ForexLive European FX news wrap: Dollar stays pressured, yen slips in post-BOJ trade

Headlines:

• Onshore yuan posts strong rally as Trump tariff fears abate
• EUR/USD knocks on the door of 1.0500 after euro area PMI data
• France January flash services PMI 48.9 vs 49.3 expected
• Germany January flash manufacturing PMI 44.1 vs 42.7 expected
• Eurozone January flash services PMI 51.4 vs 51.5 expected
• UK January CBI retailing reported sales -24 vs -15 prior

BOJ press conference:

• BOJ governor Ueda: Will keep adjusting degree of easing if price outlook is realised
• BOJ governor Ueda: No preset idea in mind on future rate adjustments
• BOJ governor Ueda: Upward revision to inflation forecast should kick in during mid-2025
• BOJ governor Ueda: There is still a long way to go in reaching neutral rate
• BOJ governor Ueda: Cannot say that the risk of returning to deflation is zero
• BOJ governor Ueda: Next rate hike will depend more on price moves, less on economic growth

Markets:

• EUR leads, JPY lags on the day
• European equities mostly higher; S&P 500 futures down 0.1%
• US 10-year yields up 0.5 bps to 4.641%
• Gold up 0.9% to $2,778.44
• WTI crude up 1.0% to $74.97
• Bitcoin up 2.2% to $105,388

It was an eventful session as market players had lots to scrutinise before we look to wrap up the week.

Trump tariff fears are seen abating as he said that he would rather not use them against China earlier in the day. And that kicked off a wave of dollar selling in general. That mood persisted for much of the session with EUR/USD briefly nudging above 1.0500, following better PMI data from France and Germany.

The pair moved up to 1.0515 before slipping back to 1.0478 now, still up 0.6% on the day though. Meanwhile, GBP/USD is up 0.5% to 1.2410 and USD/CAD down 0.3% to 1.4345. The dollar is off the lows for the day at least but still pressured in general as tariff fears recede.

USD/JPY is an interesting one as we did also get BOJ governor Ueda’s press conference in the mix. Ueda was calm, reaffirming the BOJ rate path as a whole. And while he did say to expect strong wage hikes from the spring wage negotiations in March, it doesn’t mean that they will be rushing to hike rates. He pretty much gave no confirmation or denial on that.

Traders took it to mean that the BOJ will stay on its current trajectory, and USD/JPY moved back up to 155.40 initially before gradually paring losses to 156.00 in the past hour. The pair is now even trading up by 0.1% to 156.30 currently as bond yields are also holding up on the day.

10-year Treasury yields are seen marginally higher at 4.64%, brushing aside its earlier fall to 4.61% as yields are holding the bounce this week.

In the equities space, European indices remain buoyed for the most part with the DAX at record highs and CAC 40 poised for an eighth straight day of gains. As for US futures, the mood is more muted following the gains yesterday but Wall Street might have other ideas before the weekend comes along.

Looking ahead, we do have US PMI data to offer something all before closing out what has been a rather eventful trading week, all thanks to the Trumpster. Have a great weekend, everyone.

This article was written by Justin Low at www.forexlive.com.