EUROPEAN FX UPDATE: USD misery continues as EUR's rally extends into Friday's trade

USD: DXY -0.5%; 103.62

• USD's miserable run for the week has extended into Friday trade. DXY started the week off around the 107.56 mark but has since ripped through its 200DMA to the downside @ 104.99 and printed a YTD trough @ 103.56; lowest since 5th Nov (103.37 was the low that day). Downside for the USD has largely been in part due to the surge in the EUR (see below section for details), whilst an ongoing soft run of US data (this week saw soft ISM manufacturing, disappointing IBD/TIPP Economic Optimism, weak ADP and a surge in Challenger layoffs) has also added pressure. The week's main data highlight comes via today's NFP print. US nonfarm payrolls (160k vs. prev. 143k) are expected to show a moderate increase in February, with the unemployment rate holding steady at 4.0%. Elsewhere, attention is also on the trade front, as Trump made some concessions to Mexico and Canada yesterday. However, the Trump admin remains hawkish on the trade front with the more sweeping April 2nd reciprocal tariffs still due to go ahead.

EUR: EUR/USD +0.7%; 1.0861

• This week's monster really in the EUR has continued into today's session with the pair printing a fresh YTD Peak @ 1.0871. Upside this week has stemmed from the recent spending pledges coming out of Germany, a hawkish tweak to ECB guidance and an ongoing slew of soft data releases out of the US. On the ECB, source reporting in the aftermath of the decision noted that some officials see an increasing chance of a rate in April with 2.5% unlikely to be the terminal rate. Others on the GC see a growing chance of a pause in their easing cycle at their next meeting before rates come down again. In sum, there is likely to be a showdown between the hawks and the doves on the ECB in April. Markets are narrowly leaning towards a pause with around 10bps of easing priced in for the meeting. Attention is now on a test of 1.09; not breached since 6th Nov.

JPY: USD/JPY -0.4%; 147.40

• Overnight, USD/JPY traded on both sides of the 148.00 level before ultimately moving lower alongside the risk-off mood in APAC. In terms of domestic newsflow, source reporting via Bloomberg noted that the BoJ is reportedly leaning towards holding the key rate at the March meeting as it wishes to monitor the January hike and impact of US policies. Furthermore, it sees recent wage developments as being within expectations. The downside in USD/JPY has led to another YTD trough for the pair @ 147.20. If downside extends, focus will be on a test of 147. If breached, there is clean air until the 4th October low @ 145.91.

GBP: GBP/USD +0.4%; 1.2934

• GBP is on the front foot vs. the USD once again and has printed another YTD peak @ 1.2925. As has been the case throughout the week, fresh macro drivers for the UK have been lacking and therefore it is the USD leg of the equation that has been the primary driver for Cable. The pair has soared from the 1.2577 opening price on Monday, clearing its 200DMA @ 1.2785 and made its way onto a 1.29 handle. Looking ahead to next week, the sole data highlight comes via monthly GDP metrics on Friday. If upside in Cable extends, the next target will come via the 8th Nov high @ 1.2988 ahead of the 1.30 mark.

Antipodeans: AUD/USD -0.3%; 0.6315. NZD/USD -0.2%; 0.5727

• Both bucking the trend of other majors and are on the backfoot vs. the USD. Price action takes place in the context of the risk-off mood in APAC trade and as participants digested the latest trade figures from Australia and New Zealand's largest trading partner, China which showed a surprise contraction in imports and a miss on exports. AUD/USD has pulled back from yesterday's WTD peak @ 0.6363 but is still very much up on the week vs. the 0.6211 low seen on Monday; also holding above its 50DMA @ 0.6263. Similar price action for NZD/USD which has retraced from yesterday's WTD peak @ 0.5759 but is still very much up on the week vs. the 0.5602 low seen on Monday; also holding above its 50DMA @ 0.5659.

CAD: USD/CAD U/C; 1.4293

• CAD is flat vs. the USD following a heavy day of tariff-related newsflow yesterday. To recap, Trump signed an amendment to Mexico and Canada tariffs to make USMCA-compliant products exempt from levies until April 2nd. However, there will be no USMCA exemption for auto tariffs next month, steel and aluminium tariffs will not be modified and April 2nd reciprocal tariffs will still go ahead. On net, the announcements have provided some reprieve for CAD. Attention now turns to today's Canadian jobs report which is expected to see a slowing in the pace of employment growth to 20k from 76k and the unemployment rate nudge higher to 6.7% from 6.6%. That being said, greater macro focus for CAD remains on the trade front. As it stands, see a 68% chance of a cut next week and a total of 62bps of easing by year-end. USD/CAD is currently tucked within yesterday's 1.4239-1.4377 range.

07 Mar 2025 - 10:15- ForexData- Source: Newsquawk