The U.S. dollar is trading higher against most G10 currencies, though the overall tone suggests consolidation ahead of the long weekend. With U.S. markets closed on Monday for Martin Luther King Jr. Day and the presidential inauguration also occurring, market participants are taking a measured approach.
Meanwhile, the Japanese yen is retracing some of its recent gains amid speculation of a Bank of Japan (BOJ) rate hike later this month. In the U.K., weaker-than-expected retail sales data caps a series of underwhelming economic indicators. In China, Q4 GDP came in slightly above expectations, but skepticism about the reliability of the data persists.
U.S. index futures point to a modestly firmer bias, while gold and February WTI crude oil are trading in tight ranges.

Asia-Pacific Markets
The U.S. dollar briefly dipped below JPY 155 earlier today, marking a one-month low, before recovering to near JPY 155.85 during European trading hours. Speculation remains high regarding a potential BOJ rate hike at next week’s meeting, though the swaps market suggests the next quarter-point hike might not be fully priced in until late this year. The yen's movement reflects a tug-of-war between monetary policy expectations and broader market dynamics.

European Markets
The euro continues to stabilize after a prolonged six-week decline, settling near $1.0245 last week. A weekly close above this level would mark only the third such gain since late September. However, the euro faces uncertainty tied to potential policy moves or disruptive announcements from the U.S. following Monday’s inauguration. On the positive side, the U.S. two-year yield premium over Germany has narrowed for the fourth consecutive week, providing some support to the euro.
Sterling, however, has struggled as the weakest performer among G10 currencies so far this year, declining around 2.5%. Despite three weekly gains since late Q3 2024, sterling's momentum faltered this week, with the low set near $1.2100 on Tuesday. December’s 0.3% decline in U.K. retail sales has further heightened expectations of a Bank of England (BOE) rate cut at its February 6 meeting, with the probability rising to over 90% from 75% a week ago.

American Markets
The Dollar Index hit session highs yesterday, briefly surpassing Wednesday's levels following the U.S. retail sales report, before reversing to close near 108.80. Despite this, the index remains in a consolidation phase, trading within a narrow range today.
As markets prepare for the Martin Luther King Day holiday and the presidential inauguration on Monday, trading activity is expected to remain subdued. However, the underlying themes of U.S. economic resilience and fiscal policy shifts could shape the narrative in the weeks ahead.