The DXY Index was barely changed at 96.8 ahead of today’s US monthly jobs report. With nonfarm payrolls expected to remain soft below 100k for a fourth consecutive month, markets see the Fed resuming rate cuts in June, after Fed Chair Jerome Powell’s term ends in May. US President Donald Trump believes that his Fed Chair nominee, Kevin Warsh, agrees with him that the US should have the world’s lowest interest rates. US Treasury Secretary Scott Bessent added that it was up to the president to decide whether to sue Warsh for not lowering rates the way he wanted. Moving beyond Warsh’s difficult Senate confirmation hearing, the prospect of sustained political pressure from Trump to lower rates keeps the questions over the Fed’s independence in play.
Following Monday’s rise, EUR/USD may start to vacillate around a higher 1.19 level, instead of 1.18 in the first week of February. More European Central Bank officials downplayed the recent dip in CPI inflation below the 2% target. They affirmed their views that risks were balanced for the deposit facility rate to remain unchanged at 2%. They also softened their tone on the EUR’s strength. Since EUR/USD reached its post-1999 launch average (1.1826 yesterday), ECB President Christine Lagarde has pushed for a greater international role for the EUR to strengthen the bloc’s economic sovereignty, reduce its dependence on the USD, and shield the economy from external shocks. EUR/USD will likely retest the 1.2080 high seen on January 28.
Our post-election JPY view is playing out. Profit-taking pushed USD/JPY down a second day by 1% to 154.39 overnight, following up on Monday’s post-election decline of 0.9%. Finance Minister Satsuki Katayama and Vice Minister for International Affairs Atsushi Mimura reaffirmed vigilance against excessive JPY weakness. Their comments have kept the fears of intervention alive. Katayama clarified that Prime Minister Takaichi’s resounding victory at the February 8 snap elections did not imply undisciplined fiscal policy without discipline, which led the JGB 10Y yield to ease 5 bps to 2.24%, offsetting most of Monday’s 6 bps rise. USD/JPY has been confined mostly within a 140-160 range since mid-2024. Its decline from 161.70 to 140.6 occurred in 3Q 2024 while its decline from 158.4 to 140.9 occurred in the first four months of 2025.
Quote of the Day
"Our greatest weakness lies in giving up. The most certain way to succeed is always to try just one more time.”
Thomas Edison (born Feb 11, 1847)
February 11 in history
The Vatican City’s sovereignty was established in 1929 through the Lateran Treaty between the Holy See and Italy.
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