EUROPEAN FX UPDATE: USD mixed vs. peers, GBP soft post-GDP, JPY weighed on by RENGO

USD: DXY +0.1%; 103.90

• DXY is higher but showing a mixed performance vs. peers (softer vs. activity currencies, firmer vs. havens). On an encouraging footing, US Senate Minority Leader Schumer said he will vote to keep the government open. However, optimism surrounding the US remains tempered by the ongoing tariff risk from the Trump administration with the President declaring that he is not going to change his mind on April 2nd tariffs. Some of this pessimism may be reflected in today's main US data point, prelim UoM data for March with the headline sentiment print set to decline. Attention will also be placed on the inflation forecasts, however, we should caution that when looking at the breakdown of responses (Dems vs. GOP), this is a highly politicised metric. DXY briefly made its way onto a 104 handle and eclipsed yesterday's peak @ 104.08.

EUR: EUR/USD U/C; 1.0850

• EUR flat vs. the USD after a session of losses yesterday that were triggered by US President Trump's threat of 200% tariffs on EU wine and champagne. Today has seen a lack of updates pertaining to negotiations in Germany over the debt reform package. As it stands, tensions between the Greens and CDU/CSU remain high following comments yesterday that there had been no progress in discussions. Germany's CDU/CSU are to hold a special parliamentary faction meeting this afternoon, according to Reuters sources. Today's EZ calendar is a light one aside from Fitch's latest review on France's credit rating (currently AA-). EUR/USD remains on a 1.08 handle after hitting a YTD peak @ 1.0946 on Tuesday. Next downside target comes via yesterday's low @ 1.0822.

JPY: USD/JPY +0.8%; 148.93

• JPY is the laggard across the majors in the wake of the latest Japanese Rengo (largest labour union) wage hikes. Rengo announced that the first-round data shows average wage hikes of 5.46% in FY25 (demand of 6.09%); initial wage hike exceeds 5% for the second straight year. Some desks have suggested that this figure was below prior speculation and thus is the likely driver behind the JPY weakness which briefly sent USD/JPY onto a 149 handle with a current session peak @ 149.02. If upside extends, the WTD high sits @ 149.19. Markets do not fully price in the next 25bps BoJ hike until October.

GBP: GBP/USD -0.2%; 1.2931

• Pressured vs. the USD and EUR in the wake of disappointing UK M/M GDP for January which unexpectedly contracted and showed a marked decline from the prior (-0.1% vs exp. 0.1% and prev. 0.4%). In response to the data, ING acknowledges that "the UK economy got off to a sluggish start in 2025". However, it cautions that "the simple reality is these monthly numbers are unhelpfully volatile" and adds "January’s weakness shouldn’t detract from what is likely to be a fairly reasonable year for UK growth". BoE pricing moved in a marginally dovish direction with a June 25bps cut now fully priced and a total of 56bps of easing seen by year-end vs. 54bps pre-release. Cable briefly slipped below yesterday's low @ 1.2920. If downside extends, the low from 12th March kicks in @ 1.2912.

Antipodeans: AUD/USD +0.3%; 0.6305. NZD/USD +0.5%; 0.5724

• Both at the top of the G10 leaderboard with sentiment in APAC upbeat overnight despite the losses on Wall St. Chinese equities benefitted from speculation that the PBoC could further reduce the RRR (China is Australia and New Zealand's largest trading partner). AUD/USD is currently tucked within yesterday's 0.6286-0.6333 range and back above its 50DMA @ 0.6272 in what has been a choppy week for the pair. Similar price action for NZD/USD which sits within yesterday's 0.5682-0.5742 parameters.

14 Mar 2025 - 10:00- ForexEU Research- Source: Newsquawk