EUROPEAN FX UPDATE: USD softer vs. most major peers, antipodeans lead, EUR/USD remains on a 1.09 handle

USD: DXY -0.3%; 103.11

• USD is currently softer vs. all peers after benefiting yesterday from a jump in US yields. The trade narrative remains at the forefront of investor sentiment after US President Trump showed no signs of easing up on his aggressive approach to trade as he threatened an additional 50% tariff on China. Furthermore, Trump added that the US is not looking at pausing tariffs; tariffs could be permanent and there could also be talks. Attention for the next phase of the trade war is the extent to which trading partners seek to strike a deal or retaliate and how much relief/pain this can present to global equity markets. Despite moves in Congress to progress Trump's tax cut agenda, the trade narrative remains the dominant one. Today's data slate includes just NFIB small business optimism, whilst 2027 Fed voter Daly is due on the speaker slate. DXY sits towards the top end of yesterday's 102.18-103.54 range.

EUR: EUR/USD +0.4%; 1.0945

• EUR firmer vs. the USD but to a lesser extent than some peers. Yesterday saw EUR/USD close higher but a long way off the earlier session peak @ 1.1050 with the pair dragged lower by upside in US yields. ING posits that the EUR remains underpinned by its liquidity premium. However, the desk adds there is potential some downside risk for EUR/USD from a rate perspective, given that "the ECB looks increasingly likely to cut next week while the Fed still hasn’t given any signal to justify the four cuts priced by 2025". In the trade war, the EU Commission reportedly proposed a 25% tariff on US goods to take effect from May 16th, whilst President Trump continues to speak out against the EU. Today's EZ docket is light in terms of data and as such, broader macro conditions and developments on the trade front will likely remain the focus for the pair. EUR/USD is currently contained on a 1.09 handle within a 1.0905-91 range.


• EUR/USD opex: 1.0850 (1.5bln), 1.0875-80 (820mln), 1.0900 (742mln), 1.0925 (626mln), 1.0950 (567mln), 1.0965 (502mln), 1.1000 (570mln), 1.1050 (954mln), 1.1065 (712mln).

JPY: USD/JPY -0.3%; 147.45

• JPY firmer vs. the USD despite the pick-up in risk sentiment we have seen thus far (albeit stocks have pulled away from best levels). In terms of updates out of Japan, Chief Cabinet Secretary Hayashi says PM Ishiba is considering visiting the US to meet with US President Trump. Additionally, US Treasury Secretary Bessent said he has not seen a trade offer from Japan and expects Japan to get priority in negotiations because they came forward early. This could explain why JPY is able to eke out some gains vs. the USD and some of its other major peers. USD/JPY has delved as low as 146.98 but is some way off yesterday's trough @ 144.82. Market pricing for a BoJ hike this year remains low with just 10bps of tightening seen by year-end.


• USD/JPY opex: 147.00-15 (1.5bln), 149.00 (1bln), 149.50 (470mln), 149.90 (620mln).

GBP: GBP/USD +0.2%; 1.2750

• GBP is firmer vs. the broadly softer USD but once again to a lesser extent than the EUR on account of the Euro's greater liquidity premium. UK-specific drivers are on the light side. As we mentioned yesterday, desks are looking to see how the UK positions itself between the US and EU with Starmer noting last week that discussions on an economic deal with the US are "well advanced". Today's session is light in terms of UK data. However, BoE's Lombardelli is due to speak at 17:00BST on the divergence between British and U.S. economic productivity. Cable remains on a 1.27 handle and within yesterday's 1.2709-1.2934 range. Interim resistance is provided by the 1.28 mark and 200DMA @ 1.2814.

Antipodeans and Yuan: AUD/USD +1.2%; 0.6056. NZD/USD +1.2%; 0.5600. USD/CNH +0.1%; 7.3542

• Antipodeans firmer vs. the USD and top of the G10 leaderboard on account of the pick-up seen in risk sentiment. This comes despite both nations' exposure to China and the threat by US President Trump yesterday over an additional 50% tariff on the name. The Yuan has come under particular attention today after the PBoC set its daily fixing above 7.20 for the first time since September 2023. However, ING cautions that a material weakening of CNY by the PBoC is unlikely as such a move could easily be countered by further tariffs from the Trump administration. Furthermore, it would also decrease domestic purchasing power. Nonetheless, the fixes will likely come under greater-than-usual scrutiny in the coming sessions. AUD/USD has made its way back onto a 0.60 handle but is still some way shy of yesterday's 0.6126 peak. Similar price action for NZD/USD with the pair returning to a 0.56 handle but far south of yesterday's best @ 0.5645.

08 Apr 2025 - 10:20- ForexEU Research- Source: Newsquawk