The general tone in the foreign exchange market is one of consolidation after yesterday’s stronger-than-expected January jobs data injected volatility into dollar trading. The news stream is light and tomorrow the US reports January . Japan’s markets reopened after yesterday’s holiday and extended the yen’s recovery marginally and the JGB rally. As JPY152 has been approached, we suspect the short squeeze that has lifted the since the weekend election has run its course, or nearly so. Meanwhile, Chinese officials have done little to deter the market from gradually driving the yuan higher. The finished last year slightly below CNY6.99 and is threatening to slip through CNY6.90. The eked out 0.1% growth in Q4, but the December data were weak, and the market remains confident of rate hike in March-April.
While next Friday is a decision day for the US Supreme Court where a ruling on the US President’s use of emergency powers to impose widespread tariffs, Congress is gradually trying to curb the powers as well. With the help of several Republicans, the House narrowly passed a bill to overturn the fentanyl tariffs on Canada. This is not the real thing, and the Canadian dollar has barely reacted. The next two hurdles of turning bill into low are formidable: approval by the Senate and then signed by the President. Unlikely.
Prices
G10
• The stronger-than-expected US January caught the market leaning the wrong way. The had been hovering around $1.19 was immediately dropped about 2/3 of a cent. It recovered choppily until Europe when home, and then the euro was bid to the post-data high near $1.1890. While the euro’s recovery was notable, it stalled a little below $1.1930 for the third consecutive session. The euro is consolidating within a roughly 20-tick range on either side of $1.1870.
• The powerful yen short squeeze was momentarily disrupted by the US jobs report, but within several hours, the dollar made new lows for the move near JPY152.55. Local participants returned today after yesterday’s holiday, and the dollar’s losses were extended to almost JPY152.25. Initial support is seen near JPY152, last month’s low, which itself was the lowest the greenback has been since last October. Still, the downside momentum faded. A move above JPY153.50-60 would help stabilize the technical tone.
• traded in a broad range yesterday (~$1.3610-$1.3710) and engulfed Tuesday’s range. Settlement was a little softer and below Tuesday’s low, but the bearish outside down day saw little follow-through selling, and that was despite the disappointing GDP data. Sterling is trading in a range of about $1.3605-$1.3655 range today. The swaps market has about a 73% chance of a rate cut at next month’s Bank of England meeting and almost a 95% chance of a cut by the end of April.
• The also traded in a wide range yesterday, with the greenback in about a CAD1.3505-CAD1.3620 range. The US dollar settled a little firmer (~CAD1.3570) and above Tuesday’s high. The market appears to have ignored the news that the US House of Representative overturned the 25% tariff on Canada for fentanyl, and for good reason. The bill must be passed by the Senate, and even is approved, President Trump will most likely veto it. Hence, it seems mostly symbolic. The greenback is in about a third of a cent range below CAD1.3600 today. Consolidation may keep it yesterday’s range today, but Friday’s US CPI could inject more volatility.
• The bulls were undeterred by the US jobs data and rallied to new highs, a little above $0.7140 near midday in NY. It marginally extended the gains today but stalled in front of $0.7150. This is a three-year high for the Australian dollar. The 2023 high was closer to $0.7160. It subsequently pulled back to almost $0.7100 where buyers emerged.
EM
• The dollar traded on both sides of Tuesday’s range against the and settled little changed on the day. The greenback remains stuck in its trough. It has not been above MXN17.28 this week or below MXN17.13. Today’s range is about MXN17.1620-MXN17.2280 range so far today.
• The dollar recorded yesterday’s session lows against the in the North American afternoon near CNH6.9060. Selling today pushed the greenback to almost CNH6.8955, a new multiyear low. Moving slowly, the market has not found much official resistance to pushing the yuan gently higher. After three days of setting the dollar fix lower, the PBOC set it slightly higher today (CNY6.9457 vs. CNY6.9438 yesterday).
• The US dollar continues to consolidate against the . It remains within the range set at the end of last week (~INR90.1750-INR90.8550). Foreign investors appear to have begun to buy Indian equities. January CPI was in line with expectations (2.75%), but it reflects new weighting and spending categories. Of note, food has been reduced to about a little more than a third from almost half. The base year was also changed from 2012 to 2024. The yield on India’s 10-year yield slipped almost three basis points to 6.68%.
Other Markets
• Equities are mostly higher today. Taiwan and South Korea led the Asia Pacific bourses higher with 1.6% and 3.1% gains, respectively. MSCI’s regional index is at record highs. Europe’s Stoxx 600 recovered yesterday and settled slightly higher. It is up another 0.35% in late morning trading today. US index futures are 0.25%-0.30% better.
• Benchmark 10-year yields mostly lower. The continued counter-intuitive rally in JGBs continued today as Tokyo returned from yesterday’s holiday. The and 40-year bond yields have not risen since February 2-3. European yields are +/- half of a basis point, while the US is almost one basis point softer near 4.17%.
• is consolidating quietly in about a $5045-$5100 range. Silver is also trading quietly within yesterday’s range. Today’s range has been about $81.55-$85.00.
• President Trump has said he prefers to continue to talk with Iran and this helped March pullback from yesterday’s high near $66. However, the market remains on edge, and the pullback stalled in front of $64.
Data
• After the stronger-than-expected January US jobs data, the weekly may not be impactful. January are also due. They rose 5.1% in December, and the poor weather warns of a setback last month. The median projection in Bloomberg’s survey is for a 4.3% decline. Still, a 4.16 mln unit seasonally adjusted annual pace would be above last year’s average (4.08 mln). January CPI is due tomorrow, and both the headline and core rates may have softened to 2.5%.
• The UK’s Q4 GDP disappointed with a 0.1% quarter-over-quarter expansion, the same as Q3. The year-over-year pace slowed to 1.0%. Consumption slowed, and after surging by 1.1% in Q3 and total business investment slumped 2.7% in the quarter after growing q.6% in Q3. Net exports were a bigger drag. Government spending rose slightly in the quarter. The December data warns weak momentum coming into the new year. Industrial output fell by 0.9% in December, with a 0.5% drop in manufacturing. Construction output continued to fall (0.5% after a revised 0.8% decline in November).
• Japan reported that January producer prices rose 0.2% for a 2.3% year-over-year rate. It is the slowest since April 2024. Japanese producer price inflation peaked in Q1 25 at 4.3%. Core CPI peaked last May at 3.7% and stood at 2.4% at the end of 2025.
• Australia’s Melbourne Institute survey of consumer inflation expectations rose to 5% from 4.6% to match last year’s peak. The futures market remains convinced that the next hike will be delivered in May (~95% discounted).
