The dollar begins the new week and new month in a mixed fashion. There have been some follow-through gains after the pre-weekend jump, but a consolidative tone has emerged. The greenback is holding on to gains against the Canadian dollar, Norwegian krone, and Swiss franc. It is nearly flat against the yen. Emerging market currencies are mixed, with Asian currencies mostly lower. The notable exception is the Indian rupee, which is up about 0.5% after the weekend budget pushed up rates. Geopolitical tensions have eased and the US and Iran are talking, and oil prices have tumbled.
The sell-off in the precious metals has continued and although prices have stabilized, volatility remains elevated. Market participants are also digesting President Trump’s nominee, Kevin Warsh, to succeed Powell as the Fed chair. Given the ongoing investigation into the cost over-runs of the Fed’s renovations, the Senate confirmation process might not be smooth. The volatility in equities seen last week is carrying over into this week’s activity. The ECB and Bank of England meet this week but both are widely expected to stand pat, as will Mexico, and likely India too.
Prices
G10
• The euro broke down ahead of the weekend. After 6 bln euros of options struck at $1.19 expired, the euro was sold to $1.1850, matching a four-day low. Before steadying today, it slipped to $1.1840 but has not been able to resurface above $1.1875. The near-term risk may extend to $1.1825-$1.1830, but we would not rule out a deeper pullback (~$1.1745-65?). There are 3.4 bln euros in options at $1.1850 that expire tomorrow.
• The dollar rose to a three-day high against the Japanese yen, near JPY154.80 ahead of the weekend. In follow-through buying, arguably aided by Prime Minister Takaichi’s recognition that a weaker yen helped the economy absorb the higher US tariffs, the greenback rose to JPY155.50. Subsequently, the dollar pulled back toward JPY154.55 and is little changed ahead of the North American session. Options for $570 mln at JPY155 expire today. The dollar entered the gap left on the charts from last Monday’s lower opening but was unable to close it. The gap extends to about JPY155.65, which also corresponds to the halfway point since the dollar’s peak on January 23 (JPY159.25) before the Fed checked rates reportedly on behalf of the US Treasury.
• Sterling was sold to a three-day low before the weekend. It held a smidgeon below $1.3680, though today it eased to almost $1.3660. Sterling traded in a broad range last Tuesday, when President Trump said he was not concerned about the dollar (~$1.3665-$1.3870). It remains in that range and is hovering around $1.3700 in late European morning turnover. The lower end of that range corresponds to the (38.2%) retracement objective. A break could spur a move toward $1.3600. Options for GBP350 mln at $1.3650 expire today.
• The US dollar posted a bullish key reversal against the Canadian dollar before the weekend. It first was sold to a new low since October 2024, near CAD1.3480. It recovered smartly through the North American session and reached slightly above CAD1.3520. It settled well above Thursday’s high (~CAD1.3580). The US dollar reached CAD1.3675 today but has found support near CAD1.3625. Additional nearby chart support is seen around CAD1.3600.
• After reaching nearly $0.7100 last Thursday, the Australian dollar corrected lower ahead of the weekend amid the greenback’s broad recovery. It was pushed to $0.6940. The downside correction did not seem complete, and the Aussie was sold to about $0.6910 today. It has rebounded sharply back to nearly $0.6970. It may be vulnerable to buy the rumor sell the fact type of activity if the central bank hikes rates tomorrow. And it would likely sell-off on disappointment if the RBA does not hike rates. Options at $0.6900 and $0.6930 for A$475 mln and A$325 mln, respectively expire today.
EM
• The Mexican peso succumbed to the greenback’s broader correction, even though Q4 GDP came in better than expected (0.8% quarter-over-quarter after a 0.3% contraction in Q3 25). The dollar rose to a new high for the week ahead of the weekend, nearly MXN17.4850. The US dollar was initially sold to around MXN17.3665 today before rebounding. It reached MXN17.5725 today, slightly shy of the 20-day moving average (~MXN17.6015), which it has not settled above in three weeks. Although the peso is slightly higher on the day ahead of the North American session, it looks vulnerable, though Mexico itself is closed for a national holiday.
• The PBOC set the dollar’s fix slightly higher today (CNY6.9695 vs CNY6.9678 Friday). The greenback is posted a potential outside down day against the offshore yuan by first rising through the pre-weekend high and then selling off through its lows. The dollar frayed the 20-day moving average (~CNH6.9615) but has not settled above it since late November. The Financial Times article about how President Xi wants to yuan to be an international reserve currency is based on a recycled speech more than a year old. The yuan is including in the SDR so any country (most) that has SDRs also has yuan in reserves. It is a reserve currency, albeit limited.
• Helped by a budget that lifted yields and central bank intervention, the Indian rupee has gained about 0.5% today. It is the largest gain since last October. The budget projected a slightly smaller deficit (~4.3% vs 4.4% of GDP). The Reserve Bank of India meets Friday and is expected to keep its repo rate steady at 5.25%.
Other Markets
• Asia Pacific equites tumbled. India was an exception, with around a 1% gain. However, most large markets fell by over 1%, leading by South Korea’s Kospi’s 5.25% drop. Europe’s Stoxx 600 is little changed, while US index futures are weak. The Nasdaq futures are off almost 1%, while the S&P 500 futures are down a little more than 1%.
• Benchmark 10-year yields are mixed. While Japan’s 10-year yield is a basis point softer slightly below 2.23%, the 30-year and 40-year bond yields are firmer. European yields are mostly a little firmer, with the 10-year Gilts a notable exception, with a two-basis point decline. The 10-year US Treasury yield is also off a couple of basis points slightly below 4.22%.
• Gold initially plummeted to about $4403 (settled slightly above $4894 ahead of the weekend). It recovered to almost $4800, where it seemed to stall. For its part, silver was sold to around $71.40 (settled ~$85.20 last Friday). Silver recovered to almost $84.
• March WTI has been sold hard today. It settled near $65.20 and dropped to about $61.40, a four-day low. A US strike on Iran looks slightly less imminent and OPEC+ agreed to hold output steady next month when its current accord ends.
Data
• The US ISM manufacturing survey is more important today than the final estimate of the manufacturing PMI. The latter is in contraction territory while the former has been expanding since the fluke dip below 50 last July. The Treasury also will announce the quarter borrowing estimates. Attention turns to the labor market with JOLTS tomorrow, ADP on Wednesday and nonfarm payrolls on Friday. The estimates for non-farm payrolls have crept higher in recent days, and in the Bloomberg survey, the median is now for an increase of 78k.
• Canada sees its January manufacturing PMI today. It has not been above 50 since last January. The economy is still struggling. At the end of last week, StatsCan reported the economy grew by 0.1% in November after contracting by 0.3% in October. The highlight of the week is the labor market report on Friday. The median projections in Bloomberg’s survey call for s 7k increase in overall jobs (10.1k increase in December) and a steady unemployment rate of 6.8%.
• The final eurozone January manufacturing PMI was revised to 49.5 from the preliminary estimate of 49.4. The first increase in three months was confirmed. It needs to return above 50 to signal expansion of the manufacturing sector. The French reading has (51.2 vs 50.7 in December), but Germany has not (49.1 vs. 47.0); nor has Italy (48.1 vs. 47.9) or Spain (49.2 vs. 49.6). Separately, Germany reported a 0.1% decline in December retail sales. The aggregate figure is due Thursday.
• The final UK manufacturing PMI stands at 51.8 (vs. 51.6 initially and 50.6 in December). It is the fourth consecutive increase and the third month above the 50 boom/bust level. Last January, it stood at 48.3.
• Japan’s January manufacturing PMI stands at 51.5, in line with the preliminary estimate and the third consecutive increase. It is the strongest since August 2022. A year ago, it stood at 48.7.
• Australia’s final January manufacturing PMI is at 52.3 from the preliminary estimate of 52.4 (and up from 51.6 where it was in November and December 2025). The market has around 70% chance discounted of a rate hike tomorrow. If it disappoints, the Aussie will likely be punished, but even if a hike is delivered, there may be some profit-taking.
• China reported disappointing January PMI over the weekend. The manufacturing component fell to 49.3 from 50.1. The December reading was the anomaly. It was the first above-50 reading since March. Last January, it was at 49.1. The non-manufacturing PMI fell to 49.4 from 50.2. It had was above the 50 boom/bust level except in November last year. The composite reading fell to 49.8 from 50.7. Earlier today, the RatingDog version (previous Caixin) was reported. It edged up to 50.3 from 50.1.
Reviewed by Marc Chandler
on
February 02, 2026
Rating:
