USD Weakness Continues as USDJPY Leads Losses Amid Japan Policy Outlook

USDJPY Drops as Japan Signals Domestic Investment Push

The US dollar extended losses against most major currencies on Friday, with USDJPY leading declines at -0.32%. The yen strengthened after Japan's Finance Minister, Katayama, indicated plans to encourage domestic pension funds to increase investments in Japanese assets and expand access to government bonds for households. This move reinforces expectations for gradual interest rate normalization in Japan, reducing the need for capital outflows and boosting demand for the yen.

Middle East Tensions Weigh on Risk Sentiment

Market volatility remained elevated amid fragile calm in the Middle East following recent US-Iran strikes. Shipping activity through the Strait of Hormuz dropped sharply, adding pressure to energy markets already strained by supply disruptions. The geopolitical uncertainty kept risk appetite in check, though equity futures showed mixed signals ahead of the US open.

Eurozone Inflation Data Reinforces ECB Policy Outlook

Germany's final CPI matched expectations at -0.3% m/m, while France's revision to -0.3% m/m slightly undershot forecasts. The data offered no surprises, leaving euro area inflation dynamics unchanged and supporting expectations for a cautious European Central Bank stance.

Canada Jobs Report in Focus

Traders await Canada's employment report at 8:30 AM ET, with forecasts pointing to 11.2K job gains and a steady 6.6% unemployment rate. The data will test the Bank of Canada's current policy trajectory, with the Canadian dollar poised for volatility. Building permits data is also due, following a 7.6% prior decline.

Yield and Commodity Moves

US Treasury yields edged higher, with the 10-year at 4.547% (+0.8bp). Crude oil rose $0.69 to $72.82, while gold slipped 0.51% to $4,102. Silver and Bitcoin traded down and up, respectively, at $59.41 and $64,368.

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