EUROPEAN FX UPDATE: USD on the backfoot but only marginally so, EUR & GBP pivot 1.12 & 1.33 vs the USD

DXY: -0.1%, 100.67

• Dollar is on the backfoot, continuing the pressure seen following Thursday’s disappointing Retail Sales and softer-than-expected PPI data. As a reminder, this led money markets to fully price in two Fed cuts by year-end; currently pricing in roughly 57bps.


• Given that US President Trump is currently in the Middle East, trade updates have been light. Markets will be laser focused on geopolitical updates, and particularly on if there will be any meeting between Russian President Putin and Ukrainian President Zelenskiy in the near term.


• DXY currently sits in a 100.52-78 range. Further downside for the index will see a potential test of the week’s trough at 100.27 – should that be taken out, 100.00 will be next in focus.


• ING posits that “The risks remain skewed to the downside for DXY as strategic dollar shorts remain prevalent, and the 100.0 support could be retested sooner rather than later”.


• Day ahead: April's import prices are expected to fall by -0.4% M/M (prev. -0.1%), and export prices are seen -0.5% M/M (prev. 0.0). University of Michigan prelim sentiment data for May is expected to see the headline rise to 53.4 from 52.2, while conditions are seen little changed (at 59.6 from 59.8) and expectations are seen ticking up a little (to 48.0 from 47.3); attention will be on the inflation metrics (previously, the 1yr ahead expectation was at 6.5%, while the 5-10yr gauge was at 4.4%). Lastly, Fed’s Barkin is also due.

EUR: +0.2%, 1.1203

• EUR is modestly firmer vs the Dollar, with specific for the Bloc very light today – Final Italian inflation metrics were revised marginally lower but ultimately had little impact on the Single-Currency. Commentary via ECB’s Kazaks and Villeroy this morning has not added too much to the agenda; the former reiterated the need for a meeting-by-meeting approach and highlighted the uncertainty around trade.


• This morning EUR has climbed back above the 1.12 mark and has traded in a busy 1.1182-1.1219 range.


• ING writes that “we still see 1.120 as a good short-term anchor for EUR/USD, although the bias seems to be for testing 1.130 rather than 1.110 in the short term on the back of lingering USD strategic selling”.

JPY: -0.2%, 145.30

• JPY is slightly firmer vs the Dollar after choppy price action overnight, which saw USD/JPY initially trickle lower amid initial haven flows into the yen and recent declines in US yields, but later bounced off support at the 145.00 level. USD/JPY did not react much to the weaker-than-expected GDP data.


• USD/JPY currently trading around 145.30 in a 144.93-145.68 range; the trough for today marks a fresh WTD low. Further downside in USD/JPY might see a test of its 21 DMA at 144.14.

GBP: +0.1%, 1.3308

• GBP is flat/incrementally firmer vs the Dollar and holds just above the 1.33 mark, in a very thin 1.3300-1.3320 range.


• UK-specific updates have been lacking today. Some focus has been on an FT article which suggested that EU leaders are urging UK PM Starmer to improve the region’s mobility deal – particularly for EU students.

Antipodeans: AUD +0.3%, NZD +0.5%

• Antipodeans are the best performers vs the Dollar, nursing some of the losses seen in the prior session.


• The Kiwi is the best G10 performer today; overnight, New Zealand 1yr and 2yr inflation expectations are both seen higher, which may explain some of the outperformance in today’s session. Do note that the NZD is outmuscling the AUD in the AUD/NZD cross; some traders may be focused on next week’s RBA meeting, where markets widely expect the Bank to deliver a 25bps cut.


• NZD/USD currently sits in a 0.5865-5918 range; further upside will see a potential test of its 21 DMA at 0.5938.

16 May 2025 - 09:55- ForexData- Source: Newsquawk