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Equity Surge Favours Weaker USD, JPY

FOREX
  • USD and JPY selling has been dominant across the European morning, with both currencies among the poorest performers across G10. Moves across currency markets are being led by volatile equities, as index futures on both sides of the Atlantic surge after the better-then-expected NVidia earnings released after the Wednesday bell.
  • PMI data from across Europe also generally fared better than expected, with the Eurozone and French figures topping forecast, and countering modest weakness in Germany manufacturing. Post-data EUR strength tipped EUR/USD above 1.0880 in a momentum-driven move, before prices faded on the failure to break the 1.0888 50-dma.
  • G10 FX implied vols extend recent lows, with EUR/JPY 6m implied nearing on 8 vol points and the lowest level since Feb'22. With lower vols tied to JPY weakness over the past 12 months, EUR/JPY has extended the YTD rally, putting the cross within range of key resistance at the bull trigger of the cycle high from late 2023 at 164.30.
  • GBP saw only scant support on the back of a better-than expected February composite prelim PMI, with markets preferring to sell rallies in the currencies. A bounce off lows for the greenback aided the move, however GBP selling was also highly evident against CAD, JPY and others.
  • US takes focus going forward, with weekly jobless claims numbers and the prelim February PMI data on the docket. Minutes from the ECB's January meeting and Fed speakers including Jefferson, Harker, Cook and Kashkari are set to make appearances.
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