FX Analysis – GBP, EUR JPY, USD

USD saw weakness in Wednesday’s session with a risk on equity market and only a marginal move higher in yields weighing on the Greenback ahead of today’s key US CPI report. There was little in the way of major US data releases but some hawkish leaning comments late in the session from the Fed’s Williams stemmed losses. The US Dollar Index (DXY) did make another attempt to breach the 102.57 resistance, but for the 5^th time this year was again rejected, this will be a key level to watch over todays CPI report.

EUR moved higher with EURUSD heading into the APAC session at highs of around 1.0970. EUR was supported by comments from the ECB’s De Guindos who warned the rapid pace of disinflation seen in 2023 is likely to slow down in 2024 and Schnabel who said it is too early to discuss rate cuts.

JPY was the G10 underperformer after Japanese wage data came in much softer than expected, throwing cold water on expectations of the BOJ normalizing rates. USDJPY following the US10Y-JP10Y rate differential higher and breaching the psychological 145 level.

GBP also saw gains vs USD, taking advantage of a weaker USD and a risk-on session in equities.  BoE Governor Bailey spoke in the UK session, pushing back on rate cut expectations while stressing the importance of returning inflation to target.

Ahead today the much-awaited US CPI report which will shape market expectations of the Feds next move and should get FX markets moving.