📰 Daily Market Report | Political Markets Continue – Focus on the Davos Speech and UK Inflation Data

📰 Daily Market Report | Political Markets Continue – Focus on the Davos Speech and UK Inflation Data

The market continues to show a strong “political market” character.
President Trump’s aggressive foreign policy stance and political developments surrounding Prime Minister Takaichi in Japan are intersecting, affecting all asset classes: FX, equities, bonds, and commodities.

Tonight’s biggest event is:

President Trump’s speech at the Davos Forum (World Economic Forum)
Scheduled for 13:30 UTC

The focus will be on the Greenland issue and relations with Europe:

• Will he maintain a hardline stance?

• Or will this become another “TACO trade” (Threaten → then compromise)?

This speech will determine whether the ongoing trend of
“U.S. selling” (dollar selling, U.S. bond selling, U.S. equity selling)
continues or begins to fade.

🇯🇵 Japan Side: The Yen Focused on Politics and Fiscal Policy

After Prime Minister Takaichi’s announcement of a possible dissolution and general election, markets have priced in:

• Concerns over fiscal deficit expansion

• Selling of Japanese Government Bonds → higher long-term yields

• Yen depreciation pressure

However, today a shift has emerged:

• Reports that major banking groups will double their purchases of JGBs

• Opposition parties also calling for stronger JGB buying

This has pushed Japanese long-term yields lower and eased pressure on the yen.

In addition, the following comment was reported:

Finance Minister Katayama:
“Japan plans to invest more than USD 330 billion in the AI and semiconductor sectors.”

This was interpreted as:

• Strengthening Japan’s industrial competitiveness

• Clarifying its growth strategy

• Supporting medium- to long-term confidence in the yen

As a result, it triggered yen buying based on structural reform expectations, rather than short-term FX intervention rhetoric.

U.S. Treasury Secretary Bessent also commented:

“We are in close contact with Japan” and
“We will respond to stabilize the markets,”

which reinforced expectations of policy coordination.

🪙 Safe-Haven Demand Remains Strong

• Gold and platinum have hit record highs

• The Swiss franc has reached record highs against the yen

Risk aversion remains strong, and equity markets continue to face downside pressure.

🇬🇧 UK Inflation Data Ahead

Before the Davos speech, UK inflation data will be released at:

07:00 UTC

Market expectations:

• UK CPI (December, YoY): +3.3% (previous: +3.2%)

• Core CPI: +3.3%

If data meet or exceed expectations:

Expectations of Bank of England rate cuts may retreat → supportive for GBP.

This makes it a key short-term inflection point for the pound.

💱 Early London FX Moves (Updated, in UTC context)

In the early London session, corrective dollar buying has dominated.

• USD/JPY

  • Fell to around 157.82,

  • then rebounded back into the 158 handle.

  • Today’s range so far: 157.82 – 158.28

• EUR/USD

  • Extended losses to around 1.1701,

  • falling more than 30 pips from the Tokyo high near 1.1734.

Background:

• Short-covering of “U.S. selling” positions ahead of Trump’s speech

• U.S. Treasury buying → U.S. yields drifting lower

• A temporary corrective dollar rebound

However:

Whether U.S.–Europe relations truly improve remains highly uncertain.

Therefore, current dollar strength should be viewed as a temporary adjustment, not a trend reversal.

🎯 Key Themes for Today

The market is currently caught between:

• “Fear → flight to safety”, and

• “Correction → dollar short covering.”

Depending on President Trump’s speech at 13:30 UTC:

• U.S. selling could accelerate again,

• or it could temporarily fade.

This makes today a critical turning point for global market direction.