EUROPEAN FX UPDATE: USD softer vs. most peers as markets digest Trump's tariff walk back

USD: DXY -0.6%; 102.28

• USD is softer vs. most peers after a bit of a bounce in the Greenback yesterday after US President Trump announced a 90-day pause in tariff actions and cut reciprocals to 10% for nations that asked for talks. On net, the decision by Trump has enhanced the outlook for global trade and underpinned risk sentiment in the market. However, tensions remain and reprieve for the market will likely not be granted until the pause becomes a permanent state of affairs. Furthermore, Trump has also opted to lift the tariff on China to 125%. Attention today will temporarily return to the data slate with CPI metrics for March due on deck, whereby Core M/M is expected to inch higher to 0.3% from 0.2%. However, given events of the past 24 hours, it's hard to tell how much of a material sway the release could have on the USD. Elsewhere, today's agenda includes weekly claims and Fed’s Logan, Bowman, Schmid, Goolsbee & Harker. Fed pricing now doesn't fully factor in the next 25bps reduction until July with a total of 85bps of cuts seen by year-end. DXY is currently within yesterday's 101.83-103.33 range.

EUR: EUR/USD +0.8%; 1.1034

• EUR is one of the better performers vs. the USD after a particularly choppy session yesterday. The initial reaction to the Trump tariff walkback saw the surge in the USD outweigh the potential upside for EUR with EUR having benefitted in recent sessions after being viewed as a liquid alternative to the Greenback. Since then, EUR has recouped some lost ground vs. the USD with EUR/USD back on a 1.10 handle but still south of yesterday's best @ 1.1094. EU Commission President von der Leyen has welcomed yesterday's announcement by the US and will speak with member nations over the next steps. As a reminder, the EU Commission was set to impose its first countermeasures against the US on April 15th with 10-25% tariffs on US imports. Attention is slowly pivoting towards next week's ECB meeting which is priced at 95% for a 25bps rate cut.

JPY: USD/JPY -1.0%; 146.26

• USD/JPY has faded some of the prior day's gains after briefly surging above the 148.00 level owing to President Trump's 90-day reciprocal tariff pause. Hopes remain high that Japan can strike a deal with the US for a more permanent level of reprieve amid recent comments from Treasury Secretary Bessent that Japan would be top of the list when it comes to negotiations after approaching the US quickly. Elsewhere, the latest Japanese PPI data printed firmer than expected. BoJ tightening bets have picked up from the modest 2bps of hikes by year-end priced yesterday with around a 50% chance of a 25bps hike by December now expected. USD/JPY is holding above the 146 mark and within yesterday's 143.98-148.28 range.

GBP: GBP/USD +0.5%; 1.2873

• GBP firmer vs. the USD but weaker vs. the EUR. Whilst GBP has benefitted from the risk-on price action triggered by President Trump's tariff walk back, ultimately the move is of little direct benefit to the UK given that it was only subject to the 10% baseline tariff and did not have reciprocal tariffs imposed on it in the first place. Note, it remains to be seen whether the UK can strike a trade deal with the US despite recent optimism over both sides coming to a deal. For today's docket, BoE's Breeden is due to speak on 'UK Economic and Financial Stability prospects' at 13:00BST. Cable is now back above its 200DMA @ 1.2813 with a current session peak @ 1.2881. The next target comes via the 1.29 mark.

Antipodeans: AUD/USD +0.1%; 0.6152. NZD/USD +0.5%; 0.5674

• Both stronger vs. the USD but less so for AUD. Whilst China is a big export market for both, price action for AUD has been tempered to a greater extent. Whilst markets are celebrating some of the tariff relief yesterday, concern still lingers over the tensions between US and China as Trump further increased tariffs on the nation to 125% with immediate effect. Since then, China has shown little signs of backing down. Also of note for AUD, National Australia Bank revised its RBA forecast in which it now sees an oversized 50bps cut in May and the OCR to decline to 2.6% by February 2026. Furthermore, Chinese inflation metrics came in soft overnight. AUD/USD hit a fresh WTD peak @ 0.6203 but failed to sustain a move above the 0.62 mark. If upside resumes, the 50DMA kicks in @ 0.6276. NZD/USD has ventured as high as 0.5709 before slipping back below its 50DMA @ 0.5697.

10 Apr 2025 - 10:10- ForexEU Research- Source: Newswires