With Japanese markets closed for a national holiday, the US dollar initially weakened against several currencies before recovering most of its losses. Among the G10 currencies, the dollar strengthened against the Swiss franc and Japanese yen. In Germany, election results aligned with pre-election polls, pointing to a likely CDU/CSU-SPD coalition, possibly with Green Party involvement. Emerging market currencies mostly advanced against the dollar.
Meanwhile, global equity markets reflected mixed sentiment. After a decline in US stocks before the weekend, most Asia Pacific markets followed with losses, except for Australia. In Europe, stocks showed moderate gains, while US futures indicated a potential rebound. The yield on the US 10-year Treasury remained steady near 4.43%, while gold remained strong at approximately $2,940. Oil prices dipped below $70 before recovering in European trading.

Asia Pacific Markets

In Japan, with Tokyo markets closed for the Emperor’s Birthday, the yen saw movement as the dollar dropped slightly below JPY148.90 before bouncing back. The US services PMI contraction and weakened consumer confidence contributed to lower US yields, pushing the yen higher. However, the dollar recovered in European trading, reaching JPY149.65. A sustained move above JPY150 could help stabilize the currency’s technical outlook.

European Markets

The euro briefly hit a new monthly high in early trading but faced resistance before reaching January’s peak of $1.0535, eventually declining toward session lows. A break below $1.0450 could set up a test of last week’s low at $1.04, potentially signaling further downside toward $1.03. Meanwhile, Germany’s IFO business climate index remained unchanged at 85.2, as improved expectations offset a weaker current assessment. The outcome of the German elections was largely as expected, with CDU winning the largest share of votes. However, due to Germany’s fragmented political landscape, coalition talks will be necessary. The most probable scenario involves a partnership between SPD, the Greens, and CDU/CSU, which could introduce new policies aimed at economic integration and defense strengthening.
The British pound also experienced volatility, initially reaching a two-month high above $1.2690 before pulling back. It found support near $1.2625, while the broader support range extended toward $1.2550.

American Markets

The US Dollar Index reached its lowest level since early December during Asia Pacific trading, dropping to around 106.10 before rebounding. By late European morning trading, it had fully recovered, with a potential close above 106.75 likely to strengthen the technical outlook. A move beyond last week’s high of nearly 107.40 could indicate a potential bottom. The economic calendar includes Federal Reserve surveys and housing price data, with multiple Fed officials set to speak throughout the week. Among them, Logan, Barr, and Barkin will provide insights into monetary policy, though their perspectives are already well understood. Meanwhile, US 10-year Treasury yields remained near 4.43%, reflecting market stability. The overall outlook for the dollar remains cautious, with upcoming economic data and policy signals likely to influence further movements.