[MARKET UPDATE] JPY gains ground on yield differentials and some haven flows while GBP lags after the UK jobs report

• DXY trades flat intraday but at the lower end of a tight 97.072-97.247 range as US participants gear up to return from the long weekend. Focus has been on geopolitics as US-Iran talks look to continue through to the afternoon, whilst US-Ukraine-Russia trilateral talks have now been moved to tomorrow. US-Iran talks will be watched as US President Trump positions a second carrier in the Middle East. Note, there is a non-zero chance that US President Trump could choose to strike Iran if this round fails. On the data front for the day ahead, weekly ADP jobs data are due (prev. showed an average of +6.5k/week over the four-week period). Elsewhere, the Empire State Manufacturing Index for February, and the NAHB housing market index for February are scheduled.
• JPY gained as risk sentiment in Japan deteriorated shortly after the open, while there were some recent comments from former BoJ board member Adachi, who sees a likelihood that the BoJ will hike rates by 25bps in April. During European hours, the JPY remains the outperformer as US yields fall, but overall the pair remains within the ranges of the last four trading sessions, with today's current parameters between 152.70 and 153.75. Note, JPY could also be seeing some haven flows against the backdrop of the US-Iran talks today.
• GBP fell in the aftermath of a dovish jobs report: unemployment unexpectedly rose to 5.2%, just below the BoE’s 5.3% peak forecast (raised in February), while wage growth slowed across both measures, especially including bonuses. GBP/USD have recovered off its worst levels with the pair currently around the middle of a 1.3552-1.3633 intraday range at the time of writing.
• EUR marginally trickled lower, but with price action kept within tight parameters near the 1.1850 level amid light newsflow from the bloc and the recent mixed EU Industrial Production data. Some risk was taken out for the EUR (for today) as the US-Ukraine-Russia trilateral meeting has been pushed back to tomorrow. A modest four-pip immediate dip was seen as German ZEW disappointed, with EUR/USD currently in a 1.1828-1.1852 range.
• Antipodeans are mixed, in-fitting with the global risk profile, and with little reaction seen to the overnight release of the RBA Minutes from the February meeting which noted that members agreed that prevailing uncertainties meant it was not possible to have a high degree of confidence in any particular path for the cash rate and the Board concluded inflation would stay stubbornly high if it had not hiked interest rates as it did this month.

The JPY's gains against other currencies stem from falling US yields and a shift in risk sentiment, particularly as haven flows increase amid geopolitical tensions. Conversely, the GBP is lagging following a dovish UK jobs report with rising unemployment and slowing wage growth, suggesting potential headwinds for the BoE's outlook and further pressuring the currency. This dynamic highlights the importance of currency correlations with yield differentials and economic data releases in the current market context.