Markets steady as UK politics roil and Japan rallies
US Treasuries pared earlier losses after officials signaled expectations for softer jobs growth ahead, with the US 10-year yield ending 0.6bps lower at 4.20% and the 2s/10s curve 0.7bps steeper.
Political jitters in the UK saw gilts underperform, though they rebounded as cabinet support for the PM emerged. Oil rose 1% after US warnings to ships in the Strait of Hormuz.
US equities closed higher, led by mega-cap tech (S&P +0.5%, Nasdaq +0.9%).
Inflation expectations eased, with the NY Fed’s one-year gauge falling to 3.1%. Fed officials struck a cautious tone, highlighting choppy jobs data and ongoing confidence in the dollar.
Bunds closed slightly higher, with the long end underperforming. ECB officials reiterated their focus on price stability, while the Bank of France governor’s early resignation added a note of uncertainty. UK gilts and the pound came under pressure as leadership challenges intensified, with 10-year yields spiking intraday before paring losses.
UK jobs data showed tentative signs of stabilization, with permanent staff hiring at an 18-month high, though still below expansionary levels.
Australian household spending fell 0.4% m/m in December (vs. +0.1% expected), the first decline since March 2024, as earlier sales events pulled forward demand.
Japanese equities soared (Nikkei +3.9%, Topix +2.3%) after PM Takaichi’s election win, cementing expectations for fiscal stimulus.
Dollar index slid 0.9% overnight after Bloomberg said Chinese regulators urged financial institutions to rein in US Treasury holdings.
Aussie up 1.1% overnight, while Kiwi gains 0.7%.
USDSGD fell 0.44% while USDCNH down 0.22% to a 33-month low.
China tells banks to cut back on US Treasuries, USD/CNH hits 33-month low
Chinese regulators have told banks to scale down purchases of US Treasuries and asked those with heavy exposure to trim positions, Bloomberg reported, citing unnamed sources.
Officials framed the move as a way to spread risk, not a signal of geopolitical tension or doubt about US credit.
The directive does not cover China’s state holdings of Treasuries.
USD/CNH slipped, with USD/CNH hitting a 33‑month low. Key resistance sits at the 21‑day EMA of 6.9485, followed by the 50‑day EMA at 6.9863.
Japan posts record surplus but December stumbles
Japan booked a record current account surplus of JPY31.88 trillion ($202 billion) in 2025, underscoring its strength in global trade.
But December’s surplus dropped 32% year‑on‑year to JPY728.8 billion, well short of expectations for JPY1.06 trillion.
Exports rose 4.5% to JPY9.943 trillion and imports climbed 3.7% to JPY9.808 trillion, leaving a goods surplus of JPY134.9 billion.
Services swung to a deficit of JPY340.1 billion from a small surplus a year earlier, while primary income eased and secondary income losses widened.
USDJPY fell to key support levels at the time of writing, still above key psychological handle of 155.00.
The next key support sits at the 100‑day EMA of 154.454.
Antipodeans rise on dollar slide
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 9 – 14 February
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
