EUROPEAN FX UPDATE: USD mixed vs peers. GBP hit by soft inflation as attention turns to Reeve's spring statement

USD: DXY U/C; 104.23

• DXY is currently flat but with the USD showing diverging fortunes vs. peers with the greenback softer vs. cyclicals and firmer vs. havens despite the pullback in European stocks seen since the cash open. ING highlights that the USD has been able to find some support alongside "a little more stability in US asset markets". One of the main drivers for this has been due to increasing expectations that Trump's tariff announcement on April 2nd will be less draconian than initially feared. That being said, yesterday's consumer confidence served as a reminder that there is an air of pessimism surrounding the US economy. Today's docket sees the release of US durable and remarks from Fed's Kashkari and Musalem. DXY is currently contained within yesterday's 103.94-104.46 range.

EUR: EUR/USD +0.1%; 1.0797

• EUR is mildly firmer vs. the USD despite anti-EU rhetoric from US President Trump in which he declared that Europeans have been "freeloading" and the EU has been "absolutely terrible" to the US. Incremental macro drivers for the bloc have been lacking since yesterday's better-than-expected IFO report and cautious ECB commentary in which some policymakers were at pains to leave the April meeting as an open decision. As it stands, a 25bps cut is currently priced at around 77%. EUR/USD is currently tucked within yesterday's 1.0777-1.0829 range.

JPY: USD/JPY +0.1%; 150.08

• Overnight, USD/JPY rebounded from the prior day's trough and reclaimed the 150.00 handle with tailwinds amid the constructive APAC risk tone and following the softer Services PPI data from Japan. Commentary from BoJ Governor Ueda failed to move the dial after he reiterated that the BoJ expects to keep raising interest rates if the economy and prices move in line with forecasts. We also saw comments from incoming BoJ board member Koeda that underlying inflation is heightening moderately and Japanese real interest rates are currently extremely low. USD/JPY has pulled back from its overnight high @ 150.63 but is just about holding above the 150 mark.

GBP: GBP/USD -0.4%; 1.2901

• GBP sits at the foot of the G10 leaderboard following a softer-than-expected outturn for UK inflation. Headline Y/Y CPI declined to 2.8% from 3.0% (Exp. 2.9%), core slipped to 3.5% from 3.7% (Exp. 3.6%) and services held steady at 5.0% (Exp. 4.9%). In response to the data, Capital Economics reminds us that increasing utility prices will likely send Y/Y CPI back above 3% in April and could rise as high as 3.5% in September. Market pricing according to Refinitiv moved in a moderately dovish direction with 44bps of loosening priced in by year-end. Cable has slipped onto a 1.29 handle and matched the WTD low @ 1.2885. Attention now turns to Chancellor Reeves' spring statement which is set to unveil a reduction in spending plans after her headroom at the Autumn budget was wiped out by rising bond yields.

Antipodeans: AUD/USD +0.3%; 0.6316. NZD/USD +0.4%; 0.5751

• AUD/USD was knocked lower during the APAC session following soft Australian inflation metrics in which the weighted Y/Y CPI unexpectedly slipped to 2.4% from 2.5%. The data sent AUD/USD to a session low @ 0.6279 before prices eventually recovered and the pair moved back onto a 0.63 handle, stopping shy of yesterday's peak @ 0.6325. As it stands, the next 25bps cut from the RBA is not priced until July. NZD/USD has also been able to shrug off overnight weakness and has eclipsed yesterday's best @ 0.5750.

26 Mar 2025 - 10:05- ForexData- Source: Newsquawk