The Dollar commences the new week and new month displaying a mixed performance. Following the pre-weekend surge, there have been additional gains; however, a consolidative tone has now taken hold. The greenback maintains its strength against the Canadian dollar, Norwegian krone, and Swiss franc. It is almost unchanged relative to the yen. Emerging market currencies display a varied performance, as Asian currencies predominantly trend downward. The Indian rupee stands out as a notable exception, appreciating approximately 0.5% following the weekend budget that elevated rates. Geopolitical tensions have diminished, leading to discussions between the US and Iran, resulting in a decline in oil prices. The decline in precious metals persists, and while prices have found some stability, the level of volatility continues to be high. Market participants are currently assessing President Trump’s nominee, Kevin Warsh, to take over for Powell as the Fed chair. In light of the current inquiry regarding the budget excesses associated with the Federal Reserve’s renovations, it appears that the Senate confirmation process could face challenges. The fluctuations in equities observed last week are continuing to influence this week’s market dynamics. The ECB and Bank of England are scheduled to convene this week, with expectations leaning towards a decision to maintain the current stance. Similarly, Mexico and likely India are anticipated to follow suit.

The euro experienced a decline as the weekend approached. Following the expiration of 6 billion euros in options at $1.19, the euro was traded down to $1.1850, aligning with a four-day low. Before stabilizing today, it dipped to $1.1840 but has struggled to rise above $1.1875. The immediate risk could reach the $1.1825-$1.1830 range, although a more significant pullback around $1.1745-65 cannot be dismissed. Options totaling 3.4 billion euros at a strike price of $1.1850 are set to expire tomorrow. The Dollar reached a three-day peak against the Japanese yen, approaching JPY154.80 as the weekend approaches. In follow-through buying, arguably supported by Prime Minister Takaichi’s acknowledgment that a weaker yen has assisted the economy in managing the increased US tariffs, the greenback appreciated to JPY155.50. Subsequently, the dollar retraced to JPY154.55 and remains relatively stable as we approach the North American session. Options for 570 million at JPY155 expire today. The dollar approached the gap created on the charts from last Monday’s lower opening but failed to fully close it. The gap has widened to approximately JPY155.65, aligning with the midpoint since the dollar reached its peak on January 23 at JPY159.25, prior to the Federal Reserve’s intervention regarding interest rates, reportedly on behalf of the US Treasury.

Sterling experienced a decline, reaching a three-day low prior to the weekend. It remained slightly under $1.3680, but today it has softened to nearly $1.3660. Sterling experienced significant fluctuations last Tuesday, coinciding with President Trump’s remarks expressing no concern regarding the dollar (~$1.3665-$1.3870). The asset continues to trade within that range, currently positioned around $1.3700 during the late European morning session. The lower end of that range aligns with the (38.2%) retracement target. A break may trigger a shift towards $1.3600. Options for GBP350 million at $1.3650 are set to expire today. The US dollar demonstrated a strong bullish key reversal against the Canadian dollar prior to the weekend. It initially reached a new low since October 2024, approaching CAD1.3480. It demonstrated a strong recovery during the North American session, surpassing CAD1.3520. It closed significantly above Thursday’s peak (~CAD1.3580). The US dollar achieved a value of CAD1.3675 today, yet it has encountered support around CAD1.3625. Further support in the vicinity of the chart is identified at CAD1.3600.

Following a peak of nearly $0.7100 last Thursday, the Australian dollar experienced a downward adjustment as the weekend approached, influenced by a general rebound of the greenback. The price reached $0.6940. The recent downside correction appears to be incomplete, with the Australian dollar trading down to approximately $0.6910 today. It has experienced a significant rebound, returning to approximately $0.6970. There could be susceptibility to buy the rumor, sell the fact dynamics if the central bank raises rates tomorrow. It is probable that there will be a sell-off in response to disappointment if the RBA opts not to increase rates. Options at $0.6900 and $0.6930 for A$475 million and A$325 million, respectively, are set to expire today.