ForexLive European FX news wrap: Risk aversion holds as DeepSeek triggers tech selloff

Headlines:

• USD/JPY threatens firmer break under 155.00 on safety flows
• The rout continues with S&P 500 futures down over 2% now
• Bitcoin dips back under $100,000 on risk selloff
• Weekly update on interest rate expectations
• ECB’s Lagarde: Central bank independence in question in several parts of the world
• Germany January Ifo business climate index 85.1 vs 84.7 expected
• China promises to take back illegal migrants after Trump threats

Markets:

• JPY leads, NZD lags on the day
• European equities lower; S&P 500 futures down 2.2%
• US 10-year yields down 9 bps to 4.522%
• Gold down 0.4% to $2,760.93
• WTI crude down 0.4% to $74.23
• Bitcoin down 3.5% to $98,988

It’s a rare risk-off day in markets on a combination of things that happened late in the weekend.

Trump delivered a warning on Colombia, essentially reaffirming that tariffs are essentially a blackmail tool now. And that spooked markets a fair bit, which enabled the dollar to rally higher in Asia trading.

The risk mood wasn’t helped as tech shares cratered on the hot news over the weekend, that being China AI startup, DeepSeek, took number one spot on the Apple store’s free apps page. The firm released its flagship model, R1, just last week and is said to perform just as well as ChatGPT but at 30 times less cost.

That put a mark on chipmakers and tech shares to start the new week. With DeepSeek partnering with AMD, that is seeing Nvidia shares bear the brunt of the pain in pre-market trading with the stock down over 11% currently. Ouch.

The selloff extended to the broader tech sector and that is weighing on US futures and triggering a broader flight to safety in markets. S&P 500 futures are down 2.2% with Nasdaq futures down 3.9% at the moment.

In turn, investors turned to bonds with 10-year Treasury yields sinking by nearly 10 bps to 4.52%.

The dollar was the lead gainer in Asia but was completely turned in European trading as such. USD/JPY fell from 155.90 all the way to a low of 153.70 before keeping just above 154.00 currently. The pair is still down over 1% on the day though.

Meanwhile, EUR/USD reversed course in a push up from 1.0460 to 1.0515 and GBP/USD likewise from 1.2450 to 1.2510 currently. Both pairs are sitting marginally higher on the day now.

As stocks sold off, the franc was also more bid with USD/CHF seen down 0.9% to 0.8975 currently from around 0.9050 earlier in the day.

In other markets, Bitcoin is also facing a rough start to the new week as it falls back under six digits. And gold is also marked lower by 0.4% to $2,760 but at least off earlier lows of $2,747.

Is this going to be just another flash in the pan risk-off wave, similar to the ones we saw last year?

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