
EUROPEAN FX UPDATE: DXY attempts to recoup lost ground, EUR weighed on by PMIs, JPY hit by Ueda remarks
USD: DXY +0.2%; 106.59
- DXY is attempting to recoup some lost ground after printing a YTD trough overnight @ 106.35. ING attributes downside in the USD yesterday to 1) Trump opening up the prospect of a US-China trade deal, 2) US data came in softer than expected, 3) US equities underperformed again after disappointing Walmart earnings, and 4) the US curve flattened on the back of Treasury Secretary Scott Bessent's recent comments. For today's agenda, markets will be bracing for any readout from Bessent's call with his Chinese counterpart. On the data slate, US flash PMIs are due, however, these typically play second fiddle to the ISM metrics. Fed's Kugler and Jefferson are due on the speaker slate. If upside for DXY extends, the next target comes via the 107 mark with yesterday's peak just above @ 107.15.
EUR: EUR/USD -0.3%; 1.0470
- EUR was knocked lower in early trade following a dismal outturn for French flash PMI data which saw the services metric print below the lower end of expectations, dragging the composite metrics further into negative territory and to its lowest reading since 2023. EUR/USD printed a session low @ 1.0469 before recouping some ground after a beat on German manufacturing PMI was able to move the composite metric further into expansionary territory. The outturn for the Eurozone saw a beat for manufacturing, miss for services and composite. The accompanying report noted "Economic output in the eurozone is barely moving at all". From a policy perspective, markets fully price 2 x 25bps cuts by the June meeting with a total of 77bps of cuts seen by year-end. Attention now turns to Sunday's German election with focus on what the outcome will mean for the nation's fiscal agenda. ECB's Lane due to speak @ 14:30GMT.
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EUR/USD opex: 1.0350-55 (600mln), 1.0370-75 (372mln), 1.0400-05 (3.18bln), 1.0420-25 (400mln), 1.0440-50 (2.83bln), 1.0460-65 (512mln), 1.0475-85 (2.11bln), 1.0495-00 (978mln), 1.0520-25 (467mln), 1.0550 (388mln), 1.0575-80 (1.02bln), 1.0600 (297mln).
JPY: USD/JPY +0.5%; 150.35
- JPY is the clear laggard across the majors with a firmer-than-expected outturn for Japanese national CPI overshadowed by comments from BoJ Governor Ueda. Ueda declared that the Bank will respond to any abnormal upside in long-term interest rates with purchases of government bonds. As such, after initially printing a fresh YTD trough overnight @ 149.29, the pair has returned to a 150 handle but is still some way off yesterday's 151.46 peak. Market pricing for the BoJ sees the next 25bps hike fully priced by September with a total of 35bps of tightening seen by year-end. ING expects the next 25bps move in May followed by another in October.
GBP: GBP/USD -0.2%; 1.2645
- Cable printed a fresh YTD peak in early European trade following a solid retail sales report for January with the headline print coming in above the top end of estimates. Cable ventured as high as 1.2678 before being dragged lower by the firmer USD (coincided with the release of soft French PMI metrics). Elsewhere on the data slate, flash PMIs for January were a mixed bag with a beat on services offset by a miss in manufacturing, leaving the composite in-line with estimates @ 50.5. The accompanying report noted “The lack of growth alongside rising price pressures points to a stagflationary environment which will present a growing dilemma for the Bank of England". As it stands, markets fully price the next 25bps BoE cut by June with a total of 50bps of loosening seen by year-end.
Antipodeans: AUD/USD -0.2%; 0.6385. NZD/USD -0.1%; 0.5757
- Both marginally softer vs. the stronger USD. AUD/USD was able to print another fresh YTD peak and breach the 0.64 threshold (0.6408 peak) before succumbing to the strength in the greenback. RBA Governor Bullock reiterated the tone of this week's policy statement by noting that there is no pre-commitment to any specific course of action on interest rates and the board remains cautious about further policy easing. Similar price action for NZD/USD after notching a YTD high @ 0.5772 before fading upside.
21 Feb 2025 - 10:00- ForexData- Source: Newsquawk
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