EUROPEAN FX UPDATE: USD steady, NZD leads post-RBNZ, GBP contained after mixed inflation metrics

USD: DXY +0.1%; 107.13

• DXY steady with the USD showing a mixed performance vs. peers after yesterday's session of gains which some have attributed to a recent pick-up in US yields. Overnight, President Trump stated he will impose 25% tariffs on autos, pharmaceuticals and chips. However, this is a reiteration of recent threats and markets are broadly anticipating a period of "relative calm" ahead of the April 1st deadline. Geopolitics remains in focus after yesterday's meeting between the US and Russia over the Ukraine war; it remains to be seen how fruitful discussions will be given Ukraine's absence from the talks. On the macro agenda today, FOMC minutes are due, however, given the lack of willingness from policymakers to cut rates at this juncture, they are unlikely to provide much in the way of material direction for the dollar. DXY sits towards the top end of yesterday's 106.80-107.12 range.

EUR: EUR/USD -0.2%; 1.0426

• EUR softer vs. the USD with macro newsflow for the Eurozone on the light side. As such, geopolitics remains in focus with attention on the fallout from US-Russia discussions on the Ukraine war and what that could mean for the region, mainly via the lens of likely increased issuance for Defence spending. On the wires this morning, known ECB dove Panetta stated that signs of weakness in the EZ economy "are more present than we were anticipating". EUR/USD recently breached the lower end of yesterday's 1.0435-86 range with not much in the way of support until 1.04.


• EUR/USD opex: 1.0300-15 (7bln), 1.0350 (1.2bln), 1.0400-15 (1.5bln), 1.0450 (650mln), 1.0480 (685mln), 1.0500 (1.8bln), 1.0550 (637mln).

JPY: USD/JPY -0.2%; 151.68

• USD/JPY has traded on both sides of the 152.00 level (151.60-152.31 range) after disappointing Japanese Machinery Orders and Exports, as well as mixed comments from BoJ's Takata who stated the BoJ must gradually shift policy even after January's rate hike to avoid upside price risks from materialising but added that they need to take a cautious approach in shifting policy due to uncertainty. Takata added that he has no preset idea on timing and level of future hikes, adding that the closer you get towards neutral, the harder it is to estimate the exact level.


• USD/JPY opex: 151.45-50 (661mln), 151.65 (330mln), 152.00 (1.5bln), 152.50 (923mln).

GBP: GBP/USD -0.1%; 1.2597

• GBP marginally lower vs. the USD following a mixed UK inflation report; CPI Y/Y 3.0% vs. Exp. 2.8% (Prev. 2.5%), Core Y/Y 3.7% vs. Exp. 3.7% (Prev. 3.2%), Services Y/Y 5.0% vs. Market & BoE Exp. 5.20% (Prev. 4.40%). Following the release, Pantheon Macro noted, "we think the MPC would be ‘brave’ to keep cutting rates quarterly with wage growth around 6% year-over-year—at least double the rate consistent with inflation at target—stalling rather than collapsing jobs, and inflation well above 3%". Markets don't fully price the next 25bps rate cut until June with a total of 52bps of cuts seen by year-end. Cable hit a fresh YTD peak @ 1.2640 late yesterday but has since faded gains and returned to a 1.25 handle.

Antipodeans: AUD/USD +0.1%; 0.6357. NZD/USD +0.4%; 0.5723

• Both firmer vs. the USD with outperformance in the NZD post-RBNZ. NZD was initially pressured after the RBNZ delivered a third consecutive 50bps rate cut and signalled further cuts ahead, although the currency later rebounded off lows after the dust settled and RBNZ Orr suggested at the press conference for a shift to 25bps cuts in April and May. After delving as low as 0.5679, NZD/USD has regained some composure but is yet to approach yesterday's 0.5738 peak. AUD/USD is higher but to a lesser extent with the next notable upside target coming via the YTD peak printed on Monday @ 0.6373.

19 Feb 2025 - 10:15- ForexEU Research- Source: Newsquawk