The US Dollar collapsed on headlines indicating the US Federal Reserve asked New York banks about their USD/JPY position sizes. This sparked speculation that the US could be preparing to collaborate with Japan on the ongoing JPY weakness.
The worry over JPY intervention also contributed to the USD sell-off. The US Fed will announce its interest rate decision on Wednesday. Currently, the Fed’s target rate is 3.50% to 3.75%. The market will be watching closely for one of Jerome Powell’s final interest rate decisions, especially given President Donald Trump’s decision on who will succeed him as the next Fed Chair.
The US Dollar Index is currently at/near 97.00, marking its lowest level since September 2025. The downward trend occurs despite US President Trump’s comments about the US and European relationship, plus the Greenland dispute at last week’s Davos summit, being seen as having negative effects on investor sentiment.
EUR/USD is trading near the 1.1880 price range (a four-month high); a weaker USD outshines the below-market anticipation of Eurozone data. Germany released its January IFO Survey, reporting the Business Climate at 87.6, below the 88.1 anticipated by the market. GBP/USD is around the 1.3690 mark as the continuing weakness in the USD drives this currency pair higher.
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USD/CAD continues to navigate within the vicinity of the critical level of 1.3700, with no significant moves in an upward or downward direction as both the US and Canadian central banks prepare to announce interest rates on Wednesday afternoon, at approximately 12:00 PM EST.
AUD/USD is trading strongly above the 0.6930 mark, last seen in September 2024, as this commodity-related currency supports gold in its bullish trend. USD/JPY is currently testing support levels not seen in several months around the 154.00 level following Sunday comments from Japanese Prime Minister Sanae Takaichi that the government will be taking the necessary steps to counteract market manipulation and unregulated trading.
Therefore, there is an increasing likelihood of further monetary intervention by the Bank of Japan. Gold has now surpassed the historical price point of $5,000 and is currently trading within close proximity to its record high of $5,111, due to ongoing geopolitical tensions involving Europe and Greenland with the United States.
