The enjoys a broadly firmer tone today, but it is mostly consolidating. The is a notable exception. The greenback reached JPY156.85, its best level since January 23, and does not look as if it has peaked. Sunday’s election is around the corner, and polls show Prime Minister Takaichi leading the LDP to a strong showing, where it may recapture an outright majority.
Earlier today, she warned that the Bank of Japan cannot be counted on to cap the rise in yields, as the cost may be to weaken the yen to an undesired extent.
Meanwhile, the partial closure of the US government has ended, but the disruption of the economic data will still delay the January employment data that was due on Friday. That may give the ADP private sector jobs estimate greater heft today. After the recent meltdown, gold and silver have found a better footing and extended yesterday’s gain.
Prices
G10
• After holding Monday’s low (~$1.1770), the reached a marginal session high in North America yesterday near $1.1830. The euro rose to almost $1.1840 today to rise above the previous session’s high for first time six consecutive sessions. Soft final PMI data and an unexpected decline in core CPI seemed to cap the single currency ahead of $1.1850, where options for nearly 1.8 billion euros expire today. Initial support is in the $1.1780-$1.1800 area. A break of $1.1760 could signal the next leg lower.
• The dollar reached a seven-session high against the yen in North America yesterday, slightly north of JPY156. Follow-through buying today lifted the greenback to JPY156.80 today, through the technical retracement objective JPY156.50 and the 20-day moving average (~JPY156.60) for the first time since January 23. The next area of chart resistance may be in the JPY157.40-50 area.
• traded inside Monday’s range (~$1.3625-$1.3715) yesterday. It edged up to almost $1.3735 today, which corresponds to the halfway mark of the decline from the January 28 high near $1.3850. Above there, the next retracement is around $1.3765. The Bank of England meets tomorrow. There is little question that it remains on hold. However, since the end of last year, the odds of a cut by mid-year have eased. The market had around 30 bp of cuts discounted and now slightly less than 25 bp.
• Yesterday, the US dollar recorded an inside day against the as well. The greenback spent little time above Monday’s settlement (~CAD1.3680). It remains in Monday’s range so far today after. After slipping to CAD1.3630 earlier, it returned to Tuesday’s range. The CAD1.3620 area is the initial retracement of the greenback’s jump from almost CAD1.3480 before the weekend to a little above CAD1.3700 on Monday. Options for about $375 mln at CAD1.3650 expire today.
• The peaked at $0.7050 yesterday on the rate hike announced. It stalled and pulled back to $0.6980 in mid-morning NY turnover. It held slightly below yesterday’s high and is holding above $0.7010 in quiet turnover. The Australian dollar peaked on January 29 slightly shy of $0.7100, a three-year high. A break of the $0.6980 area may be an indication that the downside correction is resuming.
EM
• After getting turned back from approaching the 20-day moving average on Monday (~MXN17.60), the greenback was sold to nearly MXN17.1935 yesterday. It appeared to forge a base last week in the MXN17.10-12 area. The ’s resilience was impressive, given the risk-off characterized by the US equity drop and the mediocre Mexican data. December worker remittances were stronger than expected, but still below last December. This confirms the broader pattern of slower dollar inflows, and for the year as a whole worker remittances fell by about $650 mln. The country’s funding needs were lessened too. The trade balance swung from an $18.5 bln deficit in 2024 to a $771 mln surplus in 2025.
• The dollar fell to a new multiyear low against the today near CNH6.9290, and it has come back a bit better bid and is above CNH6.9400 in late European morning turnover. The PBOC set the dollar’s fix higher for the first time this week (CNY6.9430 vs. CNY6.9385 yesterday).
• The dollar gapped sharply lower against the yesterday and is consolidating today. The gap extends from Monday’s low (~INR91.4425) to yesterday’s high (~INR90.5165). It entered the gap and rose to INR90.5550 today but has not closed it. The services and composite PMIs eased sequentially. The composite stands at 58.4, down from 59.5. The central bank meets before the weekend and is expected to keep the repo rate steady at 5.25%.
Other Markets
• Despite the nearly 1.5% decline in the Nasdaq yesterday, Asia Pacific equities rallied today, led against by South Korea’s Kospi’s almost 1.6% advance. The MSCI regional index is near the record high set at the end of January. Europe’s Stoxx 600 is up for the fourth consecutive session, the longest advance since last November. US index futures are narrowly mixed.
• Benchmark 10-year yields are mixed. Despite Japan’s Prime Minister warning that the BOJ should not be counted on to curb the rise in JGB yields, given the cost, which she said includes a risk of weakening the yen, the 10-year JGB yield slipped a basis point today and the longer bond yields were also slightly softer. European 10-year yields are mostly 2-3 bp lower. The 10-year Gilt yield is a little firmer, as is the 10-year Treasury yield which is poking slightly above 4.28%.
• ’s three-day and more than $1000 drop stabilized yesterday, and the yellow metal posted its first gain in four sessions. The market seemed reluctant to take it back above $5000 but it reached almost $5100 day. Recall that last week, it settled above $5000 in the first four sessions. Silver also stabilized yesterday. It rose for the first time in four sessions, stalled as it approached $90. It traded to almost $90.75 today but has pulled back to $88 in European turnover. In the three-day decline it fell from $121.65 to about $71.40.
• March jumped to almost $63.75 on news that the US Navy shot down an Iranian drone. However, indications from President Trump that he is still interested in talked helped ease fears of an imminent strike. It is consolidating so far today between ~$62.95 and $64.20.
Data
• The private sector jobs estimate takes on added significance given that the partial US government shutdown will delay the January jobs report that was due Friday. The median forecast in Bloomberg’s survey is a 45k increase (41.k in December). It would be the first back-to-back monthly gain since April-May last year. The final S&P services and composite PMI may draw some attention, but the greater interest will be on the new new information—the . After the US Treasury’s quarterly borrowing estimate earlier this week, the quarterly refunding details will be announced today.
• Canada sees the January services and composite PMI. The market impact may be minimal. The focus is on Friday’s jobs report. Overall job growth is see slowing from the 10.1k increase in December, fueled by a 51.4k increase in full-time positions.
• The eurozone saw the final January services and composite PMI. The services PMI is at 51.6 from the 51.9 preliminary estimate and 52.4 in December. The composite PMI stands at 51.3 (51.5 preliminary estimate, which was unchanged from December). In January 2025, the composite PMI was at 50.2. Aggregate producer prices fell 0.3% in December and are 2.1% lower year-over-year. The preliminary estimate for January CPI fell 0.5% for a 1.7% year-over-year pace. The core rate slipped to 2.2% from 2.3%.
• The final January UK services PMI was 54.0 down from 54.3 initial estimate. It finished last year at 51.4. The manufacturing PMI showed improvement over the flash estimate. The composite PMI stands at 53.7 (53.9 initially).
• Japan’s final January services PMI is at 53.7, up from the initial estimate of 53.4. It was at 51.6 in December. The final composite PMI stands at 53.1 up from the preliminary estimate of 52.8, the highest since May 2023.
• Australia’s final January services PMI is at 56.3 (56.0 initially and 51.1 in December). The composite PMI is 55.7 (vs. 55.5 initial estimate and 51.0 in December). The composite PMI was at 51.1 in January 2025.
• China’s RatingDog (formerly Caixin) services PMI edged up to 52.3 from 52.0, while the composite rose 51.6 from 51.3.
