Economic Data and Market Sentiment - Japanese exports rose for the fifth consecutive month in January, indicating a positive trend in trade [6][9] - Confidence among Japanese manufacturers improved in February for the first time in three months, as per the Reuters Tankan poll [6][9] - The International Monetary Fund urged Japan to continue raising interest rates and avoid further loosening of fiscal policy [7][9] Geopolitical Developments - Progress was reported in nuclear talks between Iran and the U.S., with an understanding on main "guiding principles" reached, although a deal is not imminent [5][8] - Peace negotiations between Ukraine and Russia are ongoing, with U.S.-mediated talks taking place in Geneva [6][8] U.S. Economic Indicators - The Federal Reserve's Open Market Committee is set to release minutes from its January meeting, which may provide insights into future monetary policy [8] - The U.S. Commerce Department will issue its first estimate for GDP for the fourth quarter on Friday, which is a key economic indicator [8] Currency Market Movements - The dollar index remained stable at 97.11 after a two-day advance, reflecting mixed market sentiment [2][8] - The yen strengthened by 0.1% to 153.12 per dollar, while the euro held steady at $1.1852 [2][5] - The Australian dollar and kiwi remained steady at $0.7083 and $0.6047 respectively, with New Zealand's central bank expected to hold rates [8][9] U.S.-Japan Investment Initiatives - The Trump administration announced three projects valued at $36 billion to be financed by Japan, part of a larger $550 billion investment agreement aimed at reducing U.S. tariffs [7][9]

Economic Overview - The yen trimmed losses from the previous day amid thin trading conditions due to holidays in Asia and the U.S. [1] - Key economic events this week include the release of the Federal Reserve's meeting minutes and advance figures on U.S. GDP [1][10]. U.S. Economic Sentiment - Kristina Clifton, a senior currency strategist, expressed a positive outlook on the U.S. economy, anticipating a high chance of a June interest rate cut, with a follow-up cut expected in July [2]. - The dollar index remained stable at 97.12 after a 0.2% gain in the previous session, while the euro fell by 0.06% to $1.1843 [5][10]. Currency Movements - The yen strengthened by 0.15% to 153.28 per dollar, while the British pound weakened by 0.07% to $1.3616 [6][10]. - The Australian dollar decreased by 0.07% to $0.7064, and New Zealand's kiwi fell by 0.08% to $0.6026 ahead of the Reserve Bank of New Zealand's policy meeting [8][11]. Inflation and Monetary Policy - U.S. consumer prices rose less than expected in January, providing the Federal Reserve with more flexibility for policy easing this year [6][10]. - Money market traders are pricing in 62 basis points of easing for the remainder of the year, indicating two quarter-point cuts and a 50% chance of a third cut [6][11]. - The next interest rate cut is likely in June, with an 80% chance of a 25-basis-point reduction [11]. Global Economic Indicators - Japan's economy showed minimal growth, with an annualized expansion of only 0.2% last quarter, which has implications for potential government stimulus [7][11]. - Minutes from the Reserve Bank of Australia's board meeting indicated concerns over inflation and employment risks shifting materially [9][11]. Cryptocurrency Market - Bitcoin experienced a slight increase of 0.05% to $68,881.72, while ether remained stable at $1,999.11 [9].

Treasury Wine Estates today (16 February) booked a jump in half-year losses as the Australian wine group recorded an impairment on its business in the US. The Daou Vineyards brand owner, which has suspended a planned dividend, warned in December an impairment on its US operations was on the horizon due to its “more conservative long-term market growth assumptions” for the country. Treasury logged a non-cash impairment charge worth A$987.6m (US$699.5m) pre tax. The company said the charge was primarily l ...

A resurgent yen has been the main focus for the foreign exchange market this week, particularly as its rise confounded initial expectations that a selloff in the currency could gather pace if Takaichi secured ‌a strong mandate.It ⁠was last ⁠steady at 152.86 per dollar, but was set to gain nearly 3% for the week, which would mark its largest advance since November 2024.Against the "The election outcome might be seen as marking an end to the political instability that has persisted since July last year, sugg ...

Core Viewpoint - The rising yen has negatively impacted the dollar, which is near a four-month low due to various domestic issues, including a potential U.S. government shutdown and political instability under President Trump [1][11]. Currency Market Dynamics - The yen has stabilized around the 153-154 per dollar level, with the latest rate at 154.24 per dollar, recovering from a low of 159.23 [2][11]. - The dollar has fallen more than 1% against a basket of currencies this year, currently at 97.05, having reached a low of 96.808 [8][11]. - The euro is steady at $1.1878, while sterling is at $1.3678, both having reached higher peaks recently [7][11]. Federal Reserve and Political Influence - The Federal Reserve is set to begin a two-day policy meeting, overshadowed by ongoing political issues, including a criminal investigation involving Chair Jerome Powell [9][11]. - Concerns about the independence of the Federal Reserve are growing, particularly if Powell resigns, which could negatively affect the dollar [10][11]. Intervention Speculation - There is speculation about a potential coordinated currency intervention by U.S. and Japanese authorities, which has made investors cautious about pushing the yen lower [6][11]. - Analysts suggest that while the market is currently wary, renewed attempts to test Japanese authorities' resolve may occur if no intervention happens soon [6][11].

Core Insights - The US dollar ended the previous week softer, influenced by inflation signals, rising Treasury yields, and uncertainty surrounding the Federal Reserve and the White House [1] - Mixed inflation data, with Core CPI undershooting expectations and PPI meeting them, did not significantly alter the Federal Reserve's near-term policy stance [2] - The breakout in the 10-year yield above 4.2% suggests a potential increase in long-term US yields, yet the dollar struggled to gain traction due to resilient equity sentiment and reduced geopolitical fears [3] Currency Performance - The New Zealand dollar led the G10 currencies, supported by strong domestic manufacturing data, while the Canadian dollar benefited from optimism regarding renewed trade engagement with China [4] - European currencies, particularly the Euro, Swiss Franc, and Sterling, performed poorly due to political issues and declining growth momentum [4] - The Yen traded unevenly, influenced by speculation over US-Japan FX intervention and expectations of further Bank of Japan tightening, but overall demand for safe havens remained low [5] Currency Pairs Analysis - GBP/AUD has weakened significantly, with expectations for the trend to continue lower, potentially testing the key level of 1.98820 [6][8] - EUR/NZD has formed a head-and-shoulders pattern, with a baseline around 2.007; a break below this level could lead to a nearly 3% decline, testing the previous key level at 1.96225 [9][10] Market Outlook - Upcoming events, including the Davos summit and US-EU tensions over Greenland, are expected to create volatility in the Euro and Swiss Franc [11] - The acceleration of the equity earnings season, with results from major companies like Netflix and Intel, will shape risk sentiment and influence Dollar-sensitive carry trades [12] - The 10-year yield's movement above 4.2% will be closely monitored, as its trajectory could significantly impact the US dollar's performance against improving global risk appetite [13]

Geopolitical Tensions and Market Reactions - Markets have largely ignored deepening geopolitical tensions, with stocks rallying and currencies and bonds showing little movement following U.S. intervention in Venezuela and the capture of President Nicolas Maduro [1][8] - China has banned exports of dual-use items to Japan, a response to remarks by Japanese Prime Minister Sanae Takaichi regarding Taiwan, but this has not significantly impacted foreign exchange markets [1][2][8] Currency Market Overview - The Australian dollar fell 0.3% to a session low of $0.6717 but later recovered, while the British pound remained flat at $1.3502 and the Japanese yen strengthened slightly to 156.63 [8] - The euro increased by 0.03% to $1.1692 after a previous session decline of 0.3%, attributed to inflation slowing more than expected in major eurozone economies [5][8] U.S. Economic Data and Federal Reserve Outlook - Currency traders are in a wait-and-see mode ahead of U.S. labor market data, including private payrolls and job openings, with a focus on the upcoming nonfarm payrolls report [5][8] - There is a belief among investors that the Federal Reserve will cut rates at least two more times this year, which has contributed to a weaker dollar [7][9] - The ADP's monthly jobs report is anticipated to be particularly impactful, with concerns about rising unemployment and the potential underperformance of AI investments [6][9]

Core Viewpoint - The first week of December exhibited a dip-buying seasonal pattern with major indices rising, while significant price movements occurred in the forex market due to changing central bank expectations and improved global risk sentiment [1] Forex Market Analysis - The U.S. Dollar underperformed against G10 currencies, influenced by softer private employment data, mixed labor indicators, and a decrease in the Fed's preferred inflation gauge to its lowest year-on-year level since May, reinforcing expectations for a rate cut [2] - Despite a rebound in longer-dated Treasury yields, this did not significantly boost the Dollar as investors shifted towards higher-beta currencies amid improved risk sentiment [3] Currency Performance - The Swiss Franc lagged as defensive positioning faded, with rising yields outside Switzerland and stable equity markets [4] - The Euro struggled to gain traction despite the Dollar's weakness, hindered by concerns over the euro area's growth and yield advantages [4] - The Australian Dollar rose sharply, driven by market speculation that the RBA may need to resume tightening in 2026, supported by comments from Governor Michele Bullock regarding inflation risks [4][5] - The Canadian Dollar also strengthened due to robust labor market data, leading to expectations that the Bank of Canada will maintain rates into 2026, while Sterling benefited from positive sentiment following the Autumn Budget [5] Market Focus and Expectations - The upcoming week is centered on the Fed's December decision, with the CME FedWatch tool indicating a nearly 90% probability of a rate cut [10] - With the rate cut already priced in, the focus will shift to how the Fed communicates its easing trajectory into 2026 and whether upcoming market data supports a more aggressive rate-cut profile [11]

Core Insights - Markets anticipate a quarter point reduction in interest rates when the Federal Open Market Committee meets on December 9-10, with a focus on future easing signals [1] - Traders are pricing in approximately 86% odds of a Fed cut next Wednesday, with expectations for 2-3 additional reductions in the following year [2] Labor Market Analysis - Federal Reserve officials are closely monitoring the labor market to assess the need for further economic support [3] - Recent data indicates that new applications for unemployment benefits fell to a three-year low, although this may be influenced by the Thanksgiving holiday [5] Data and Economic Indicators - The economic data landscape is incomplete due to a prolonged government shutdown, which delayed some releases and hindered data collection [6] - Crucial monthly payroll figures, typically released on Fridays, have been delayed, and previous month's data was not published [9] Inflation Metrics - One of the Fed's preferred inflation measures, the PCE deflator, is expected to show a 0.2% monthly increase, which could influence the decision to cut the Funds rate [10] - Analysts suggest a potential soft increase in core PCE inflation of only 0.1% [10] Currency Market Reactions - The U.S. dollar is near a five-week low against major currencies as investors prepare for a potential Federal Reserve rate cut [9] - The dollar index was flat at 99.065, having dipped to a low of 98.765 earlier in the session, indicating a 0.4% decline for the week [9] Central Bank Policy Outlook - Upcoming central bank policy decisions include the Reserve Bank of Australia's meeting on Tuesday, the Bank of Canada's on Wednesday, and the Swiss National Bank's on Thursday [10] - The Bank of Japan is expected to raise rates this month, but future actions remain uncertain, with markets pricing in only one more rate hike next year and a 50% chance of another [10]

Group 1 - Traders are increasing their protection against significant fluctuations in sterling ahead of the upcoming U.K. budget [1]