The US Dollar experienced significant selling pressure at the beginning of yesterday’s trading session. The apprehension surrounding joint intervention follows the pre-weekend Fed assessment of rates, seemingly conducted for the benefit of the US Treasury, and highlighted by remarks from Japanese officials, including Prime Minister Takaichi. In the meantime, a further unfortunate death linked to ICE in Minnesota has prompted a warning from Democratic Senators regarding the potential obstruction of the funding bill recently passed by the House, aimed at maintaining federal government operations beyond the month’s end. Funding for ICE has been secured through the recently approved legislation, often referred to as the “big, beautiful bill.” Initially appearing to support the resolution of the trade dispute between Canada and China, which involved a reduction in certain Chinese tariffs on canola and a decrease in the tariff imposed by Canada on Chinese-made electric vehicles (49k units), President Trump now seems to be considering a 100% tariff on Canadian exports to the US. Treasury Secretary Bessent appeared to indicate that the risk was related to a thorough trade agreement. The significant rebound in the yen indicates that direct intervention may not be necessary. The increased verbal intervention proved effective, leading to a decline in Japanese bond yields. The dollar is generally weaker, although it has recovered from its lowest points. Consolidation appears to be on the horizon. This week, the G10 central banks, along with the central bank of Brazil, are anticipated to maintain their current positions. President Trump may reveal his choice to replace Powell as Chair of the Federal Reserve.

The Euro approached $1.1835 before the weekend, buoyed by discussions in the market regarding the Fed’s intervention in yen prices, allegedly on behalf of the Treasury Department. The highest point since September 18, following the Federal Reserve’s initial rate cut, was nearly $1.1920. The euro has maintained its position above last Friday’s high. Initial buying momentum in today’s early activity reached nearly $1.1900 before encountering resistance. The Yen experienced selling pressure following the BOJ’s decision to maintain its policy, with Governor Ueda indicating no immediate plans for another rate increase. The increased verbal intervention from Japan’s finance minister had a limited effect; however, the report that the Fed monitored prices and suggested it was acting on behalf of the US Treasury triggered a more significant market reaction. The dollar experienced a decline, falling to just under JPY 155.65, marking its lowest point since Christmas Eve, amid concerns of potential material intervention. The no-cost US strategy, akin to a verbal intervention, effectively disrupted what officials referred to as a “one-way” market—ironically eliminating the rationale for substantial intervention. Comments made over the weekend by Prime Minister Takaichi highlighted the heightened worries regarding joint intervention. The dollar faced swift selling activity today. The asset experienced a downward gap and has traded down to approximately JPY153.40 today, a level not observed since early November. The subsequent chart area of significance is around JPY152.50, representing the midpoint of the dollar’s ascent since September 17 and the Federal Reserve’s rate cut.

Sterling started the previous week by declining to a one-month low around $1.3330 and concluded with a two-day rally that propelled it to nearly $1.3645, marking its peak since September 18 (approximately $1.3725). The gains have been extended today to nearly $1.3685. It concluded just above three standard deviations from the 20-day moving average (Bollinger Bands are configured at two standard deviations from the 20-day moving average). The three standard deviation mark is currently positioned around $1.3690. The Canadian Dollar experienced a significant increase as the weekend approached. The US dollar experienced a slight decline, trading below CAD1.3700 for the first time since late December. Today, follow-through selling neared CAD1.3670. The November non-auto retail sales exceeded expectations, coming in at 1.7% compared to the anticipated 1.0%. However, the primary factor influencing the market was the widespread decline of the dollar. The five-month low established in December was approximately CAD1.3645. Over the weekend, it was reported that President Trump issued a threat of a 100% tariff on Canada should it pursue a trade agreement with China. Meanwhile, Treasury Secretary Bessent appeared to indicate that this was more of a caution against entering into a broad trade deal, which would be in violation of the USMCA. The authority under which the tariffs would be implemented remains uncertain. With significant imports from Canada, such as oil, the threat of tariffs may follow a similar path to the one posed last year regarding a commercial featuring former President Reagan’s criticism of tariffs. The implementation did not occur.

The Australian dollar has experienced a rally over the last five sessions leading up to today, with an impressive nearly 2% increase in the last two sessions alone. It has increased to $0.6935 today, marking its highest point since October 2024. Robust economic indicators and heightened speculation regarding a potential rate increase as soon as next week served as critical catalysts, while the significant sell-off of the dollar in North America prior to the weekend offered further momentum. The Australian dollar concluded at a level exceeding three standard deviations above the 20-day moving average. The current level is approximately $0.6940. The Swiss franc followed the yen as the strongest currency within the G10, appreciating nearly 1.2% against the dollar ahead of the weekend. The greenback fell to CHF0.7790, marking its lowest point since January 2015, when the Swiss National Bank removed its cap on the franc against the euro, leaving many in the market unexpectedly off balance (~CHF0.7400). Last year’s low was recorded on September 17 (~CHF0.7830) when the Federal Reserve implemented its initial rate cut in a series of three for 2025. The dollar has been traded at CHF0.7740 today, coinciding with the third standard deviation from the 20-day moving average.