Kit Juckes, Chief FX Strategist at Societe Generale, discusses the balance between US political pressure and Japan’s fiscal constraints. While the dollar decline has been punchy and one-sided, the move was already underway before last Friday’s speculation of a USD/JPY rate check. The greenback has fallen across the board, with NOK, AUD and NZD gaining the most ground so far this month. Yen strength ultimately accelerated the move, turning what had been steady dollar selling into an avalanche into the weeken ...

Group 1: Dollar Index and Economic Indicators - The dollar index (DXY00) fell to a 1.75-month low, down by -0.55%, influenced by the FOMC's decision to cut the federal funds target range by -25 basis points and increase liquidity through $40 billion monthly T-bill purchases [1] - US weekly jobless claims rose by +44,000 to a 3-month high of 236,000, indicating labor market weakness, which is dovish for Federal Reserve policy [4] - The US September trade deficit unexpectedly shrank to -$52.8 billion, the smallest in 5.25 years, contrasting with expectations of a widening to -$63.1 billion [4] Group 2: Market Reactions and Future Expectations - The markets are pricing in a 24% chance of another -25 basis point cut in the federal funds target range at the upcoming FOMC meeting on January 27-28 [4] - Concerns about President Trump's potential appointment of a dovish Fed Chair have added bearish sentiment towards the dollar, with Kevin Hassett being viewed as the most dovish candidate [3] Group 3: Euro and Yen Performance - The euro (EUR/USD) rose to a 2.25-month high, up by +0.46%, supported by dollar weakness and positive comments from ECB President Lagarde regarding potential economic growth forecast increases [5] - The yen (USD/JPY) decreased by -0.60%, benefiting from a weaker dollar and improved business confidence in Japan, with Q4 BSI large manufacturing confidence reaching a 1-year high [6]