US FX WRAP: Dollar moves higher as participants look past jobs data; GBP weighed by soft CPI

Analysis details (20:25)

DXY is now trading firmer than it was before the Oct/Nov jobs reports on Tuesday, as small upticks in US yields likely added support. The usual significance of the releases was likely dampened by a few factors, US government shutdown, a higher BLS standard of error, and the delayed resignations arising from the DOGE layoffs earlier in the year. As such, the path of the dollar is likely to remain more uncertain than usual, with upcoming unemployment rates likely to be somewhat distorted. Key updates included those on the Fed, with reporting from Politico suggesting Trump officials have privately raised doubts over Hassett being the next Fed Chair, criticising his current effectiveness as NEC Director. Meanwhile, Fed's Waller continued to call for cuts as the job market says so, arguing rates are 50-100bps over neutral, meaning Waller's neutral rate view is more or less around the Fed median view of 3.0%. DXY hit highs of 98.641 before retracing to ~98.38.

GBP was weighted by soft CPI data. Headline Y/Y eased more than anticipated to 3.2% (exp. 3.5%, prev. 3.6%), mainly driven by a drop in food prices. Core CPI M/M -0.2% (exp. 0.1%, prev. 0.3%). The report solidified bets for a 25bps BoE rate cut, with markets now assigning ~99.7% chance of an outcome from the 91% seen before the release. Click here for the Newsquawk BoE Preview.

JPY was the worst G10 performer against the buck, paring its WTD strength. Events throughout the day did little to change the dynamics in Japan. Imports fell shy of expectations in November, while Exports and Machinery Orders beat. Japanese Government member Nagahama said the BoJ's monetary policy appears to be heavily influenced by FX moves. "If the BoJ were to raise rates this week, it might be to combat the weak Yen that reduces the positive effect of government measures to cushion the blow from the rising cost of living." USD/JPY hit highs of 155.70 from earlier 154.52 lows.

EUR finished the day unchanged vs USD, unreactive to data points in the morning, which did little to change the expected unchanged outcome from the ECB meeting on Thursday. Nonetheless, the German Ifo hit its lowest level since May, weighed by deteriorations in current conditions and expectations. Click here for the ECB Newsquawk Preview.

17 Dec 2025 - 20:25- ForexUS Research- Source: Newsquawk