[MARKET ANALYSIS] Mild gains in GBP, AUD, whilst JPY underperforms and DXY trades flat within a narrow range

• DXY resides within a narrow range within yesterday's 97.298-97.692 range after seeing weakness yesterday against most major peers, giving back some of the post-ISM spoils, while JOLTS data was delayed, and there were several comments from Fed speakers, but failed to move the dial. Overnight, US President Trump signed the USD 1.2tln spending bill to end the government shutdown, as expected, and thus NFP will likely be released next week (TBC). Today, however, desks are eyeing the private ADP and ISM Services PMIs. Analysts at ING "see the balance of risks slightly tilted to the upside today, as positive data could act as a catalyst for a bit more USD recovery amid an already supportive macro backdrop relative to spot levels."
• JPY is the underperformer vs the USD, EUR, and GBP, as the Japanese currency continued to lag amid the ongoing expectations for a landslide victory by Japanese PM Takaichi's ruling LDP at the snap election on Sunday. USD/JPY topped yesterday's 156.08 peak to print a current high of 156.59, but is still some way off the 23rd Jan high of 159.23.
• EUR/USD trades flat with little notable action seen on the Final Services and Composite PMIs as traders await the EZ flash HICP metrics, which are unlikely to sway the ECB as the central bank is expected to hold policy settings steady next week, with traders' focus on EUR commentary.
• GBP/USD sees modest gains and narrowly gains despite the revisions lower in Final PMIs, but likely lifted by the GBP/JPY pair testing highs from 23rd Jan as the cross looks to test 215 to the upside, residing at levels last seen in 2008.
• Antipodeans are mixed with the Aussie buoyed by rebound in gold prices whilst the NZD posts losses following ultimately mixed employment and labour cost data from New Zealand.

The DXY is trading flat within a narrow range, indicating market consolidation after recent volatility, particularly influenced by mixed economic data and comments from Fed officials. Meanwhile, the JPY underperformance suggests market skepticism around the Japanese government’s stability ahead of elections, contrasting with slight gains in GBP and AUD driven by currency dynamics, particularly against a recovering gold price. This could signal a cautious bullish sentiment for the USD if upcoming data supports a more favorable outlook.