The foreign exchange market is currently experiencing a period of cautious stability. The Federal Reserve has acknowledged the resilience of the U.S. economy, allowing for a patient approach in policy adjustments. Despite inflation remaining elevated, monetary policy continues to be significantly restrictive. While most G10 currencies are under pressure against the dollar, the Japanese yen and Canadian dollar show resilience. Among emerging market currencies, Asia and the Mexican peso remain relatively strong, whereas central European currencies are underperforming.

Asia Pacific Markets

In the Asia Pacific region, the Japanese yen has been fluctuating within a defined range. The dollar has been recording lower highs against the yen for five consecutive sessions, while key moving averages are showing a slight downward trend. The Bank of Japan continues to reinforce its commitment to raising interest rates if economic conditions progress as anticipated. The yen has been hovering around JPY155, a level that has only closed below once this month. Key upcoming data from Japan includes employment figures, inflation reports from Tokyo, as well as industrial production and retail sales statistics, all of which are expected to show modest weakness. Meanwhile, the offshore yuan has also maintained a consolidative tone, with the dollar trading within a narrow range over recent sessions.

European Markets

The euro has seen further declines, approaching $1.0380, erasing more than a third of its previous rebound. If the currency breaks below $1.0355, it may face additional pressure toward $1.0315. The European Central Bank announced a 25-basis-point rate cut, following a series of similar reductions last year. Market projections indicate a total of 75 basis points in cuts for the first half of the year, with a potential additional cut in the final quarter. Meanwhile, the latest GDP data for the eurozone showed stagnation in Q4, as weak economic performance in Germany, France, and Italy weighed on overall growth. Germany's economy contracted by 0.2%, while France unexpectedly reported a 0.1% decline. Italy, on the other hand, saw no growth for the second consecutive quarter.
In the UK, the British pound has demonstrated relative resilience compared to other G10 currencies.

American Markets

The Federal Reserve has maintained its current policy rate while acknowledging that inflation remains a concern. In its latest statement, the Fed described labor market conditions as "solid," an upgrade from its previous assessment. The central bank is adopting a patient approach, given the abundance of upcoming economic data and political developments leading up to the next Federal Open Market Committee meeting in March. Market participants are now focusing on the initial estimate for Q4 GDP, with projections varying from 2.7% to 3.2%. However, a larger-than-expected goods trade deficit in December could negatively impact overall growth figures. Weekly jobless claims data may be overshadowed by the GDP release, as well as anticipation for the January employment report. Early forecasts suggest an increase of approximately 150,000 new jobs. Meanwhile, the U.S. Dollar Index recently extended its recovery to nearly 108.30, surpassing the 38.2% retracement level from its January 13 peak.