Forex Today: Yen pops and drops on BoJ, German ZEW in focus

The US dollar experience a bit of a bounce versus its main competitors in the Asian session, after the reports hit the wires that the US President Trump signed the funding bill, which ended a 3-day US government shutdown. As a result, most majors came under fresh selling pressure while Yen recovered ground somewhat after the BoJ announced its unchanged monetary policy decision.

Among other related markets, the Asian equities rallied on upbeat global economic outlook and easing US political woes. Oil prices edged higher IMF economic outlook while gold prices head towards $ 1340 levels amid subdued Treasury yields.

Main topics in Asia

UK has already 'agreed in principle' with EU to Norway-style transition - The Independent

Belgian MEP Philippe Lambert, a key member of the European Parliament’s Brexit team said in an interview with The Independent late-Monday, the UK has already “agreed in principle” to a Norway-style Brexit transition period.

BOJ keeps policy steady, as widely expected

The Bank of Japan (BOJ) concluded its 2-day monetary policy review meeting and announced no changes to its monetary policy settings, holding rates at -10bps, while maintaining 10yr JGB yield target at 0.00%.

BoJ Quarterly Report: Inflation likely to continue increasing towards 2% target

The BoJ released its quarterly economic assessment report alongside the policy announcement, with the key headlines found below.

US President Trump signs funding bill to reopen US government

US President Donald Trump has signed a bill funding US government through Feb. 8, thus ending the three-day government shutdown, says White House Statement. 

IMF downgraded its outlook for UK growth in 2019

In its latest forecast, the IMF projects growth for Britain of 1.5 percent next year, down from 1.6 percent previously.

Key Focus ahead

This Tuesday, we have a relatively eventful EUR calendar, with the BoJ Kuroda’s press conference eagerly awaited ahead of the European open. Meanwhile, the UK public sector net borrowings data and German ZEW economic surveys will keep the EUR, GBP traders busy. The WEF annual meetings and ECOFIN meetings will go on throughout the day. Also of note remains the UK CBI industrial order expectations data that will be reported in mid-Europe. In the NA session, the second-tier Eurozone consumer confidence and US regional manufacturing gauge will fill up an otherwise light session.

GBP/USD rises above 1.40 for the first since post-Brexit vote

GBP/USD clocked a new post-Brexit vote high of 1.4003. As discussed yesterday, the rally looks unjustified if we take into account the widening 10-year UK-US yield spread. 

EUR/USD: 1.2275 – a tough nut to crack ahead of German ZEW?

The EUR/USD pair failed once again to chew the offers near 1.2275 region and reversed from there to now trade back in the red zone just ahead of the midpoint of the 1.22 handle.

Merkel’s CDU and Germany’s SPD coalition talks are set to begin Tuesday - Scotiabank

Analysts at Scotiabank explained that the EUR is up from Friday’s close, range bound and consolidating just below last Tuesday’s multi-year high.