Japan’s labour cash earnings in December saw a year-on-year increase, but the 2.4% growth fell short of the anticipated 3%. This underperformance occurred amidst various global economic discussions, such as China’s subdued inflation recovery and US-Iran nuclear talks.
Elsewhere in the financial markets, the EUR/USD exchange rate is navigating hurdles, sitting between 1.1830-1.1835 due to a weaker US dollar. Concurrently, the gold price surged above $5,000 as demand was boosted by China’s buying activities.
USD CNY Situation Analysis
In other developments, the USD/CNY situation is stabilised by policy support. Upcoming events such as the US NFP and CPI data are expected to influence market dynamics, particularly affecting FED rate cut bets in light of Japan’s upcoming election.
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Japanese Wage Growth and Market Trends
We are seeing that Japanese wage growth missed the mark in December, coming in at just 2.4%. This trend is confirmed by the latest core CPI reading for January 2026, which sat at a subdued 1.7%, keeping the Bank of Japan on hold. This points towards using options to position for a higher USD/JPY exchange rate in the coming weeks.
The broad weakness in the US dollar is the other major factor, pushing EUR/USD towards the 1.1835 hurdle. Much of this stems from last week’s Non-Farm Payrolls report, which showed job growth of only 95,000, significantly missing expectations. Traders should consider positions that benefit from continued dollar softness against major currencies, at least until the fog of uncertainty lifts.
Gold breaking above $5,000 is a significant development, largely driven by strong central bank buying out of China. We remember gold trading around the $3,200 level for much of 2025, which puts this powerful upward trend into perspective. Given the noted volatility, buying call options could be a way to capture further upside while limiting risk.
Looking ahead, all eyes are on the upcoming US CPI data, which will be critical for the Federal Reserve’s rate cut outlook. Progress in talks between the US and Iran is also reducing the dollar’s appeal as a safe-haven asset. These factors reinforce a cautious to bearish stance on the dollar.
