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FOREX: Euro Strength Post ECB Retraces, JPY Outperforms

FOREX
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  • The ECB reduced its benchmark Deposit Rate by 25bps to 2.75% on Thursday as expected. This was its fourth consecutive cut, and the committee left the language in its statement unchanged, expressing confidence that inflation will converge towards its 2% target in 2025.
  • There was little reaction in EURUSD as the information hit the wires, however, short-term positioning and softer-than-expected US GDP data, prompted a firm bounce for the pair in early US hours.
  • EURUSD rallied from levels just above 1.0400 to a 1.0467 high, and price action gathered topside momentum as it broke a cluster of prior highs printed across the Tuesday and Wednesday sessions. With President Lagarde stating “it is premature in this point in time to discuss the point where we have to stop,” and stressing that decisions will be taken on a meeting-by-meeting basis, the Euro spent the remainder of Thursday trade steadily paring its initial advance. EURUSD is close to unchanged as we approach the APAC crossover.
  • JPY is favoured across G10 for a second session, helping USDJPY consolidate a move back below its 50-day EMA. The moves follow a speech from the BoJ's deputy governor Himino, who stressed that real rates in Japan remain in negative territory despite a recent rate hike - meaning the BoJ has scope to continue to tighten policy should its economic outlook unfold inline with expectations. Price action raises the focus on key support below - crossing at 153.72 to coincide with the DeepSeek-inspired sell-off in US equities this week. This level also marks the 50% retracement for the upleg in the pair posted off December low - meaning a break below will open the next leg toward 152.55.
  • Tokyo core CPI data highlights the overnight docket before German state level and French CPI cross in European hours. Elsewhere, Canada GDP and US Core PCE Price Index are expected, alongside the MNI Chicago Business Barometer.
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  • The ECB reduced its benchmark Deposit Rate by 25bps to 2.75% on Thursday as expected. This was its fourth consecutive cut, and the committee left the language in its statement unchanged, expressing confidence that inflation will converge towards its 2% target in 2025.
  • There was little reaction in EURUSD as the information hit the wires, however, short-term positioning and softer-than-expected US GDP data, prompted a firm bounce for the pair in early US hours.
  • EURUSD rallied from levels just above 1.0400 to a 1.0467 high, and price action gathered topside momentum as it broke a cluster of prior highs printed across the Tuesday and Wednesday sessions. With President Lagarde stating “it is premature in this point in time to discuss the point where we have to stop,” and stressing that decisions will be taken on a meeting-by-meeting basis, the Euro spent the remainder of Thursday trade steadily paring its initial advance. EURUSD is close to unchanged as we approach the APAC crossover.
  • JPY is favoured across G10 for a second session, helping USDJPY consolidate a move back below its 50-day EMA. The moves follow a speech from the BoJ's deputy governor Himino, who stressed that real rates in Japan remain in negative territory despite a recent rate hike - meaning the BoJ has scope to continue to tighten policy should its economic outlook unfold inline with expectations. Price action raises the focus on key support below - crossing at 153.72 to coincide with the DeepSeek-inspired sell-off in US equities this week. This level also marks the 50% retracement for the upleg in the pair posted off December low - meaning a break below will open the next leg toward 152.55.
  • Tokyo core CPI data highlights the overnight docket before German state level and French CPI cross in European hours. Elsewhere, Canada GDP and US Core PCE Price Index are expected, alongside the MNI Chicago Business Barometer.