EUROPEAN FX UPDATE: USD steady ahead of PPI metrics, fleeting EUR softness as German political tensions mount

USD: DXY U/C 103.63

• USD broadly flat vs. peers. Yesterday's macro narrative was dominated by the cooler-than-expected US CPI data. However, USD largely overlooked the release with some desks noting greater emphasis on the trade front. Nonetheless, today brings more price data with PPI due on deck which will feed into the Fed's preferred inflation metrics (PCE). Expectations are for Y/Y PPI to cool to 3.3% from 3.5%, M/M is forecast at 0.3% vs. prev. 0.4%. It remains to be seen whether today's data will also be somewhat overlooked by the market. As it stands, the next full 25bps cut is fully priced by June with a total of 70bps of loosening seen by year-end. As a note of caution, US Senate Democratic Leader Schumer said Senate Republicans do not have the votes to approve the House-passed government spending bill without amendments. DXY is currently contained within yesterday's 103.35-103.78 range.

EUR: EUR/USD -0.1%; 1.0880

• EUR ever-so-slightly weaker vs. the USD. In terms of notable newsflow for today's session, EUR saw some fleeting softness after a German Green Party official said there is no progress in talks with CDU/CSU and SPD on debt plans. Note, fiscal reform will be debated in the Bundestag today from 11:00GMT. After slipping below 1.09, ING writes that "the next leg higher for the euro may need to wait for Russia to officially agree on the 30-day truce with Ukraine". Albeit, the desk concedes that it "may not be a major or long-lasting bullish driver for the euro, as a peace deal is already largely in the price". Today sees a busy speaker slate at the ECB with Vujcic, Makhlouf, Holzmaan, Villeroy and Lagarde all scheduled. Policymakers are likely to remain non-committal ahead of the April decision. If downside, in EUR/USD extends, the next target comes via the 11th March low @ 1.0828.

JPY: USD/JPY -0.1%; 148.11

• USD/JPY is marginally lower and briefly slipped below the 148 mark following its mid-week pullback from the 149.00 level. In terms of newsflow out of Japan a recent source report suggested that the BoJ is unwilling to step into the bond market despite the rise in yields. Furthermore, comments from BoJ Governor Ueda overnight noted that underlying inflation remains slightly below 2% but expects it to gradually accelerate as the economy recovers. Ueda added that Japan’s monetary base and balance sheet are somewhat too big which is why bond buying is being slowed. 147.59 marks the current session low with not much in the way of support until the 147 level.

GBP: GBP/USD -0.1%; 1.2944

• GBP is trivially lower vs. the USD after a session of slight gains yesterday which took Cable to a fresh YTD peak @ 1.2987. It once again remains the case that fresh 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. As it stands, markets price a total of 51bps of loosening this year. If downside in Cable resumes, yesterday's low sits @ 1.2912.

Antipodeans: AUD/USD -0.4%; 0.6290. NZD/USD -0.5%; 0.5697

• Both at the bottom of the G10 leaderboard following the risk-aversion during APAC trade whilst macro drivers for Australia and New Zealand remain on the light side. After a session of gains yesterday, AUD/USD has slipped below the 0.63 mark but is holding above yesterday's low @ 0.6276 and the 50DMA @ 0.6272. NZD/USD has just slipped below the 0.57 mark but holding above yesterday's @ 0.5697 and the 50DMA @ 0.5666.

13 Mar 2025 - 10:00- ForexData- Source: Newsquawk