EUROPEAN FX UPDATE: USD softer vs. peers, JPY benefits from yield dynamics, AUD boosted post-jobs

USD: DXY -0.2%; 106.98

• USD softer vs. all peers with DXY hampered by strength in the JPY on account of widening yield differentials. US yields were knocked lower post-FOMC minutes after the account showed various participants believed it might be appropriate to pause/slow balance sheet runoff. That being said, commentary from FOMC officials has continued to underpin the cautious view at the Bank with Jefferson stating they can take their time weighing the next move whilst Goolsbee said inflation is too high, once it comes down rates can follow. Today's Fed speaker slate includes Goolsbee, Musalem, Jefferson & Barr. Elsewhere, today's other scheduled highlights include Treasury Secretary Bessent at 12:00GMT on Bloomberg TV with weekly claims and Philly Fed data to follow thereafter. On the trade front, the latest updates have seen Trump state that a new trade deal with China is possible whilst also declaring that he will announce tariffs on cars, semiconductors, chips, pharma and probably lumber "over the next month or sooner". DXY has returned to a 106 handle but is currently holding above yesterday's 106.87 low.

EUR: EUR/USD +0.1%; 1.0431

• EUR slightly firmer vs. the USD but to a lesser degree than most peers following losses on Tuesday and Wednesday. On the trade front, EU Trade Commissioner Sefcovic said the EU is prepared to talk with the US about reducing its 10% tariff on cars as part of a broader negotiation. Elsewhere on an EU level, rates markets remain partially focused on the discussion over increased defence spending in the region and the subsequent issuance requirements. Markets also continue to digest yesterday's comments from Schnabel who posited that the Bank is nearing the point at which it'll need to pause rate cuts. Vindication or a rebuttal of this view may be provided by tomorrow's flash PMI metrics. EUR/USD is currently stuck within yesterday's 1.0400-61 parameters.

JPY: USD/JPY -0.8%; 150.25

• USD/JPY retreated overnight amid initial gains in Japanese yields (and softness in their US counterparts post-FOMC minutes) alongside the negative risk appetite on Tokyo. Further downside was seen after the pair breached beneath last week's support at the 151.00 level to print a fresh YTD low. Thereafter, the pair breached support at the 150 mark with a session trough @ 149.96. USD/JPY has since returned to a 150 handle, however, if downside resumes, the next target comes via the 9th December low @ 149.68.

GBP: GBP/USD +0.2%; 1.2611

• GBP a touch firmer vs. the USD but to a lesser degree than peers. UK newsflow for today has been light in a week where markets have digested firmer than expected labour market data and a mixed inflation report. Next up on the data docket is tomorrow's release of retail sales and flash PMI metrics. As such, in the interim, direction for Cable may be dictated more by the USD leg of the equation; currently tucked within yesterday's 1.2562-1.2639.

Antipodeans: AUD/USD +0.5%; 0.6375. NZD/USD +0.4%; 0.5729

• Both notably stronger vs. the USD with AUD bolstered by stronger-than-expected jobs data in Australia in which employment change topped forecasts at 44k (exp. 20k) and was solely fuelled by full-time jobs. Sentiment was also bolstered by comments from US President Trump that a new trade deal with China is possible. As such, AUD/USD has printed a fresh YTD peak @ 0.6379 with not much in the way of resistance until the 0.64 mark. NZD/USD is firmer but to a lesser extent than AUD and currently yet to breach yesterday's 0.5732 peak.

20 Feb 2025 - 10:15- ForexData- Source: Newsquawk