EUROPEAN FX UPDATE: USD up vs. peers, antipodeans lags, EUR slides and GBP eyes BoE

USD: DXY +0.5%; 103.91

• DXY has continued to build on yesterday's post-FOMC gains with the release broadly as expected. The announcement failed to appease any of those in the market looking for a dovish lean from the FOMC with Chair Powell reaffirming that the Fed is in no hurry to cut rates. Ultimately, the Fed is in a holding pattern as policymakers look to gain clarity on the Trump administration's trade agenda. Note, in the aftermath of yesterday's announcement, Trump posted "The Fed would be MUCH better off CUTTING RATES as U.S.Tariffs start to transition... into the economy". As it stands, markets don't fully price the next cut until July with a total of 66bps of loosening seen by year-end. For today's agenda, focus is on weekly claims data and the latest Philly Fed index. DXY has ventured as high as 103.95. If 104 gives way, interim resistance comes via the 14th March peak @ 104.09.

EUR: EUR/USD -0.5%; 1.0842

• EUR softer vs. the broadly firmer USD. From a macro perspective in the Eurozone, remarks from ECB President Lagarde largely echoed her introductory statement at this month's ECB press conference. However, she did flesh out the Bank's view on the ongoing trade conflict, noting that ECB analysis suggests that a US tariff of 25% on imports from Europe would lower Euro Area growth by around 0.3ppts in the first year. Lagarde added "a European response in the form of raising tariffs on US imports would further increase this to about half a percentage point.". Elsewhere, some desks are flagging the recent uptick in US stocks. If extended, it could halt some of the advances in EUR/USD if European equities fail to follow suit, ING also adds that yesterday's FOMC announcement could "stabilise the greenback by keeping dovish expectations relatively capped"; desk sees a move to 1.07 as more likely than 1.10. EUR/USD has slipped further from its YTD peak on Tuesday @ 1.0954 and has hit a new low for the week @ 1.0839. Next downside target comes via the 14th March low @ 1.0830.

JPY: USD/JPY U/C; 148.68

• JPY flat vs. the USD and more resilient than peers. Yesterday, USD/JPY slumped beneath the 150.00 level as US yields softened in reaction to the Fed announcement, while the pair then continued its slide and approached closer to the 148.00 level in the absence of Japanese participants who were away from market overnight. If 148 eventually gives way, the next downside target comes via the 14th March low @ 147.68.

GBP: GBP/USD -0.3%; 1.2965

• GBP softer vs. the broadly firmer USD but stronger vs. the EUR. This morning's UK labour market report had no impact on expectations for today's upcoming BoE policy announcement. Cap Eco writes "the latest figures show that the jobs market is not collapsing as some surveys suggest and that there hasn’t been a big rise in the LFS redundancy rate". However, employment growth is "very weak" but is not feeding through into slower wage growth. In a few hours time, the BoE is widely-expected to stand pat on rates with consensus looking for a 7-2 vote split (note, there is a wide range of views on the vote breakdown). Looking beyond today's meeting, markets near-enough fully price the next cut in June with a total of 52bps of easing seen by year-end. Cable is currently contained within yesterday's 1.2954-1.3010 range.

Antipodeans: AUD/USD -1.0%; 0.6294. NZD/USD -1.2%; 0.5743.

• Both at the bottom of the G10 leaderboard with pressure seen in AUD following disappointing jobs data from Australia which showed a surprise contraction in Employment Change and a drop in the Participation Rate, while better-than-expected New Zealand GDP failed to spur a bid. AUD/USD has breached yesterday's low @ 0.6319 and the 0.63 mark; 50DMA sits @ 0.6282. NZD/USD has continued to pull back further from its YTD peak printed on Monday @ 0.5831 with a current session trough @ 0.5745, matching Monday's low.

CHF: EUR/CHF U/C; 0.9570

• SNB delivered a 25bps cut to 0.25%, in-fitting with the majority of views and one that potentially takes the SNB to its terminal rate, with markets pricing in just 9bps of additional easing in 2025, though the still low inflation forecasts and uncertainty ahead (a point the SNB emphasised) mean further policy adjustments cannot be ruled out. Cap Eco writes "we think the SNB is likely to keep the policy rate on hold at 0.25% for the foreseeable future". In an immediate reaction, EUR/CHF knee-jerked a little higher from 0.9531 to a session peak of 0.9582 within a few minutes, before stabilising around 0.9570.

SEK: EUR/SEK U/C; 11.0072

• Limited reaction seen in EUR/SEK following the widely-expected decision by the Riksbank to hold rates and the Riksbank declaring that it sees rates at current levels going forward, as reflected in the rate path. The lack of additional easing has been attributed to the recent higher-than-expected outturn for inflation. On the trade front and how it could impact monetary policy, the Riskbank had little to say (unlike other global central banks such as BoC) other than "uncertainty abroad is unusually high due to the escalating trade conflict".

20 Mar 2025 - 10:15- ForexEU Research- Source: Newsquawk