The aussie was the big beneficiary on Friday as the U.S. dollar came under pressure from rallying risk markets, with gold, silver, and equity futures advancing while USD/CNH fell. In data, U.S. consumer sentiment edged higher and beat expectations, while one-year inflation expectations fell sharply from 4.0% to 3.5%, easing concerns about persistent price pressures.

Key U.S. data next week—including December retail sales, January payrolls, CPI, and weekly claims—pose volatility risks. Fed Vice Chair Philip Jefferson expressed cautious optimism about 2026, while San Francisco Fed President Mary Daly characterized the economy as "precarious." Treasury Secretary Bessent said a strong-dollar policy means building conditions that underpin dollar strength.

EUR/USD opened New York trading near 1.1790 after touching 1.1766 overnight, then extended its advance to reach 1.1826 before settling near 1.1820. Bulls found technical support from the 61.8% Fibonacci retracement of the 1.1572-1.2084 range and the 21-day moving average. ECB policymakers said current policy fits the inflation outlook but warned they must be ready to act if price growth weakens excessively. Separately, ECB officials cautioned that a sharp euro rise could prompt a policy response, noting the currency's strength mainly reflects dollar weakness rather than eurozone fundamentals.

GBP/USD held firm through the New York afternoon, trading up 0.7% at 1.3610 within a Friday range of 1.3509-1.3624. The broad risk rebound lifted sterling, considerably paring Thursday's post-Bank of England slide. Bank of England Chief Economist Huw Pill warned against excessive comfort from an expected April inflation dip, stressing the need to prevent undershooting the target, while British house prices posted the best monthly gain since 2024 in January. The political fallout from UK PM Keir Starmer appointing Peter Mandelson as ambassador to Washington remains a downside risk.

USD/JPY settled above the cloud top and 21-DMA ahead of weekend Japanese elections, trading in a narrow 156.52-157.14 range below the key 158 level. The LDP is expected to secure a solid lower house majority. AUD/USD surged 1.44% to 0.7025, benefiting from precious metals gains and easing geopolitical tensions after Iran's top diplomat said Oman-mediated nuclear talks with the U.S. were off to a good start. USD/CAD fell 0.47% after Canada unexpectedly shed 24,800 jobs, though its unemployment rate fell to 6.5%. Treasury yields were mixed, sending the 2s-10s curve down about 1 basis point to +71.2bp as it pulled back from a four-year high.

The S&P 500 rose 1.74%. WTI oil was up 1.1% as investors assessed U.S.-Iran talks.

Gold rose 4%, silver popped 8% and copper gained 1.1%. Heading toward the close: EUR/USD +0.39%, USD/JPY +0.03%, GBP/USD +0.66%, AUD/USD +1.37%, DXY -0.23%, EUR/JPY +0.39%, GBP/JPY +0.67%, AUD/JPY +1.39%.(Editing by Burton Frierson Reporting by Robert Fullem)

Credit Agricole CIB Research discusses the JPY outlook into Japan's Feb-8 snap elections.

"The JPY is heading into the weekend’s Lower House election on the backfoot as investors price in PM Sanae Takaichi’s strong popularity translating into votes and an outright victory by the LDP in the election.Indeed, polling is pointing to the incumbent LDP-JIP coalition winning over 300 seats. Winning over 310 seats in the Lower House would allow the coalition to override any Upper House veto, where the coalition lacks a majority," CACAIB notes.

The JGB curve could face steepening pressure following the election if the LDP wins an outright victory. Investors would price in greater fiscal sustainability risks with unbound “Sanaenomics”. The US-Japan box yield spread & the Nikkei are the strongest drivers of USD/JPY with Japanese politics dominating the Fed and BoJ as drivers of the exchange rate. A steeper JGB curve is negative for the JPY. Investors will be on alert for FX intervention post the election, however," CACIB adds.

Newly-minted USD/JPY longs appear uneasy ahead of weekend elections in Japan. Price gains since USD/JPY was near 152 have not translated into conviction, with positioning and options markets suggesting growing caution beneath the surface.

One-month USD/JPY risk reversals have risen to around 1.8% in favor of yen calls, with a similar tilt seen across the volatility curve. Bearish USD/JPY skews remain unusually wide following the sharp three-day slide tied to suspected rate checks in January, highlighting lingering downside sensitivity.

Election expectations themselves may be contributing to this nervousness. Markets largely anticipate the LDP securing a clear majority, with some polls pointing to 300+ seats and a small chance of a two-thirds supermajority, while 233 seats is viewed as the minimum outcome.

With optimism already fully priced and the Nikkei at a fresh record, the risk of an electoral letdown is non-trivial—an outcome that could allow the yen to claw back recent losses, with the passing of event risk also prompting some short covering.

Futures open interest has matched spot gains from 153 to a 157.34 high and is now sitting at a two-month peak. However, positioning is not yet extreme, suggesting bulls are reluctant to chase higher amid elevated volatility and persistent intervention risk.

A decisive break above 158 with a backdrop of subdued volatility, possibly due to equity gains, would be needed to open the path toward 160. Failing that, a slip back below the 21-DMA of 156.63 and cloud top at 156.35 could trigger a pullback toward the 154.72 cloud base where dip buying may be considered.
Yen


(Robert Fullem is a Reuters market analyst. The views expressed are his own.)

Bank of America Global Research discusses the USD and EUR outlook in the medium-term.

"The dollar has had a tumultuous January but has found its footing over the past week. We remain bearish but feel some of the hype over concepts such as "debasement" and "sell America" are overdone at this stage. Evidence thus far does not support these claims, though we do remain attentive going forward. We envision FX hedging as a much more plausible bridge between these potential risks and how investors are likely to react," BofA notes.

"Elsewhere, we maintain a constructive view on the EUR side of the equation, Overall, we look for the USD to grind lower vs several G10 currencies, both for US and non-US centric reason," BofA adds.

Despite today’s broad risk-on tone, sterling's 0.6% rise to 1.3608 is likely a temporary lift, as cable's outlook remains bleak amid a markedly more dovish Bank of England policy stance, which should weigh on medium-term prospects for the pound.

Thursday's surprisingly dovish 5–4 vote to hold the Bank Rate at 3.75%—versus the widely expected 7–2 split—triggered a slide in sterling, with GBP/USD falling to a 10-session low at 1.3509 amid broader risk ructions lifted the dollar.

The narrower-than-forecast vote revealed a more divided MPC and caught markets off guard, strengthening expectations that rate cuts could begin as early as March.

Governor Andrew Bailey’s acknowledgement that the BoE is close to neutral territory further influenced market perceptions, leading analysts to adjust their forecasts for a more aggressive easing cycle. With projections of softer UK inflation and rising unemployment, some analysts even foresee a 6–3 vote in favor of a 25 basis point cut at the March 19 MPC meeting.

Still, the policy path remains data-dependent, as wage growth remains a concern, and political uncertainty in the UK adds an additional layer of risk premium. With markets already pricing an earlier start to easing, incoming employment, wages and inflation data could either reinforce or challenge the newly dovish trajectory.

As expectations for faster UK rate cuts remain elevated, GBP/USD is likely to trade with a bearish bias, with any upward moves likely capped. A decisive break below 1.3453, the 50% Fib of 1.3039-1.3867, could lead to further declines, with bears targeting the January 19 low of 1.3321 and a series of daily lows on the way to late-November lows just above 1.30.
Sterling Chart:


(Paul Spirgel is a Reuters market analyst. The views expressed are his own)

ANZ Research discusses AUD/NZD outlook ahead of the RBNZ Feb-18 meeting.

"The New Zealand domestic calendar is light, leaving NZD/USD primarily driven by external factors. Rising optimism around the US economy has weighed on precious metal prices, which could be a headwind for the NZD at the margin," ANZ notes.

"In terms of crosses, relative rate dynamics are moving in favour of the AUD, following the RBA’s comparatively hawkish hike earlier this week. However, we are cautious on chasing the rally in the pair and will consider the pair a ‘sell on rallies’ above 1.1650 ahead of the RBNZ meeting on 18 February. CTFC positioning suggests the AUD is relatively extended, having turned net long recently compared to the NZD, which is still significantly net short," ANZ adds. 

CIBC Research discusses its reaction to Canada's January jobs report.

"Employment in Canada fell to start the year, but with fewer people seeking jobs the unemployment rate also surprisingly came down. The 25K decline in employment compared to a consensus expectation for a 5K gain, although the reduction was driven exclusively by part-time positions (-70K) with full time jobs actually increasing," CIBC notes.

"Overall, today's employment report was very much a mixed bag, with both employment and unemployment apparently declining in the same month. As a result, we doubt this will have much impact at the Bank of Canada, and it doesn't change our view that interest rates will be on hold for the remainder of this year," CIBC adds.

Feb 6 (Reuters) - Japan’s lower house election takes place on February 8. Into the event, USD/JPY holds around 157 with the yen staying offered. Polls suggest the Liberal Democratic Party will comfortably clear the simple majority threshold – 233 seats – with the ruling coalition likely securing around 300 to 310 seats, putting a supermajority within reach.

A strong LDP showing is largely in the price, limiting scope for yen weakness on the result. Spot remains close to rate-check territory around 158–159, which should continue to act as a natural topside cap before intervention risk re-emerges near 160.

While a landslide would keep fiscal expansion risk alive given less need to accommodate opposition parties, increased political stability under that outcome could offer some JPY support at the margin. That said, there’s also the risk of a classic buy the rumour, sell the fact type setup for USD/JPY.

The bigger market mover would come from a surprise no-majority outcome, which would likely trigger an initial leg lower in USD/JPY, but given the political uncertainty that would follow – potentially including Prime Minister Sanae Takaichi’s resignation – follow-through on the downside may prove limited.
USDJPY hourly chart fri


JP election polymarket


Justin McQueen is a Reuters market analyst. (The views expressed are his own). ((Email: ))

• USD/ZAR has rallied in the wake of gold's unexpected drop

• After dropping to 15.6525 in January USD/ZAR reached 16.43 in Feb

• Possible false break (bear trap) under 15.9047 (61.8% 2021-2025 rise)

• Future close in relation to 100-MMA at 16.23 is important - USD/ZAR last 16.16

• Those who successfully gambled on ZAR rising have lots of profits to book

• Rising volatility and growing risk aversion may see UD/ZAR rise toward above 17

• The target for a minor correction of Apr 2025-Jan 2026 drop is 17.28

•
USDZAR


(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)

(Adds chart) The abrupt drop in the price of gold, which quickly spilled over to other metals, has been followed by a deeper decline in the value of cryptocurrencies. This could prove contagious, with investors booking profits or selling otherwise solid investments to cover losing bets. There are many profits to book - especially in equity markets which, aside from AI-linked stocks, still look remarkably robust - and in FX markets for those who have invested in risky but higher-yielding currencies that have boomed under the guise of carry trades over the past year.

The currencies being bought are mostly from emerging markets such as South Africa, Mexico, and Hungary, while safer currencies like the Swiss franc, yen, and U.S. dollar are often sold to fund those purchases.

While these bets are clearly risky, they have been hugely profitable - as have investments in equities and the euro, which have soared during the trade war, reinforcing the impression that they are safer than the global reserve currency.

When gold dropped, so did EUR/USD, creating the impression of a false break above the hugely important 1.2000 mark. That gave traders cause to book profits and, while the EUR/USD rise is less stretched and crowded than gold, it was overbought during the move above 1.20. The $20 billion wager on a rise is larger than any other bet reported by the CME.

The dollars that were sold are now being bought back during a period of growing risk aversion, giving traders a reason to realize profits. This heightens downside risks for the much less liquid emerging-market currencies that traders have flocked to over the past year.
Gold, USD index and bitcoin


(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)

• Bitcoin drops to $59930 on Feb 6

• The sell-off is stretched below $67690 base 20-week Bollinger bands

• The 200-WMA is $58057 and $57896 is 61.8% of the major uptrend

• Between 2022 and 2025 BTC rose $15632-126272 (61.8% is $57896)

• There is a good chance of a bounce given stretched nature of the drop

• A break of key support when drop stretched would be remarkably bearish

•
Bitcoin


(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)

• AUD/USD hits 0.6963 after extending north from 0.6897 (two-week low)

• Rally from 0.6897 aided by precious metals prices ripping higher

• AUD/USD resistance levels include 0.6972 (Wednesday low) and 0.70

• 0.7050 was intra-week high on Tuesday, following RBA's hawkish hike

• RBA hike was needed to slow demand as inflation surged, Bullock says

• Rio Tinto's Australian investors applaud end to Glencore takeover talks

AUDUSD


(Robert Howard is a Reuters market analyst. The views expressed are his own)

• A tentative recovery from levels just below $60k

• Slide from mid-Jan $97,939 high compounded by tech stock rout

• Pressure on risky assets appears to be easing

• For the BTC there is a mountain to climb to get back on-side

• Friday bounce pales in the face of a near 40% slide since Jan 14

• Coin remains pinned near the lowest point since Oct 2024

• Thursday high provides a target and resistance: $73,175
Bitcoin Daily Chart:


(Peter Stoneham is a Reuters market analyst. The views expressed are his own)

• FX options expire at 10-am New York/15.00 GMT on Friday February 6

• EUR/USD: 1.1800 (2.5BLN), 1.1825 (602M), 1.1850 (1BLN), 1.1875-80 (1.2BLN)

• USD/CHF: 0.7675 (310M), 0.7725 (400M), 0.7850 (300M)

• EUR/CHF: 0.9100 (225M). GBP/USD: 1.3650 (275M)

• AUD/USD: 0.6950 (357M), 0.6975 (636M). AUD/JPY: 108.75 (200M)

• NZD/USD: 0.5950 (252M). AUD/NZD: 1.1675 (205M)

• USD/JPY: 156.00 (693M), 157.00 (851M), 157.75 (303M), 157.95-158.05 (426M)

• FX options wrap - Volatility risk premiums back in demand (Richard Pace is a Reuters market analyst. The views expressed are his own)

• USD/THB lower, follows blip higher in gold prices while DXY drops

• Spot gold last +1.26% to $4830 per ounce after drop overnight

• DXY lost steam after failure above 98.0, last at 97.85 vs 98.03 high

• USD/THB last at 31.68-71 , ranged 31.66-89 so far

• Next support at 31.50, doubt will break ahead of election on Sunday

• Related
THB

(Catherine Tan is a Reuters market analyst. The views expressed are her own.)

Feb 6 (Reuters) - AUD/JPY could see more upside regardless of a number of risk factors such as Japan's weekend Lower House elections and any central bank moves this year, including a possible Bank of Japan rate hike in April. The Reserve Bank of Australia signalled a clearly hawkish bias after its rate rise on Tuesday given high domestic inflation . Markets now expect at least one more hike this year. The BOJ also maintained its hawkish bias while leaving rates steady in January. Another hike is expected in April after the turn of Japan's fiscal year and fresh wage increases by Japan Inc., with possibly another tightening in September. Totan Research/ICAP has the chances of a hike in April at 49% and 32% in September. Japanese and Australian government bond interest rate differentials look set to remain relatively wide regardless of any pending BOJ hikes. The two-year spread widened from a recent low of 234 basis points in September to around 297 bps this week. Longer-dated paper has seen smaller widening. Fresh moves into JPY-funded AUD carry trades are therefore no surprise . AUD/JPY hit a 110.18 high following Tuesday's RBA hike, and a decisive break back above 110.00 could see moves towards 114.75, the high dating to October 1990 when AUD/JPY was heading down from a peak of 123.70 in August that year.

A possible win by Prime Minister Sanae Takaichi's Liberal Democratic Party in Sunday's election could also help AUD/JPY higher, especially if they gain a Lower House majority. Expansionary Abenomics 2.0 policies with their corollaries of higher stocks and a weak yen could help fuel such a move.
AUD/JPY daily:


AUD/JPY monthly:

JGB-Australia govt bond 2-year interest rate differential -
daily:

(Haruya Ida is a Reuters market analyst. The views expressed are his own. Editing by Sonali Desai)

• USD/CNH steadies, last 6.9392, near flat vs Thurs close

• Fri closing below 6.9405 validates Bollinger downtrend channel

• USD generally eases as gold, crypto stage tentative rebound

• SSEC -0.4%, paring opening losses of around -1.0%

• China silver futures fund halts trading amid slump

• Hour-long pause imposed on Friday to 'protect investors'
CNH


(Ewen Chew is a Reuters market analyst. The views expressed are his own.)

• Australia's gold stocks fall as much as 4.4% to their lowest level since January 9

• Stock losing for a second consecutive session; shed 9.2% so far for the week, set for its weakest week since late October, if current trends hold

• Gold fell as a stronger dollar and a broad market rout prompted investors to liquidate precious metal holdings [GOL/]

• Gold miners Evolution Mining and Northern Star Resources fall 1.9% and 2.2%, respectively

• Sub-index down 0.7% this year, including the day's move
(Reporting by Sherin Sunny in Bengaluru)

• AUD/USD -0.2% Fri as the hammering of riskier assets continues in Asia

• Silver down another 5.2%, BTC -3.3% following huge falls Thur

• RBA's Bullock says demand growth needs dampening to restrain inflation

• Plummeting UST yields likely to limit USD index topside

• AUD downside should be constrained by RBA's starkly hawkish stance

• Range Asia 0.6897-0.69335, support 0.6905 0.6660, resistance 0.7158
AUD Hourly Bollinger Study & DXY Daily 55-DMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

• USD/JPY holding bid above its 154.69-156.35 daily Ichimoku cloud

• One foot on 157 handle, Asia so far 156.60-157.10, high yesterday 157.34

• Next risk event outcome of Japanese Lower House elections

• PM Takaichi/LDP likely to regain majority, ability to govern without help

• Suggests Abenomics-like expansionary policies, buy stocks/sell yen?

• That said, FX intervention risk if USD/JPY trades higher, 160 line in sand?

• USD/JPY also holding above its hourly Ichimoku cloud between 156.06-40

• Ascending 100-HMA below cloud at 155.96, 200-HMA 154.71 well below

• Trend down still in short JGB-US Treasury rate differentials, longs in flux

• In option, large expiries today at 156.00, 157.00, between 157.70-158.05

• Related comments , , , also

• US markets , , ,

• On Fed , US data , for more click on [FXBUZ]

USD/JPY:


Nikkei 225:

(Haruya Ida is a Reuters market analyst. The views expressed are his own)

Morgan Stanley Research previews the US January jobs report on Friday.

"Our forecast for 55k in headline payrolls and 90k in private payrolls reflects stabilization in underlying private payrolls growth, a temporary boost from industries where holiday hiring was weak, and a further drag from deferred resignations of federal government employees. We expect that payrolls in retail and in transport & warehousing rebound sharply and temporarily in January from a weak," MS notes.

"We estimate that average hourly earnings rose 0.2%M, held back partially by the shift back toward lower-wage industry payrolls, with the year-on-year pace slowing by 0.2pp to 3.6%. The unemployment rate is unchanged at a 'low' 4.4%, after 4.375% in December," MS adds.

• AUD/USD -0.5% late Thur as DXY firms despite U.S. job openings at 5-year low

• U.S. initial jobless claims 231k (poll 212k), JOLTS 6.54 mln (poll 7.20 mln)

• RBA Governor Bullock appearing before lower house economics committee Fri

• Metals pullback weighing on AUD, Gold -2.8%, Silver -15.5%, Copper -1.5%

• Markets giving Fri's U.S.-Iran talks benefit of doubt, oil prices ease

• AUD downside should be limited with RBA already in OCR tightening mode

• Overnight range 0.69475-90, support 0.6905 0.6660, resistance 0.7158
AUD Daily 200-DMA & DXY Daily 55-DMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

EUR/USD fell marginally after the ECB left rates unchanged on Thursday, as expected, while downplaying recent dollar weakness and saying the inflation outlook remains stable despite trade and geopolitical uncertainties. Meanwhile, the pound tumbled after the BoE voted narrowly 5–4 to keep rates unchanged, while signalling that borrowing costs are likely to fall if the anticipated slowdown in inflation is sustained. ECB President Christine Lagarde said the decision to stand pat was unanimous, risks are balanced, and that dollar moves remain within a long-standing range though bank is monitoring. Separately, the ECB is exploring ways to widen access to euro liquidity for more countries to strengthen the euro’s international role, sources said. Bank of England Governor Andrew Bailey said that investors’ roughly 50-50 expectations for a cut next month were “not a bad place to be,” while striking an upbeat tone on the outlook. U.S President Donald Trump said Japanese Prime Minister Sanae Takaichi had his "total endorsement" ahead Sunday's elections, adding that they would meet March 19 at the White House. Treasury Secretary Scott Bessent said he would not support scrapping Canada tariffs, flagged uncertainty over China’s digital-asset ambitions, left open legal questions should Trump disagree with Fed nominee Kevin Warsh's policy, and said Russia sanctions hinge on Ukraine talks. Ukraine President Volodymyr Zelenskiy said Russia peace talks backed by the U.S. will continue soon after a second round, adding Kyiv raised further POW swaps. Bank of Canada Governor Tiff Macklem said adapting Canada’s economy to U.S. tariffs, slower population growth and artificial intelligence will take years and could be painful. The dollar pulled back from a near two-week high as U.S. tech shares slid and Treasury yields fell following a surprise rise in weekly jobless claims and a five-year low in job openings.

EUR/USD edged down toward 1.18 as risk appetite faded, with a daily doji and declining RSI signalling ongoing bearish consolidation, even as lower Treasury yields and short-covering support.

GBP/USD fell to near 1.3550 after the BoE’s narrow 5–4 hold signalled a dovish tilt, pulling forward cut odds and leaving bearish technicals in control for a possible test of the November lows.

USD/JPY printed an indecisive doji above the cloud top after touching a near two-week high of 157.34, with options markets still reflecting a mildly bullish bias heading into Japan’s weekend elections.

AUD/USD dipped to around 0.6940 amid risk-off flows and weaker metals after Rio Tinto ended takeover talks with Glencore, before a softer dollar later left technical signals broadly bullish.

Bitcoin tumbled nearly 9% to its lowest level since November.

Treasury yields were down 6 to 8 basis points as the curve steepened. The 2s-10s curve was up marginally to a four-year high near 72.1bp.

The S&P 500 slid 1.14% with futures looking to fill a December price gap near 6800.

WTI oil fell almost 3% after the U.S. and Iran agreed to hold talks in Oman on Friday.

Gold rose 2%, silver dropped 13% and copper eased 0.4%. Heading toward the close: EUR/USD -0.08%, USD/JPY +0.02%, GBP/USD -0.82%, AUD/USD -0.46%, DXY +0.19%, EUR/JPY -0.10%, GBP/JPY -0.79%, AUD/JPY -0.47%.(Editing by Burton Frierson Reporting by Robert Fullem)

MUFG Research reviews the February's BoE decision.

"The BoE held Bank Rate at 3.75% in an unexpectedly tight 5–4 vote that clearly opens the door to a cut at the next meeting in March. Policymakers are notably more confident in the disinflation process with the updated projections showing inflation returning to target swiftly in Q2 and then remaining there or thereabouts. Governor Bailey will still remain the key swing voter on a divided MPC. But external member Mann has also now emerged as an additional wildcard who could also tilt the balance, further raising the likelihood of a cut in March," MUFG notes.

"Focus will be firmly on the two sets of labour market data released before the next policy announcement. We maintain our call for a terminal rate of 3.25%, with risks tilted towards an extra cut this year," MUFG adds.