Week Ahead FX outlook:
Key FX views:
It’ll be a busy week coming up starting with elections in Japan and Thailand on 8 February. Japan’s political backdrop is reinforcing downward pressure on the yen as USDJPY drifts back toward 160 after its brief correction to 152. Local reports indicate Prime Minister Takaichi’s ruling coalition is on track to secure a lower‑house majority, supported by her strong approval ratings since taking office in October. A decisive mandate would broaden fiscal flexibility and strengthen market expectations of further public spending.
In Thailand, the baht has come under pressure ahead of the 8 February polls and softer gold prices. Political parties are offering starkly different economic visions: the opposition People’s Party is pushing structural reforms, while PM Anutin’s Bhumjaithai party and the Pheu Thai party have leaned into aggressive consumption‑driven pledges, including subsidies for consumer purchases. With no party likely to win an outright majority, another coalition government appears inevitable, limiting policy clarity at a time when the economy remains weak and headline inflation is still in deflation at -0.7%yoy.
Across Asia, China’s CPI data is expected to show subdued inflation, supporting a dovish PBOC stance. Singapore’s final Q4 GDP may show growth faster than the advance estimates, highlighting resilient domestic momentum. Meanwhile, Taiwan stands out as a growth outperformer, with final 2025 GDP reading likely to show robust growth of around 8.6%, underpinned by momentum in AI‑driven electronics demand. In the US, the key data to watch is the nonfarm payrolls. Labour market is likely to stay soft with only 70k jobs expected for January, underscoring a low-hiring environment. However, US CPI data next week could still show inflation above the Fed’s 2% target, likely reinforcing the Fed’s patience with rate cuts and preventing an aggressive dovish repricing by markets for now.
Yen and Japanese bonds remain under pressure ahead of 8 February elections
