 80% chance of a move. USD/JPY just about briefly dipped below 155 with a 154.99 low. If downside resumes, the 50 DMA kicks in @ 154.65.


• USD/JPY opex: 154.40 (426mln), 155.00 (2.1bln), 155.50 (958mln), 156.00 (800mln), 156.95-05 (3.05bln), 157.50 (250mln), 157.90-00 (681mln), 158.35 (430mln).

GBP: GBP/USD -0.4%; 1.2191

• GBP on the backfoot in what has been an indecisive week for Cable with the pair broadly pivoting around the 1.22 mark. Today's selling pressure has been triggered by a soft outturn for UK retail sales which unexpectedly contracted on a M/M basis. Capital Economics writes that "today’s release is further evidence that the economy had very little momentum at the end of last year". Market pricing for the BoE was little changed with around 21bps of easing seen for the Feb meeting and 66bps of cuts forecast by year-end. Cable briefly broke below yesterday's low @ 1.2174 before trimming downside.

Antipodeans: AUD/USD -0.1%; 0.6209. NZD/USD -0.2%; 0.5598

• Both slightly softer vs. the USD and unable to benefit from a better-than-expected outturn for Chinese GDP, retail sales and industrial production. AUD is currently tucked within yesterday's 0.6191-0.6245 trading band after printing a 4 year low on Monday @ 0.6130. NZD/USD is pivoting around the 0.56 mark but within yesterday's 0.5582-0.5633 parameters after printing its lowest level since October 2022 on Monday @ 0.5541.

17 Jan 2025 - 09:55- ForexData- Source: Newsquawk