US FX WRAP: DXY gains into month end, AUD boosted by CPI while Yen lags on soft data

Analysis details (20:35)

The Dollar Index gained on Wednesday amid broad strength against G10 peers into month-end. Despite the soft US data, gains were seen, perhaps with buying enforced to meet rebalancing requirements into month-end (DXY -4.5% M/M). Regarding data, GDP Advance (Q2) came in below both expectations provided by BBG and Reuters from surveyed economists, contracting by 0.3%, the first decline since Q1 22. Meanwhile, the March PCE report showed mixed signals, with the yearly metrics in line with Fed Chair Powell's expectations (2.3% for headline, 2.6% for core), while the monthly prints were both unchanged (headline in line, core cooler than expected). Elsewhere, trade updates had little sway over the current dynamic, with USTR Greer noting they are "some weeks out" on trade deal, while the Chinese press offered optimism on US-China relations, noting the US reached out to China recently for tariff talks. Ultimately, the Dollar was largely unfazed by the newsflow, with the latest job ADP reading signalling a slowdown in private business job growth ahead of NFP on Friday (exp. +130k) and the Chicago PMI declining more than expected into contractionary territory. Currently, the DXY sits ~ 99.50 a touch above its 10 DMA (99.298).

G10FX price action was mixed, with Antipodeans outperforming in the green alongside the CAD, while EUR, JPY, and GBP were the top laggards. On the Aussie, hotter-than-expected Q1 CPI offered support for the AUD/USD, paving the way for eventual session highs of 0.6417. Elsewhere, BoC minutes were a non-event, but CAD extended its strength following US President Trump noting Canadian PM Carney called him on Tuesday and said let's make a deal. In Japan, Industrial Production and Retail Sales were disappointing, evoking concerns over GDP growth in Q1. Ahead, the focus will be on the Yen before the BoJ's meeting overnight. As it stands, the central bank is expected to hold its interest rate at 0.50 as a recent Reuters poll indicated 84% of economists surveyed expect a hold through to end-June. Additionally, the BoJ is to release its latest Outlook Report containing members' median forecasts for Real GDP and Core CPI. For the full Newsquawk BoJ preview, click here.  

In Europe, multiple regions reported Prelim CPI (Apr) and GDP (Q1). On the former, Germany and France were hotter than expected, while Italy was on the cool side; EZ and Italy topped GDP Prelim expectations, while Germany and France were in line. Despite the hot CPI's and decent GDP data, EUR succumbed to the USD strength and trimmed earlier strength vs GBP. 

EMFX: In China, the NBS Manufacturing PMI was deeper in contractionary territory than analysts had forecasted, its first contraction since January. The move was driven by a big drop in new export orders, given the escalating trade war, while the production subindex also contracted. Elsewhere, the CLP and COP saw their respective central bank decide on interest rates, the former maintaining the benchmark at 5% as expected in an unanimous decision, while the Colombian central bank surprised markets with a 25bps rate cut to 9.25% (exp. unchanged), in an unanimous decision; COP unperformed amongst EMs on the decision.

30 Apr 2025 - 20:35- ForexData- Source: Newsquawk