USD loses despite Bessent's efforts

Yesterday's currency recap

USD rebounded sharply, with the USD Spot Index posting its biggest intraday gain since September after Treasury Secretary Bessent said the US was “absolutely not” intervening to support JPY, triggering a 1% jump in USDJPY. Yet despite the rebound, strategists stressed that it does little to shift the wider bearish view on the USD, as shutdown risks and persistent negative sentiment towards US assets continue to weigh. In contrast, CAD held firm after the Bank of Canada kept rates unchanged and struck a cautious tone.

Earlier in the day ECB officials flagged concern over the recent EUR strength.

AUD remained supported sticky core inflation supported two rate hikes in 2026 by the RBA.

Today's GBP rates

Key data points

What we think

USD has weakened this morning as concerns over a possible US government shutdown and rising US-Iran tensions dampened risk sentiment with markets favouring gold and silver. Although Treasury Secretary Scott Bessent’s comments helped slow the decline, broader political and geopolitical risks have reinforced a strong bearish trend for USD. German Chancellor Friedrich Merz warned the EUR strength against the USD is raising costs for exporters and worsening competitiveness – GBPEUR trading higher.

Thursday’s calendar is busy but second-tier in terms of outright shock risk, with the focus split between US data and inflation signals from Japan. In the euro area, January consumer confidence is expected to remain deeply negative, reinforcing the view that domestic demand remains fragile and unlikely to challenge the ECB’s easing bias.

In the US, weekly jobless claims are seen ticking slightly higher but staying at historically tight levels, keeping the “soft landing” narrative intact. More attention may fall on November trade balance and factory orders: a wider trade deficit would underscore ongoing external drag, while a rebound in factory orders would point to stabilisation in US manufacturing after a weak October.

In Japan, Tokyo CPI is expected to cool modestly both headline and ex-fresh food, which could take some pressure off the BOJ in the near term. Market impact could be minimal given much of the movement on JPY has been down to intervention talk.

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