EUROPEAN FX UPDATE: USD mixed vs. peers as markets digest trade updates and Trump comments on Fed Chair Powell

DXY: 99.15 +0.2%

• USD is up vs. most peers (ex-Antipodeans) with markets encouraged by two primary inputs. 1) optimism around the trade war following more upbeat comments from US President Trump overnight, reporting yesterday suggesting that Treasury Secretary Bessent sees the current levels of tariffs on China as unsustainable and comms from the White House that it is nearing deals with China and India. 2) Comments by US President Trump overnight that whilst he wishes for the Fed to lower rates, he is not looking to fire Powell. That being said, ING writes that "net-net, we still think the balance of risks remains skewed to the downside for USD in the near term". For today's docket, focus will be on US PMI data and Fed speak from Goolsbee, Musalem, Waller, Hammack. DXY sits towards the top end of yesterday's 98.01-99.65 range.

EUR: EUR/USD -0.1%; 1.1409.

• EUR is on the backfoot vs. the USD on account of the current trade optimism (see above section for details) with the EUR hampered as it is viewed as a liquid alternative to the USD. PMI metrics this morning from France, Germany and the Eurozone have all conformed to the same picture of beats on manufacturing, services and composite missed. The accompanying report noted "the Eurozone private sector saw output remain broadly stable in April". Note, there will be another round of data before the ECB's June policy announcement which is currently priced at 69% for a 25bps rate cut. EUR/USD has delved as low as 1.1309 before recovering to levels closer to 1.14.

JPY: USD/JPY +0.1%; 141.75

• JPY a touch softer vs. the USD but notably less so than seen during APAC hours where the pair hit a peak @ 143.21 overnight as markets reacted to the positivity on the trade front and comments by US President Trump on Fed Chair Powell (detailed above). On the trade front, it remains the case that Japan is front of the queue at the White House. Comms suggest that a trade agreement to stave off large US tariffs is nearing, although they are likely to leave many of the details to be hashed out at a later date and it may take months to hammer out the final deals as these things are complicated, according to Politico sources. USD/JPY is currently holding above the top end of yesterday's 139.88-141.67 range.

GBP: GBP/USD -0.1%; 1.3309

• GBP on the backfoot vs. the USD with losses briefly exacerbated by a soft outturn for UK PMI metrics which saw the services print unexpectedly slip into contractionary territory, dragging the composite reading with it. The accompanying report noted "April’s fall in output was the largest recorded for nearly two and a half years, consistent with GDP declining at a quarterly rate of 0.3%, reflecting falling activity and demand across both manufacturing and services". Markets continue to fully price a BoE rate cut in May. Elsewhere, on the trade front, reports state that the US is preparing negotiating terms for UK trade talks and will aim for the UK to reduce its automotive tariff from 10% to 2.5%, while the US will also push the UK to relax rules on agricultural imports from the US. Cable delved as low as 1.3235 overnight before recovering to levels just above the 1.33 mark.

Antipodeans: AUD/USD +0.7%; 0.6411. NZD/USD +0.4%; 0.5988

• The only of the majors up vs. the USD with both benefiting from the encouraging risk environment and more conciliatory comments from US President Trump that tariffs on China will not be as high as 145% and will not be anywhere near that level (albeit, that level but it won't be zero). AUD/USD is yet to reapproach yesterday's YTD peak @ 0.6439. If breached, the 200DMA sits @ 0.6470. Similar price action for NZD/USD which sits below yesterday's YTD high @ 0.6029.

23 Apr 2025 - 10:00- ForexData- Source: Newsquakw