EUROPEAN FX UPDATE: USD mixed vs. peers as trade newsflow dominates

USD: DXY +0.1%; 108.17

• DXY has started the week off on the front foot in the wake of Friday's NFP report and weekend trade developments. On the latter, US President Trump said he will announce 25% tariffs on all steel and aluminium coming into the US on Monday and unveil reciprocal tariffs on Tuesday or Wednesday which will go into effect almost immediately. Details on reciprocal tariffs are light at this stage, however, ING is of the view that "it may be countries like Brazil, India and Korea who are most exposed". Following NFP and trade threats, markets now expect just 36bps of cuts last year vs. 42bps pre-NFP. Today's docket sees the release of US employment trends and NY SCE. Greater attention lies on CPI and Fed Chair Powell's Testimony later this week. DXY briefly eclipsed Friday's 108.31 high with a session peak @ 108.44.

EUR: EUR/USD U/C; 1.0329

• EUR steady vs. the USD with the week commencing on a negative footing when it comes to trade (see above section for details). The EU has remained in Trump's sights since he took office and it appears that actions on steel and aluminium will impact the bloc with the EU also potentially set to fall within Trump's retaliatory actions. In an attempt to front-run this, the FT reported late last week that the EU is set to offer lower tariffs on US cars. Note, German Chancellor Scholz said the EU could act in an hour when asked in a pre-election debate if the EU was prepared for possible US tariffs. Elsewhere, the influential ECB member, Schnabel of Germany is due to speak @ 17:00GMT. EUR/USD briefly made its way onto a 1.02 handle with a session low @ 1.0281 before returning back above the 1.03 mark.

JPY: USD/JPY +0.6%; 152.33

• JPY the laggard across the majors after a strong showing vs. the USD last week on account of strong wage data and hawkish BoJ remarks. Over the weekend, Japanese PM Ishiba expressed optimism on Sunday that Japan could avoid higher US tariffs and noted that President Trump had "recognised" Japan's huge investment in the US. However, judging by the price action this morning, the market appears unconvinced. USD/JPY is currently towards the top-end of Friday's 150.93-152.42 range (lower bound was the lowest level since 10th December.

GBP: GBP/USD +0.2%; 1.2409

• Marginally firmer vs. the USD and EUR following a bruising end to the week last week after the BoE's "dovish" cut which saw arch-hawk Mann surprise markets with a vote for a 50bps cut. Mann is due to speak today at 17:30GMT and markets will be parsing her words to get more colour on her drastic u-turn on rates. In terms of what we do know, the minutes of the February decision showed that one MPC member (assumed to be Mann), backed a larger cut on account of wanting to show an "activist approach...even as monetary policy would need to remain restrictive for some time to anchor inflation expectations”. Elsewhere for the UK, Q4 GDP metrics are due on Thursday. Cable has been oscillating around the 1.24 mark and within a 1.2370-1.2414 range.

Antipodeans: AUD/USD +0.3%; 0.6280. NZD/USD U/C; 0.5659

• Mixed vs. the USD after a soft start to the APAC session on account of Trump's steel and aluminium import tariff threat as well as China's retaliatory tariffs taking effect. On the former, Australian PM Albanese said Australia will urge the US to give Australia exemption over steel tariffs. AUD/USD had delved as low as 0.6233 overnight before recovering to a high of 0.6279 which coincides with its 50DMA. NZD/USD has struggled to recover much lost ground and sits towards the lower end of Friday's 0.5640-95 parameters.

10 Feb 2025 - 09:45- ForexEU Research- Source: Newsquawk