In January, Tokyo’s Consumer Price Index, excluding fresh food, rose by 2% compared to last year. This increase was slightly less than the expected 2.2%. Gold prices dropped in several countries, including Pakistan, India, and Malaysia. This decline is linked to a U.S. government funding deal that strengthened the U.S. Dollar and prompted profit-taking.

Currencies And Their Movements

The currency market showed movements as well. The GBP/USD fell to around 1.3750 after the U.S. Senate moved forward with a spending plan to prevent a shutdown. Meanwhile, the EUR/USD climbed above 1.1950 amid uncertainty about U.S. trade policy and concerns over the Federal Reserve’s independence. In the cryptocurrency market, Bitcoin, Ethereum, and Ripple faced sell-offs, continuing their weekly losses of approximately 6%, 3%, and 5%, respectively. Bitcoin approached its November lows at $80,000, while Ethereum dropped below $2,800. Microsoft experienced a significant sell-off, impacting its market value by $400 billion. This marked the second-largest drop on record, even as other market indices also declined. FXStreet highlights the importance of thorough research before making any investment. They caution about potential risks and losses while providing forward-looking statements for informational purposes.

Tokyo Core Inflation Update

Tokyo’s core inflation rate for January was 2.0%, lower than the expected 2.2%. This easing in price pressures makes it less likely that the Bank of Japan (BoJ) will raise interest rates soon. The data suggests the BoJ can afford to take its time before changing its monetary policy. For traders in derivatives, this hints at a weaker yen in the weeks ahead. With the U.S. Federal Reserve holding its policy rate steady until late 2025, the interest rate gap between the U.S. and Japan is expected to remain wide. We recommend considering buying call options on the USD/JPY pair since the trend seems to favor an upward movement. This outlook is also favorable for Japanese stocks. The Nikkei 225, which performed well in 2025, will benefit from continued low borrowing costs. Buying calls on the Nikkei could be a good trade as we approach the BoJ’s March meeting. Implied volatility on yen options may have seen a brief spike due to this news, but we anticipate it will stabilize. With policy changes expected to be pushed further away, this certainty could lower volatility. This may create opportunities to sell premium through strategies like short straddles if you expect a period of stable trading. This scenario is similar to what we observed in the 2023-2024 timeframe. Following an initial global inflation shock, Japan’s price pressures eased more quickly than in other G7 countries. The BoJ’s cautious approach suggests they will wait for more data before taking action. Create your live VT Markets account and start trading now.

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