EUROPEAN FX UPDATE: Markets broadly in a holding pattern ahead of "Liberation Day"

USD: DXY -0.1% 104.05

• DXY is currently slightly softer with FX markets broadly in a holding pattern in the run-up to tomorrow's "Liberation Day". Ahead of which, US President Trump is said to be still deciding which plan he will take for reciprocal tariffs and has been presented with "multiple" tariff plans, according to administration sources cited by FBN's Lawrence. For today's docket, markets will receive the JOLTS labour market data ahead of Friday's NFP print. Expectations are for openings in February to fall to 7.616mln from 7.74mln. Elsewhere, ISM manufacturing PMI for March is expected to slip into contraction territory (49.5 vs. prev. 50.3). DXY is currently tucked within yesterday's 103.89-104.49 range.

EUR: EUR/USD +0.1%; 1.0826

• EUR is trivially firmer vs. the USD following an indecisive session yesterday, whereby markets digested softer-than-expected German inflation data and ECB sources. On the latter, Bloomberg reported that several ECB officials are still wavering on whether to cut interest rates next month, suggesting the meeting remains far more open than investors are betting. Market pricing for a reduction later this month has fallen from around 96% to 76%, according to Refinitiv data. EZ inflation data showed an expected slowdown in headline Y/Y HICP to 2.2% from 2.3%, whilst core metrics came in marginally softer-than-expected. Of potentially greater importance, albeit it failed to have any sway on EUR, services inflation slowed further to 3.4% from 3.7%. Ahead of the release, Investec had suggested a slowdown in this metric could provide further evidence of a more durable return to target for inflation in the Eurozone. EUR/USD is currently contained within yesterday's 1.0783-1.0849 range.


• EUR/USD opex: 1.0800-05 (1.6bln), 1.0825-30 (396mln), 1.0840 (1bln), 1.0860 (411mln), 1.0875-85 (580mln), 1.0900 (620mln), 1.0930 (937mln), 1.0950 (1bln).

JPY: USD/JPY -0.2%; 149.59

• USD/JPY has failed to sustain a move above the 150 mark as markets digested mostly better-than-expected data via the latest unemployment and Tankan metrics. On the latter, Pantheon Macro notes that the report shows that trade tensions are weighing on manufacturers while service industries are riding a tourism boom and inflation expectations are edging up. The consultancy writes that it expected two more hikes this year after a pause at its next meeting on May 1st. USD/JPY has delved as low as 149.51 but is some way off yesterday's trough @ 148.69.


• USD/JPY opex: 150.00-05 (2.3bln).

GBP: GBP/USD +0.1%; 1.2933

• GBP a touch firmer vs. the USD with fresh macro drivers for the UK on the light side aside from non-incremental comments from BoE's Greene that slack is opening up in the UK labour market and disinflation is continuing. Elsewhere, UK PM Starmer noted that discussions on an economic deal with the US are "well advanced". Cable is currently holding above the 1.29 mark and within yesterday's 1.2885-1.2972 bounds.

Antipodeans: AUD/USD +0.2%; 0.6260. NZD/USD +0.1%; 0.5682

• Steady performance for both vs. the USD with little sustained follow-through from the RBA rate decision. As expected, the RBA held the Cash Rate at 4.1% as unanimously forecast and provided little clues for future policy. In the follow-up press conference, Governor Bullock noted the board did not discuss a rate cut. Markets fully price the next 25bps rate cut by July with a total of 69bps of loosening seen by year-end. AUD/USD is currently tucked within yesterday's 0.6218-0.6300 range. For NZD, the currency was little changed after the RBNZ noted it is in the process of recommending a new Governor. NZD/USD sits within yesterday's 0.5648-0.5722 range.

01 Apr 2025 - 10:20- ForexEU Research- Source: Newsquawk