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[MARKET ANALYSIS] DXY flat, Cable briefly boosted on positive GDP, USD/JPY hit on reports that the BoJ is to hold in January

The DXY remains flat amidst geopolitical developments and mixed sentiment on U.S.

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[MARKET ANALYSIS] DXY flat, Cable briefly boosted on positive GDP, USD/JPY hit on reports that the BoJ is to hold in January

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  • DXY is flat and trades within a very thin 99.08-23 range; currently trading just above its 50 DMA at 99.02. Focus overnight has been on geopols, whereby President Trump said Iran has “no plan” to execute protestors. Back in the US, Trump said he has no plans to remove Fed Chair Powell, whilst also speaking highly of the prospective new Fed Chairs Hassett and Warsh.
  • GBP currently trades flat, within a 1.3423-1.3446 range; the peak for today is a handful of pips short of its 21 DMA at 1.3452. Some strength was seen in Cable following the region’s GDP series, which topped expectations and has Q4 GDP on track to surpass the BoE's forecast of no growth. Pantheon Macroeconomics said it expects UK growth to improve to 0.4% Q/Q in Q1 as Budget uncertainty fades, seasonality lifts the New Year, and September’s cyber-attack volatility limits spare capacity, keeping the MPC cautious.
  • JPY is once again in focus this morning, after Bloomberg reported that the BoJ is likely to keep rates steady in January; some officials are said to be concerned over the economic impact of a weak JPY. The piece added that if the JPY continues to weaken, then the pace of future rate hikes could be accelerated. But, policy will remain on hold in January. This spurred immediate pressure in USD/JPY, falling from 158.68 to 158.33. 
Context

monetary policy. Positive U.K. GDP data has briefly boosted GBP, indicating resilience in growth expectations and possibly influencing future BoE decisions. In Japan, reports of the BoJ's intent to hold rates despite concerns about a weak JPY suggest a cautious approach, impacting USD/JPY negatively, reflecting market sensitivity to policy shifts.

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