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Published: 2025-09-02T10:09:38.000Z

Europe Summary and Highlights 2 September

byAdrian Schmidt

Senior FX Strategist
1

The USD was stronger across the board through the European morning.

European morning session

The USD was stronger across the board through the European morning. EUR/USD dropped 70 pips to 1.1630, and USD/JPY gained 55 pips to 1.4850. GBP was particularly weak, with GBP/USD falling 130 pips o 1.33 as yields continues to rise, and EUR/GBP rising 40 pips to 0.8690. Yield gains were similar across the US, UK and Europe, but there is more market focus on the UK were 30 year yields have hit their highest since 1998.

The driver for USD strength isn’t clear, as overnight the trend was JPY weakness rather than USD strength. Higher yields have led to lower equities which has favoured the safer havens. Eurozone CPI data was slightly higher than expected, showing a 2.3% y/y rise in the core although the headline was as expected at 2.1%.

Asia session

While BoJ's Himino says "despite 3 rate hikes inflation still high and real rates still low", also appropriate to continue raising rates with economics forecast in line, there is very little commitment and does not sound urgent to hike. He is putting a lid on the JPY with comment "Underlying inflation is recently quite close to 2% but has yet to reach that level". USD/JPY is trading 0.34% higher at 147.67 with JGB underperform U.S. Treasury yields.

The broad risk sentiment is sour on Tuesday. U.S. three major equity indexes and regional equities except Nikkei are in the red. It seems to be mostly flow driven, further exacerbated by haven demand as we see gold also gaining strongly. AUD/USD is trading 0.24% lower at 0.6538, NZD/USD is also 0.31% lower at 0.5884 while USD/CAD rises 0.05%. Else, EUR/USD is down 0.15% and GBP/USD is down 0.13%.

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