Forex Today: Dollar bulls take a breather amid a quiet start to a big week

Here is what you need to know on Monday, January 31:

The sentiment on the global markets remains perky following an impressive turnaround on Wall Street last Friday, courtesy of a beat on Apple Inc.’s earnings. Despite the positive mood, thin trading prevails as a bunch of Asian markets, including China, are closed due to the Lunar New Year holiday break. Traders seem to have shrugged off the weak Chinese business PMI for January, which flagged economic slowdown concerns amid surging covid cases in the country.

Investors also pay close attention to the Ukraine crisis, as Russia added more troops around the Ukrainian border. The US and its NATO allies continue to see a likely Russian invasion. US Senators are close to finalizing a deal on legislation to sanction Russia over its actions regarding Ukraine this week.

Meanwhile, a sense of calm prevails ahead of the key central banks’ meetings, comprising the RBA, BOE and ECB, scheduled later this week. Friday will see the critical US Nonfarm Payrolls release.

The US dollar index retreats from the highest level since July 2020 amid reduced demand for safe havens. The US Treasury yields keep the hawkish Fed-led upbeat momentum intact, with the two-year rates spiking above 1.20%.

EUR/USD is bouncing back above 1.1150, although the further upside appears elusive amid firmer yields. The Fed-ECB divergence theme is here to stay. The focus shifts to the Eurozone Preliminary GDP and Germany’s Prelim CPI data.

GBP/USD has recaptured 1.3400 amid a better mood and the dollar’s retreat. The Sue Gray report is yet to be announced but the UK Foreign Secretary Liz Truss says that “the future of the PM is assured.” Meanwhile, Brexit concerns continue to loom, as markets keep their eyes on the Brexit Freedoms, which will introduce new legislation allowing it to change or scrap retained European Union (EU) laws.

USD/JPY is strongly bid around 115.50, as the yen emerges as the weakest in Asia. The spot tracks the Treasury yields higher.

Gold is licking its wounds below $1,800, slightly off its six-week troughs of $1,780. The Russia-Ukraine crisis offers some support to bulls, although the downside appears compelling amid hawkish Fed.

The barrel of West Texas Intermediate (WTI) is heading back towards seven-year highs above the $88 mark amid supply concerns and political tensions in Eastern Europe. Brent oil tops $91.

Bitcoin is down roughly 3% so far this Monday, hovering around $37,000 amid a bearish potential.