EUROPEAN FX UPDATE: USD steady ahead of CPI data, JPY lags peers

USD: DXY U/C; 103.46

• USD is broadly flat vs. peers (ex-JPY) in the aftermath of another busy session for trade rhetoric yesterday. As a reminder, US President Trump backed down from his earlier threat to double tariffs on Canadian steel and aluminium imports to 50%. At this stage, backing down from said threats will offer little in the way of reprieve for markets given the overall uncertainty created by the Trump admin's tariff programme. This is reflected in risk assets with the SPX down circa 9% from its record high set in February. Today, attention will turn to US inflation metrics for January with core M/M CPI expected to slip to 0.3% from 0.4%, core Y/Y forecast at 3.2% vs. prev. 3.3%. On a headline basis, M/M is seen declining to 0.3% from 0.5% with the Y/Y seen pulling back to 2.9% from 3.0%. Markets fully price the next 25bps reduction by June with a total of 75bps of cuts seen by year-end. DXY is currently holding within yesterday's 103.32-92 range (lower bound is the YTD low).

EUR: EUR/USD U/C; 1.0913

• EUR showing a session of calm thus far vs. the USD in comparison to recent moves. That being said, newsflow surrounding the region remains active with the EU announcing EUR 26bln worth of retaliatory tariffs against the US. Furthermore, there have been encouraging signs on the geopolitical front with Ukraine expressing readiness to accept the US proposal to enact an immediate and interim 30-day ceasefire. On the matter of defence, it's worth noting that tomorrow sees the debate in the German Bundestag begin over the proposed reform package. Today sees a busy ECB speaker slate, albeit policymakers are likely to maintain their non-committal approach re. the April decision. EUR/USD is currently holding above the 1.0900 mark but is yet to approach yesterday's YTD peak @ 1.0947.

JPY: USD/JPY +0.5%; 148.54

• Overnight, USD/JPY extended on gains and breached the 148.00 level to the upside amid widening yield differentials. From a macro perspective, BoJ Governor Ueda reiterated that the Bank is ready to conduct bond buying operation nimbly in exceptional cases, when long-term rates make irregular moves. USD/JPY has ventured as high as 148.67; highest since 6th March (149.33 was the high that day).

GBP: GBP/USD -0.1%; 1.2935

• GBP is trivially softer vs. the USD. As has been the case in recent session's, incremental macro drivers from the UK have been lacking. The main UK data highlight comes on Friday with the release of monthly GDP metrics. Albeit, focus remains more on the inflation/fiscal front; Spring statement due on March 26th. As it stands, markets price a total of 59bps of loosening this year. Cable is currently tucked within yesterday's 1.2966-1.2873 range (the upper bound of which is the YTD peak).

Antipodeans: AUD/USD -0.2%: 0.6288. NZD/USD -0.1% 0.5708

• Antipodeans have been uneventful and trade marginally softer vs. the USD. Fresh macro drivers out of Australia and New Zealand remain on the light side and therefore price action may be dictated more by the global risk environment and the USD leg of the equation. AUD/USD is currently caged within yesterday's 0.6258-0.6311 range and holding above its 50DMA @ 0.6268. NZD/USD is also stuck within yesterday's 0.5677-0.5726 parameters.

CAD: USD/CAD U/C; 1.4433

• Steady vs. the USD after a choppy session in which the trade agenda dominated price action. To recap events, US President Trump backed down from his plans to double tariffs on Canadian steel and aluminium imports to 50%. This followed the decision by the Ontario Premier to suspend its electricity surcharge on the US. Nonetheless, 25% tariffs on Canadian steel and aluminium have gone ahead. Attention today will turn to the monetary policy sphere with the BoC expected to pull the trigger on a 25bps rate cut as trade tensions weigh on the growth outlook. A total of 76bps of loosening is seen by year-end. A dovish BoC release could see USD/CAD revisit levels above 1.45; yesterday's high kicks in @ 1.4521.

12 Mar 2025 - 10:20- ForexData- Source: Newsquawk