The Euro is consolidating, remaining under mild one-month pressure despite a supportive 200-day moving average. Major banks stay constructive on the medium-term outlook, expecting a move above 1.20 in 2026 as eurozone growth stabilizes and the dollar weakens, though January seasonality points to near-term consolidation or a modest pullback. ECB officials say inflation is on track around 2% but warn that global uncertainty and trade tensions are weighing on growth, while Germany’s GDP data this week is expected to confirm an economy stuck near stagnation.

The yen is struggling to hold recovery gains after officials stepped up intervention rhetoric. Markets see a potential early election and a strong showing for Takaichi as reinforcing the reflationary “Takaichi trade” of higher yields and a weaker yen, with some calling for a move toward 160 or higher, though much of that story already looks priced in. While a decisive win could still see USDJPY test the 160–162 area, risks are two-sided: a narrow victory, a more cautious policy tone, or a hawkish BOJ or dovish Fed could trigger consolidation or even a sharp yen rebound.

The Australian dollar edged lower as domestic data softened, with inflation expectations easing slightly and bond yields dipping, reinforcing the view that the RBA is likely to keep rates on hold for now. Job vacancies continue to fall but at a much slower pace, signalling stabilizing labor conditions. Markets see only modest odds of a rate hike before mid-2026, with upcoming employment and inflation data set to be key. In the US, expectations for Fed cuts remain but are increasingly data-dependent, keeping investors cautious amid rising geopolitical risks.