The is mostly softer today as North American participants enter the fray. Trading remains quiet and the general consolidative tone continues amid a relatively quiet news stream. Although US and Iranian talks are set to continue next week, the market remains on edge.
There are three developments to note. First, the PBOC abolished the reserve requirement on foreign exchange forwards and adjusted rules to make it easier for Chinese banks to provide yuan liquidity to offshore markets. This has the effect of weakening the yuan. Second, the Danish Prime Minister has called for snap election for next month (March 24) to secure a stronger mandate as it seeks a stronger hand to resist US pressure over Greenland. Third, the Greens won the byelection in the Gorton and Denton constituency in Great Manchester. This would seem to complicate the Labour government’s challenge, which is from both the right and left.
Prices
G10
• The traded in a little more than a quarter-cent range around $1.18 yesterday. It remains mired in choppy range of around $1.1740-$1.1860. It is fraying the down trendline from late January (~$1.18) in this sideways movement. Options for 1.85 bln euros expire there today. A close above the 20-day moving average (~$1.1825) would help the technical tone. Short-term participants do not appear to have much conviction at the moment.
• The dollar recorded an inside day against the and remained within Wednesday’s ~JPY155.35-JPY156.80 range yesterday and has continued to do so today. It has chopped between about JPY155.55 and JPY156.25 today. The new nominees to the BOJ seem to undermine any threat of intervention, and the market appear likely to test the official resolve. One hinderance is that the US 10-year yield has slipped to four-month lows below 4%.
• , on the other hand, posted an outside day, trading on both sides of Wednesday’s range. It settled slightly below Wednesday’s low. It tested the 200-day moving average (~$1.3450). It did so in the second half of last week, but has not settled below it since mid-January, which proved to be the bottom rather than presage a sharper decline. Options for a little more than GBP400 mln at $1.3500 expire today, which it as stayed mostly below, while at the same time, it has held above $1.3460. There was little impact from the Greens’ victory in the Greater Manchester special election.
• The US dollar posted an outside day against the , but the close was with in the range, neutralizing the technical signal. It was the seventh consecutive session that CAD1.37 was frayed on an intraday basis, but the greenback has not settled above it once. Still, the market does not appear to have given up. A convincing break of CAD1.3640, however, would suggest it has. So far today, it is trading in a narrow range between about CAD1.3660 and CAD1.3685.
• The was sold to session lows yesterday near $0.7065 in the North American morning but recovered to a little above $0.7110 in the afternoon before consolidating. It is trading firmly but quietly today between about $0.7095 and a little more than $0.7130. Resistance is in the $0.7140-50 area. Options for nearly A$925 at $0.7080 expire today. In the futures market, the odds of a May hike are little changed this week at about 85%.
EM
• The finished softer yesterday, but its minimal loss, less than 0.2%, reflects its resilience in the face of the drawdown in US equities. In the inflation report, the central bank raised its growth forecast to 1.6% from 1.1%. The Q1 inflation projection of 4% was unchanged. Inflation is not see reaching the 3% midpoint of the target range until Q2 27. The range the dollar posted on Monday (~MXN17.10-MXN17.30) continues to prevail. Today, it has been confined to a MXN17.1665-MXN17.22 range.
• The PBOC took two measures that took the wind from the yuan bulls. First, it eliminated the reserve requirement on foreign exchange forwards from 20% to zero, making foreign currency holdings more attractive. Second, it refined the banking rules and endorsed Chinese banks’ role in providing yuan liquidity to offshore markets. The dollar rose a little above CNH6.8605 today after it slipped a little below CNH6.8270 yesterday. Even with today’s minor loss, the rose for the fourth consecutive week, and the nearly 0.60% gain is the largest week advance since last August. The last time the fix rose on a weekly basis was in late November, which itself was the first time since the end of September. The dollar’s reference rate was unchanged today at CNY6.9228 yesterday.
• The dollar pushed slightly higher against the today. It reached a new high for the week, slightly below INR90.98. Yesterday’s high was around INR90.9250, and today’s low about INR90.9375. Separately, India revised this year’s growth forecast to 7.6% from the 7.4% projection made last month.
Other Markets
• Equities: Most large bourses in the Asia Pacific region advanced. Tokyo reached record highs. Profit-taking hit high-flying South Korean Kospi and knocked it back 1%. It still rose 7% this week. Indian equities were also an exception and got tagged for more than 1%. After a minor loss yesterday, Europe’s Stoxx 600 is posting a minor gain today. Barring a setback, it will be fifth weekly advance. It has fallen in only one week since mid-December. Meanwhile, the Nasdaq futures are off more than 1% and the S&P futures are off half as much,
• Benchmark 10-year yields are lower. Soft Tokyo inflation sent the 10-year JGB down nearly four basis points. European rates are slightly softer, while the 10-year US Treasury yield is off 1-2 bp and is down nearly 10 bp this week to below 4% for the first time since the end of last November.
• Gold is consolidating quietly between $5167 and $5200. It remains in the range set Tuesday. Silver is trading quietly within the ranges seen in the past two sessions and is a little below $90 in late European morning turnover.
• April WTI appears to have rebuilt the weekend premium. It is near yesterday’s high (~$66.75). The high settlement this week was on Monday, around $66.30.
Data
• US inflation looks to have slowed in January. A 0.3% rise in the headline and will, given the base effect, allow the year-over year headline rate to slow to 2.6% (from 3.0%) and the core rate to 3.0% (from 3.3%). The may receive some passing interest ahead of November construction spending. Construction spending was virtually flat in the first ten months of 2025 after rising by an average of 0.1% a month in the first 10 months of 2024 and a heady 1.1% monthly average in the first 10 months of 2023. The Kansas Fed’s February service survey is of little consequence to the market.
• Canada will report December , which is seen growing by 0.1% after a flat November. It is unlikely to deter a small contraction in Q4 (-0.2% annualized, according to the median forecast in Bloomberg’s survey) after 2.6% expansion in Q3.
• Mexico’s trade balance displays a strong seasonal pattern toward deterioration in January. It has done so for the past 14 years without fail. It is expected to have done so last month. Last year, Mexico’s exports rose by about 7.6%, while imports rose by almost 4.4%. Mexico’s trade balance swung into a surplus of around $770 mln last year from an $18.54 bln deficit in 2024.
• The ECB’s inflation survey showed a minor change in inflation expectations. The one-year outlook eased to 2.6% from 2.8% and the three-year outlook was unchanged at 2.6%.
• Australia’s private sector credit growth remained robust in January, rising by 0.5%. It accelerated in H2 25 and appears to be one of the factors that underpin expectations that additional tightening by the central bank.
• Japan reported several important data points. First, the February Tokyo CPI, a harbinger of the national figures, edged up to 1.6% from 1.5% and the core rate eased to 1.8% from 2.0%, helped by new energy subsidies. It is the lowest core reading since April 2024. It peaked last May at 3.6%. Second, retail sales bounced back 4.1% after they fell by 2.0% in December. Third, industrial production surged 2.2% in January (-0.1% in December).
