USD/JPY surges toward 158 as fiscal bets rise
The yen down in early Asia trading as Japan’s election delivered a super-majority to PM Takaichi, stoking expectations for aggressive fiscal stimulus.
Markets are bracing for a potential policy pivot, with implied volatility in USD/JPY climbing as traders test the Bank of Japan’s resolve.
Unless the BoJ signals a faster pace of rate hikes, the yen remains vulnerable to further downside, with 160 in sight. Intervention risk is rising, but for now, the path of least resistance is higher for USD/JPY.
S&P 500 was up +2%, and Dow above 50,000. US two-year yields rose to 3.50%, flattening the curve as investors digested stronger Michigan sentiment and a sharp drop in one-year inflation expectations to 3.5%.
AUD/USD was up 1.2% overnight as RBA commentary flagged persistent inflation, prompting markets to price in a high probability of a May hike.
EUR/USD was up 0.32% overnight as ECB officials downplayed recent euro strength, emphasizing data dependence.
Yen volatility is front and center as Japan’s election outcome fuels fiscal and policy uncertainty.
Watch for intervention headlines in Japan and US data surprises to drive the next leg in FX.
US consumer mood hits six‑month high
Consumer confidence climbed to a six‑month peak in February, with the University of Michigan survey rising to 57.3 from 56.4. The reading topped expectations of 55. Optimism was strongest among households with large stock portfolios, while sentiment for those without holdings stayed weak. Inflation expectations for the year ahead eased to 3.5%, the lowest since January 2025.
Looking at APAC FX, USD/SGD is 1% above its recent low 1.2586, last seen on Jan 28th
The next key resistance lies at 21-day EMA of 1.2753, followed by 50-day EMA of 1.2818.
USD buyers may look to take advantage now.
Data storm set to shake currencies
The FX landscape this week will be shaped by a dense calendar of inflation and growth data across major economies. US inflation takes center stage, with January CPI (Saturday) expected at 0.3% m/m and 2.5% y/y, alongside core CPI at 0.3% m/m and 2.5% y/y. These readings will be pivotal for USD direction, as markets weigh the Fed’s next steps. US retail sales (Wednesday) and nonfarm payrolls (Thursday) will further inform the growth and labor market narrative, with payrolls seen rising by 71k and unemployment steady at 4.4%.
China’s January CPI and PPI ( Wednesday) will be closely watched for signs of deflationary pressures, with CPI seen at 0.3% y/y and PPI at -1.6% y/y. Singapore’s Q4 GDP (Tuesday) and Australia’s NAB business surveys will provide additional color on regional momentum. New Zealand’s BusinessNZ manufacturing PMI (Friday) could influence NZD sentiment, especially if it sustains recent strength.
Eurozone Q4 GDP (Friday) will be reported, while UK Q4 GDP (Thursday) will be scrutinized for signs of resilience, with consensus at 0.2% q/q.
With no major central bank decisions, FX volatility will hinge on data surprises, particularly US inflation and labor market prints. A hotter-than-expected US CPI could revive USD strength, while soft Chinese data may weigh on regional FX. Overall, the week’s releases will be crucial for shaping near-term currency trends as markets reassess growth and inflation trajectories.
Antipodeans led gains
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 9 – 14 February
Have a question? [email protected]
*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.
