EUROPEAN FX UPDATE: USD softer as geopolitical premium recedes. Attention now on Powell

USD: DXY -0.2%; 98.13

• DXY is lower as the safe-haven premium continues to unwind for the USD. This comes after US President Trump declared a ceasefire between Iran and Israel; which was subsequently later acknowledged by Israel. However, Israel has since stated that Iran has breached the ceasefire. Accordingly, DXY has bounced from a 97.96 low and made its way back onto a 98.0 handle. Also acting as a headwind for the USD has been recent dovish commentary from FOMC officials with both Bowman and Waller talking up the chances of a July cut (currently priced at just 23%). Attention now turns to comments from Fed Chair Powell at 15:00BST, who will be delivering his semi-annual monetary policy report to the House Financial Services Committee. Focus will be on whether he endorses the chances of a cut next month. ING posits that, if he chooses to do so, this could engineer a material move lower in the USD as traders question Fed independence, given the pressure by President Trump to lower rates. Note, US Consumer Confidence hits at the same time as Powell. If downside in DXY resumes, the YTD low from June 12th sits @ 97.60.

EUR: EUR/USD +0.1%; 1.1591

• EUR firmer vs. the USD but to a lesser extent than peers. Yesterday, the pair saw a sizeable rise from a 1.1454 low to a 1.1581 peak, which has since been extended to a 1.1622 high during today's session. The move for EUR/USD ran out of steam around the same time that Israel claimed that Iran had violated the ceasefire. In terms of domestic drivers, German IFO data saw a larger-than-expected increase for the Business climate metric. Whilst attention has also been on comments from ECB's Villeroy, who noted that the ECB could still proceed with rate cuts despite volatility in oil markets, adding that inflation expectations remained moderate. Today's speaker slate also includes ECB's de Guindos, Kazimir, Lagarde and Lane; markets will be looking to see how other members on the GC view the impact of geopolitical events on policy. If upside in EUR/USD resumes, the YTD high from June 12th sits @ 1.1631.

JPY: USD/JPY -0.8%; 145.01

• JPY is towards the top of the G10 leaderboard despite the unwind in the safe-haven premium seen elsewhere. JPY is instead benefiting from the pullback in oil prices, given that it is a net importer. Furthermore, Japanese Economy Minister Akazawa is reportedly arranging to visit the US as early as June 26th for tariff talks, according to Yomiuri. USD/JPY has pulled back markedly from yesterday's 148.03 peak and briefly slipped onto a 144 handle with a current session low @ 144.95. If downside resumes, technicians flag the 50DMA @ 144.14.

GBP: GBP/USD +0.5%; 1.3584

• GBP is firmer vs. the USD and EUR as it benefits from the bump in risk sentiment. Fresh UK-specific macro drivers are lacking for today's session. However, that could change given the busy BoE speaker slate which includes MPC members Bailey, Greene, Ramsden, Pill and Breeden. Markets will be looking for any clues over the MPC's future easing intentions given the three dovish dissenters at last week's meeting, as well as a recent run of soft data points, including last week's retail sales release. Markets currently assign a 62% chance of an August rate cut and expect around 50bps of loosening by year-end. Cable is currently eyeing a test of the 1.36 mark. If breached, the YTD high from 13th June sits @ 1.3632.

Antipodeans: AUD/USD +0.6%; 0.6496. NZD/USD +0.7%; 0.6016

• Both are near the top of the G10 leaderboard on account of the positive risk tone. Fresh macro drivers for both have been on the light side. However, traders are mindful of Australian monthly CPI metrics overnight, which are expected to see the Weighted Y/Y CPI metric decline to 2.3% from 2.4%; note, the RBA has a 2-3% inflation target band. As it stands, markets assign an 80% chance of a rate cut next month and see a total of 76bps of loosening by year-end. AUD/USD has rebounded sharply from yesterday's trough @ 0.6372 and moved back above its 50 and 200DMAs @ 0.6445 and 0.6424 respectively but has failed to hold above the 0.65 mark (current session high @ 0.6513). NZD/USD has returned to a 0.60 handle after slipping as low as 0.5883 yesterday with a session high @ 0.6034.

CAD: USD/CAD -0.1%; 1.3720

• CAD firmer vs. the USD but to a lesser extent than peers as the declines in oil prices cap gains for the currency. Attention today will be on domestic inflation data with Y/Y CPI for May set to hold steady at 1.7%, M/M is expected to rise to 0.5% from -0.1%. Note, at its most recent meeting (where it left rates unchanged), the Bank stated that further rate cuts may be warranted if tariff-related uncertainty spreads but inflationary cost pressures remain contained. Markets assign a 38% chance of a rate cut next month with a total of 31bps of loosening seen by year-end. USD/CAD ventured as high as 1.3790 yesterday, topping out just ahead of its 50DMA @ 1.3797, but has since pulled back to a low @ 1.3711.

24 Jun 2025 - 10:05- ForexGeopolitical- Source: Newsquawk