EUROPEAN FX UPDATE: USD remains soggy vs. peers, EUR digests CPI metrics, antipodeans lead

USD: DXY -0.3%; 107.97

• USD is softer vs. most peers with DXY down for a third consecutive session. Recent price action for the Greenback has been dictated by the recent Washington Post report that Trump's tariff plans may not be as bad as initially feared. Whilst Trump did later attempt to downplay this, ING is of the view that "there is no smoke without fire". That being said, ING cautions that "it is unlikely investors will want to consider actively selling the dollar ahead of Trump's inauguration on 20 January on speculation over softer tariffs". For today's docket, attention will be on ISM services PMI and JOLTS data ahead of NFP on Friday. DXY has been as low as 107.84 but is holding above yesterday's 107.75 base.

EUR: EUR/USD +0.3%; 1.0419

• EUR remains supported after being catapulted from a 1.0294 base yesterday in the wake of reports that the Trump tariff programme may be less stringent than initially feared. The macro focus has been on the December Eurozone inflation report which showed headline HICP advancing to 2.4% from 2.2% as expected and the super-core rate holding steady at 2.7%. Some minor softness was observed in EUR/USD amid expectations of a potentially hotter figure given the outturn for Germany yesterday. EUR/USD is currently a touch below yesterday's 1.0436 peak.


• EUR/USD opex: 1.0300 (3.5bln), 1.0325 (790mln), 1.0350 (767mln), 1.0375 (805mln), 1.0420-25 (1.2bln), 1.0500 (1.4bln).

JPY: USD/JPY U/C; 157.56

• JPY flat vs. the USD after USD/JPY reached its highest level since July during APAC trade @ 158.41. This subsequently triggered some jawboning from Japan's Finance Minister Kato who noted they are recently seeing one-sided, rapid moves and reiterated to take appropriate action against excessive moves. Elsewhere, Barclays have shifted their BoJ view and now see the Bank hiking in March and October vs. previous forecast of January and July with the desk of the view that "the BoJ's concern about JPY weakness has declined somewhat compared with June-July". As it stands, markets price in around 11.6bps of tightening for the 24th January meeting.

GBP: GBP/USD +0.4%; 1.2563

• GBP has extended on yesterday's tariff-induced gains vs. the USD with major fresh macro drivers for the UK on the light side today. As such, Cable has eclipsed yesterday's peak @ 1.2550 but has failed to sustain a move above its 21DMA @ 1.2573. If upside resumes, attention will be on a test of 1.26 to the upside; not breached since 30th December (1.2607 was the high that day).

Antipodeans: AUD/USD +0.6%; 0.6280. NZD/USD +0.8%; 0.5687

• Both at the top of the G10 leaderboard with markets continuing to deliberate the prospect of a potentially more friendly tariff programme by the Trump regime. AUD has managed to overlook soft building approvals data overnight with AUD/USD eyeing a potential test of 0.63 to the upside. If breached, yesterday's 0.6301 rests just above. NZD/USD has eclipsed yesterday's best @ 0.5684 and is now eyeing a test of 0.57; not breached since 0.5758.

CHF: EUR/CHF +0.3%; 0.9426

• CHF a touch softer vs. the EUR post-Swiss CPI metrics. Y/Y headline CPI fell to 0.6% from 0.7% as expected, whilst the core rate fell to 0.7% from 0.9% (expected 0.8%). The 0.6% outturn means that the average across Q4 as a whole came in around 0.63% and is shy of the 0.7% projection for Q4 that the SNB announced alongside the December decision (a forecast which was already cut from their view of 1.0% at the September meeting). Market pricing saw expectation of a 25bps cut in March further cemented. EUR/CHF moved back onto a 0.94 handle following the data and is eyeing the 30th December peak @ 0.9441.

07 Jan 2025 - 10:20- ForexData- Source: Newsquawk