The dollar exhibits a generally softer stance, yet the consolidative tone remains intact. The yen stands out as the significant exception. Japanese officials have escalated their intervention measures, issuing stronger warnings. The market initially pushed the dollar’s gains to JPY159.45 before traders took some profits, resulting in a decline to approximately JPY158.60. The market appears to be precariously positioned, yet numerous investors anticipate a decline driven by intervention, aiming to acquire the dollar at a lower price. The bond markets are exhibiting stability despite a notable five-day rally in oil prices, which has surged by 11%. The US 10-year yield has recently tested the 4.20% threshold but is currently hovering around a four-day low, now below 4.15%. The correlation between the weak yen and rising JGB yields is evident; however, this has not prevented Japanese equities from achieving record highs. The North American session includes the US PPI and retail sales data, along with the presence of at least five Federal Reserve officials. Additionally, today marks a significant decision day for the Supreme Court. The announcement does not specify which cases have been resolved; however, it is conceivable that the decision regarding the challenge to President Trump’s tariffs under emergency powers may be issued. A rejection, which is widely anticipated, is expected to have an initial negative impact on bonds and the dollar, while being favorable for equities.

The euro’s inside day on Tuesday mitigates the immediate increase following the recent challenge to the Federal Reserve’s autonomy. It is consolidating within yesterday’s range today, remaining confined between approximately $1.1635 and $1.1660. The peak for the session was noted during the late morning trading in Europe. The market appears to have stalled, indicating a downside bias in early North American trading. To extend the slide that commenced on Christmas Eve, it is essential to breach last Friday’s low, which is slightly below $1,1620. The 200-day moving average stands at approximately $1.1580, with the euro maintaining its position above this level since early March 2025.

The dollar approached JPY159.20 around midday in New York yesterday and has risen to JPY159.45 today. Japanese officials have ascended the lower levels of the intervention escalation ladder, issuing new verbal warnings from senior Ministry of Finance representatives. However, it is challenging to contend that the market is experiencing disorder or volatility. The historical one-week volatility stands at approximately 6.9%, whereas the one-month implied volatility is around 8.2%, falling short of the December peak of roughly 9.5%. Indeed, it is just slightly above the 50-day moving average (~8.5%). The low recorded last year was approximately 7.2%. The greenback has traded down to approximately JPY158.60 during the European morning session. Proximity to support is observed around JPY158.20. Sterling faced resistance yesterday at the $1.35 mark and subsequently declined to approximately $1.3425. It stayed close to the lows during the North American afternoon session. The asset has identified support around $1.3420 today and has rebounded to $1.3460. The immediate risk suggests a potential retracement to approximately $1.3435.

The greenback rebounded from a three-day low near CAD1.3855, moving closer to CAD1.39 during a calm and uneventful trading session yesterday. Tit is currently consolidating within the range of CAD1.3880 to CAD1.3900, exhibiting low trading volume today. The US dollar has made significant progress since the low observed the day after Christmas (~CAD1.3645), yet we believe there remains potential for movement towards CAD1.3950-CAD1.4000. Following an ascent to a four-day peak just above $0.6725, the Australian dollar experienced a downturn, trading beneath Monday’s low of approximately $0.6675. It successfully closed just above that level. The market appears to be lacking in near-term conviction, with the Aussie fluctuating between approximately $0.6680 and just above $0.6700. The asset has neared session lows during the European morning, and our outlook leans towards the upside as North American trading begins.