Japan’s money supply, tracked by M2+CD, grew by 1.6% in January, down slightly from December’s 1.7%. Key US economic data, such as employment and inflation reports, is expected to be released soon after a government shutdown delayed them.
Currency rates changed, with the EUR/USD dropping to about 1.1900 while the GBP/USD fell to around 1.3685 amid political uncertainty in the UK and possible interest rate cuts from the Bank of England. Gold prices dropped, trading just below $5,000, reflecting lower demand for safe-haven assets as market uncertainty eased.
Bitcoin Cash Drops
Bitcoin Cash fell to below $522, suggesting bearish sentiment and the possibility of further declines. In Forex, recent moves in USD/JPY have been more about market flow than interest rate differences.
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Japan’s slower money supply growth at 1.6% highlights ongoing disinflationary pressures. This poses challenges for the Bank of Japan, which has struggled to move away from its very loose monetary policy. The recent strength of the yen seems driven by seasonal repatriation flows ahead of the March fiscal year-end, rather than a fundamental change in interest rates.
US Dollar and UK Economic Outlook
The US Dollar is weakening as the market awaits delayed inflation and employment data. The last core PCE reading for 2025 was 2.9%, so any signs of cooling may strengthen expectations for a Federal Reserve rate cut in the second quarter. Holding short-term dollar positions is risky, and it’s wise to use options as protection against sudden market movements once the data is available.
In the UK, ongoing political risks are being compounded by signs of economic slowdown. The swaps market now suggests over a 70% chance of a Bank of England rate cut by May. Put options on GBP/USD appear attractive, as the pound seems likely to weaken against most major currencies.
Gold remains strong above the $5,000 mark, supported by significant central bank purchases throughout 2025. While a stronger risk appetite might limit gains, potential coordinated rate cuts from Western central banks create a solid support level. Any dips toward this important psychological level could be seen as a chance to enter long positions with call spreads.
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