Japan’s money supply, measured by M2+CD, grew by 1.6% year-on-year in January, a slight decrease from the previous month’s 1.7%. The release of key US economic data, including employment and inflation reports, is anticipated after a delay caused by a government shutdown.
Currency fluctuations saw the EUR/USD drop to around 1.1900 as markets awaited US data, while the GBP/USD traded lower at approximately 1.3685 amid UK political risks and potential BoE rate cuts. Gold experienced a dip, trading just below the $5,000 level, reflecting the tempered demand for safe-haven assets as market uncertainty eased.
Bitcoin Cash Declines
Bitcoin Cash fell below $522, indicating bearish sentiment and the potential for a further decline towards lower support levels. In the Forex market, USD/JPY’s recent movements have been driven by flow rather than interest rate differentials, reflecting the currency’s performance over the past two sessions in Tokyo.
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Japan’s money supply growth slowing to 1.6% confirms the disinflationary pressures we have been watching. This complicates the Bank of Japan’s policy path, especially after its struggle throughout 2025 to move away from its ultra-loose stance. We see the recent yen strength as being driven more by seasonal repatriation flows ahead of the March fiscal year-end rather than a fundamental shift in interest rate policy.
US Dollar and UK Economic Outlook
The US Dollar is soft as the market waits for the delayed inflation and employment reports. Given that the last core PCE reading for 2025 came in at 2.9%, any further sign of cooling will solidify bets for a Federal Reserve rate cut in the second quarter. This makes holding short-term dollar positions risky, and we should use options to hedge against a sharp move once the data is released.
In the UK, ongoing political risks are being coupled with clear signs of economic slowdown. The swaps market is now pricing in over a 70% probability of a Bank of England rate cut by May. Put options on GBP/USD look attractive, as the path of least resistance for the pound appears to be lower against most major currencies.
Gold is holding strong above the $5,000 level, a price supported by the significant central bank purchases we saw throughout 2025. While an improved risk appetite may cap the upside, the prospect of coordinated rate cuts from Western central banks provides a solid floor. We should view any dips toward this key psychological level as an opportunity to build long positions using call spreads.
