EUROPEAN FX UPDATE: USD steady ahead of CPI, JPY on the backfoot

USD: DXY U/C; 107.95

• DXY steady ahead of upcoming US CPI data whereby core M/M CPI is expected to tick higher to 0.3% from 0.2%, Y/Y nudge lower to 3.1% from 3.2%, headline M/M is seen falling to 0.3% from 0.4% and Y/Y is expected to hold steady at 2.9%. An in-line report could cement the markets view of inflation stickiness given that the most recent Fed statement did not include language that inflation had made progress to its 2% goal. As it stands, markets do not fully price another 25bps cut until September with a total of 35bps of easing seen by year-end. On the trade front, WSJ reports that reciprocal tariffs could go beyond simply matching other nations’ tariffs to take into account nontariff trade barriers. Elsewhere, today sees Powell address The House. Bostic and Waller are also due (latter is speaking on Stablecoins). DXY is back below the 108 mark and in close proximity to its 50DMA @ 107.95.

EUR: EUR/USD +0.1%; 1.0369

• EUR stronger vs. the USD for a third consecutive session. However, it remains to be seen how durable the recent uptick will be given the Eurozone's uncertain growth outlook, easing bias at the ECB and vulnerability of the Eurozone to tariff action from the Trump administration. Today's EZ calendar is lacking in terms of data highlights. However, Germany's Nagel is due on the speaker slate and set to talk on the neutral rate; note, policymakers have continued to downplay the importance of targeting the neutral rate when formulating policy. EUR/USD has been as high as 1.0379 but is yet to breach yesterday's 1.0381 peak.


• EUR/USD opex: 1.0270-75 (2bln), 1.0300 (2.1bln), 1.0315-25 (1.8bln), 1.0340 (908mln), 1.0375-80 (579mln), 1.0390 (834mln), 1.0400-05 (1.4bln), 1.0450 (1bln).

JPY: USD/JPY +0.7%; 153.55

• JPY the clear laggard across the majors. Japanese-specific drivers have been on the light side asides from some non-incremental remarks from BoJ Governor Ueda overnight who stated that the pace of monetary adjustment should depend on the economic situation and he is aware that rising inflation, including fresh foods, is having a negative impact on households. Direction for the JPY instead appears to be dictated by widening yield differentials with the US as the US 10yr continues to grind higher. USD/JPY is now back above its 200DMA @ 152.70 with a current session peak @ 153.88. Focus is now on a test of 154.

GBP: GBP/USD U/C; 1.2448

• GBP steady vs. the USD with the lone highlight on today's UK calendar coming via a speech by MPC member Greene @ 15:00GMT. Greene's remarks will follow those yesterday of dovish dissenter Mann who gave her reasoning behind her dissent at the last meeting but noted her “active rate policy does not mean cut, cut, cut" and suggested she may not opt for another 50bps cut at the next meeting. Note, Greene was part of the majority on the MPC last week who backed a 25bps reduction. Greene hasn't spoken since early December when she noted that services inflation has remained stubbornly high, underpinned by wage growth. Cable briefly popped above yesterday's 1.2454 peak but ran out of steam ahead of the 50DMA @ 1.2476.

Antipodeans: AUD/USD -0.1%; 0.6285. NZD/USD -0.1%; 0.5646

• Both marginally softer in quiet trade for the antipodes. AUD/USD is pausing for breath after two consecutive sessions of gains which has brought the pair above its 50DMA @ 0.6271 but failed to sustain a move above the 0.63 mark with a current session peak @ 0.6309. NZD/USD has pulled back a touch after running out of steam ahead of its 50DMA @ 0.5676 with a current session peak @ 0.5671.

12 Feb 2025 - 09:45- ForexEU Research- Source: Newsquawk