- Trump's retreat helped EUR/USD bears.
- USD/JPY intends to resume its uptrend.
They took the lead after Donald Trump's speech in Davos. The US president announced that there was some framework for an agreement on Greenland and that he was abandoning his intention to impose additional tariffs on several European countries. The markets immediately went from “sell America” mode to TACO-trade or Trump-Always-Chickens-Out mode. Stock indices rose, Treasury yields fell, while bears launched the counterattack.
The Supreme Court did not support the White House's intention to remove Lisa Cook from her position as FOMC governor. The judges recognized that this could undermine the independence of the Federal Reserve. They are considering several options. The most conservative thing would be to keep the official in office while the lower courts discuss her mortgage case. The most radical would be to draft a broad resolution on the scope of the president's authority to remove members of the central bank.
This is supported by the SWIFT report, which shows that the dollar's share of international transactions increased from 46.8% to 50.5% in December, reaching its highest level since 2023. De-dollarization is not an urgent issue in the context of a division between West and East. The US currency maintains its dominance and remains in demand.
The strengthening of the US dollar has been a tailwind for . The pair risks quickly resuming its uptrend and coming under monetary intervention due to massive sell-offs in Japanese bonds. Bond yields saw the biggest one-day jump in history, while bond yields hit their highest level since 1999. Sanae Takaichi's hints at abolishing the excise tax on food products are forcing the Ministry of Finance to rack its brains over where to get the money.
Concerns about the financial stability of debt-ridden Japan are compounded by uncertainty over the outcome of parliamentary elections scheduled for February 8. Long-time LDP ally Komeito has joined the opposition, so Sanae Takaichi's success is not guaranteed.
Donald Trump's retreat, the Supreme Court's defense of the Federal Reserve's independence, and the strengthening of the US dollar could have brought down gold. However, the precious metal only took a modest step back and Goldman Sachs raised its gold price forecast from 4,900 to 5,400 per troy ounce by the end of 2026.
He FxPro Analyst team
