[MARKET UPDATE] CNH strength on the PBoC fix, JPY awaits BoJ, flat trade elsewhere

• DXY is flat withing a narrow 98.297-98.347 parameter amid a lack of newsflow in the run-up to the BoJ announcement, and later the press conference. DXY weakened on Thursday with geopolitics continuing to dominate the tape. On the data front, initial jobless claims once again came in beneath expectations, showing encouraging signs for the labour market, while PCE for November printed in line with expectations, although personal income marginally missed.
• EUR/USD is similarly flat on either side of 1.1750 as the pair holds onto yesterday's USD-driven gains. Traders now look ahead to Flash PMI data which have a tendency to inject volatility into European markets. 
• GBP/USD is uneventful on either side of 1.3500 amid a lack of macro drivers thus far. If the pair remains above 1.3500, then technicians may be eyeing the 7th Jan peak at 1.3417 as the next point of resistance.  
• USD/JPY is firmer with the JPY on a softer footing in the run up to the BoJ (where policy settings are expected to be maintained), with the central bank also set to release its Outlook Report. Weakness in the JPY has also been attributed to political uncertainty as PM Takaichi is to dissolve the House of Representatives today to pave the way for snap elections. USD/JPY as scaled back up yesterday's 158.18-158.90 range and currently resides above 158.60 at the time of writing. 
• Antipodeans are mixed with the Aussie buoyed by the strength in gold prices whilst the Kiwi is subdued despite higher than expected Q4 inflation metrics. 
• The CNH saw immediate strength as the PBoC set the yuan’s daily reference rate below 7.0 for the first time since May 2023. 

The CNH has strengthened due to the PBoC setting its daily reference rate below 7.0, signaling a potentially bullish outlook for the yuan. In contrast, the JPY is under pressure ahead of the BoJ meeting, with expectations for policy continuity, while the DXY remains flat amid geopolitical concerns and mixed economic data. This divergence suggests a cautious sentiment across currencies, especially as traders await key announcements.