On January 20th, Japanese Prime Minister Takaichi Sanae stated at a press conference on the 19th that she would dissolve the House of Representatives on January 23rd, seeking a voter mandate to continue governing, with an election scheduled for February 8th. The term for the current members of Japan's House of Representatives was originally set to expire in October 2028. During the press conference, Takaichi Sanae explicitly stated that her tenure as Prime Minister hinges on the outcome of this election. She stressed that if the ruling coalition maintains its majority in the upcoming election, she will continue as Prime Minister and has requested a mandate to continue leading the nation. This statement frames the election as a direct referendum on the legitimacy of her administration. Takaichi Sanae also revealed that an upcoming meeting will discuss a series of "far-reaching" bills, hinting that her subsequent policy agenda may involve significant structural reforms or economic adjustments. She indicated that the Japanese government will end its excessively tight fiscal policy, with strategic fiscal spending aimed at increasing employment and household income, thereby leading to higher tax revenues.
Additionally, the head of Citigroup's Japan markets division stated that if the yen's weakness persists, the Bank of Japan could raise interest rates three times this year, doubling the current rate level. Akira Hoshino said in an interview that if the USD/JPY exchange rate rises above 160, the BOJ is likely to raise rates by 25 basis points to 1% in April. He anticipates that if the yen remains weak, the central bank could implement another hike of the same magnitude in July, and a third rate increase before the end of the year is not out of the question. "Simply put, the yen's weakness is driven by negative real interest rates," Hoshino said, referring to the situation where yields consistently fall below inflation. He stated that if the BOJ wants to reverse the exchange rate trend, "it has no choice but to address this issue."
Today's data to watch includes the UK November Unemployment Rate, UK November Average Weekly Earnings including bonuses (3Mo/Yr), the Eurozone January ZEW Economic Sentiment Index, and Germany's January ZEW Economic Sentiment Index.
Gold/USD Gold climbed significantly yesterday, assaulting the 4700 mark and refreshing its historical peak, with the spot price currently trading around 4701. Apart from a softer US dollar index providing some support, safe-haven demand fueled by trade uncertainty concerns stemming from Trump's tariff threats and geopolitical tensions were the main drivers behind the rally in the safe-haven metal. Furthermore, recent dovish remarks from Federal Reserve officials also lent some support to gold. Today, focus is on the resistance near 4750, with support located around 4650.
USD/JPY USD/JPY rebounded from yesterday's lows, closing marginally higher on the daily chart, with the spot price currently trading around 158.10. Besides short-covering providing some support, concerns over Japanese political uncertainty also underpinned the pair. However, the softer US dollar index and fears of another FX intervention by the Bank of Japan limited the pair's rebound. Today, attention is on resistance near 159.00, with support found around 157.00.
USD/CAD USD/CAD moved lower in a volatile session yesterday, losing the 1.3900 level and hitting a fresh 4-day low, with the spot price currently trading around 1.3850. Apart from profit-taking exerting some downward pressure, a weaker US dollar index, weighed down by trade uncertainty concerns, also pressured the pair. Moreover, better-than-expected Canadian CPI data released during the session added to the selling pressure. Today, focus is on resistance near 1.3950, with support situated around 1.3750.
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