EUROPEAN FX UPDATE: USD mixed vs. peers, JPY leads as BoJ hike bets mount, GBP lags post-GDP

USD: DXY +0.1% 109.13

• USD mixed vs. peers after being sold yesterday in the wake of soft CPI metrics which saw Fed easing expectations return to pre-NFP levels. For today's docket, attention will be on December retail sales data and weekly claims figures. On the former, US retail sales are expected to rise +0.6% M/M in December (prev. +0.7%), while the ex-autos measure is seen rising +0.4% M/M (prev. +0.2%). Ahead of the release, ING flags last night's Beige book which "noted that most of the Fed's 12 districts reported strong holiday sales". Elsewhere, attention will be on incoming Treasury Secretary Bessent's Senate confirmation hearing which is expected to see him questioned on the USD and tariff policy. Pre-prepared remarks have stressed the role of the USD as the world's reserve currency. DXY is just about holding above the 109 mark and within yesterday's 108.06-109.38 range.

EUR: EUR/USD -0.1%; 1.0285

• EUR is trivially softer vs. the USD after fading some fleeting reprieve provided by an upward revision to M/M German CPI for December. Today's EZ-docket includes the minutes from the December meeting which saw the Bank pull the trigger on a 25bps rate cut. The account will be scanned for any views of GC members that could suggest a slowdown in the ECB's rate cutting cycle. Of concern for EUR bulls is EUR/USD's inability to hold above the 1.03 mark despite a soft outturn for US CPI yesterday which boosted the pair to a 1.0354 peak. To the downside, yesterday's low sits @ 1.0258.


• EUR/USD opex: 1.0200-05 (1.1bln), 1.0225 (662mln), 1.0250-60 (1.23bln), 1.0265-70 (950mln), 1.0295-00 (1.15bln), 1.0310 (254mln), 1.0325-35 (1.72bln), 1.0350 (1.43bln), 1.0380 (219mln), 1.0400-05 (1.06bln).

JPY: USD/JPY -0.5%; 155.74

• JPY the best performer across the majors as expectations of a BoJ hike next week continue to ramp up. In terms of the latest updates, source reporting via Bloomberg noted that the BoJ is said to see a good chance of a January rate hike barring a major market rout following Trump inauguration. Accordingly, the market prices a circa 80% chance of a hike next week and a total of 50bps of tightening this year. USD/JPY has made a fresh low for the year @ 155.22 with the next downside levels coming via the 155 mark and the 50DMA @ 154.61.

GBP: GBP/USD -0.4%; 1.2190

• GBP towards the bottom of the G10 leaderboard following a softer-than-expected outturn for UK GDP; M/M 0.1% vs. Exp. 0.2% (prev. -0.1%). In response to the data, Pantheon Macro lowered its Q4 GDP growth forecast to 0.0% Q/Q from 0.1% previously; also cites the recent outturns for UK PMI metrics. Note, a flat Q4 print would match the BoE's forecast. On the matter of the MPC, comments from BoE's Taylor continue to reverberate with the central banker expecting 4 x 25bps rate cuts this year vs. market expectations of 59bps of easing. Cable has just slipped below the 1.22 mark but sits within yesterday's 1.2154-1.2306 range.

Antipodeans: AUD/USD -0.2%; 0.6214. NZD/USD -0.2%; 0.5602

• Both slightly softer vs. the USD after a recent run of three consecutive sessions of gains. Macro focus for AUD has been on the overnight jobs data, which, although saw a larger-than-expected level of employment change, was largely driven by part-time roles and accompanied by an uptick in the unemployment rate. Accordingly, AUD is a touch softer with a 25bps cut fully priced by April. AUD/USD is holding above the 0.62 mark and within yesterday's 0.6180-0.6246 range. NZD/USD is holding above the 0.56 mark but towards the lower end of yesterday's 0.5596-0.5654 range.

16 Jan 2025 - 10:00- ForexData- Source: Newsquawk