The real showstopper today? The Japanese Yen

The U.S. dollar took a hit after President Trump backpedaled on his latest tariff threats, coupled with a softer-than-expected JOLTS jobs report (7.6M job openings in December vs. 8.15M in November). While this triggered a broad-based USD selloff, I wouldn’t get too comfortable with that narrative—there’s more tariff turbulence ahead, particularly with Europe and China still squarely in the crosshairs. Unless Trump suddenly embraces his “Deal Maker-in-Chief” persona, the April 1 tariff review should serve as a backstop, keeping Trade War Premium baked into the dollar and limiting any major downside correction.

In a fresh escalation, just 49 minutes ago, the U.S. Postal Service dropped a bombshell—it’s halting all inbound packages from China and Hong Kong (except for letters) until further notice. This wasn’t on anyone’s radar, and the reaction was swift—Chinese stocks took a hit, adding another layer of uncertainty to an already volatile trade landscape.

Meanwhile, China’s economy isn’t catching any breaks. A private gauge of China’s service activity slowed in January, mirroring official data that showed both demand and supply cooling. However, in the classic “bad news is good news” playbook, markets are expecting this to force more China stimulus, which is keeping the yuan from buckling—for now.

That said, this is turning into a "Boy Who Cried Wolf" FX setup—traders are waiting for the next major move on the tariff chessboard before making aggressive bets, but with USD positioning still stretched, most traders are hedged rather than fully reversing dollar longs. Those who booked profits on Monday are likely eyeing a reload on dollar longs at better levels.

The real showstopper today? The Yen

The JPY ripped higher, rallying 100 pips, as strong wage growth data put a Bank of Japan rate hike squarely on the table. December’s labor cash earnings came in hotter than expected, and November’s numbers saw upward revisions—a bullish signal that traders weren’t going to ignore. If this trend continues into Shunto wage negotiations, markets will likely go all-in on a BOJ rate hike—possibly as early as May.

Bottom line: The tariff saga is far from over, and while today’s USD dip may look like a trend shift, the bigger picture still favors strong underlying dollar support—especially with April 1 looming. The yen, on the other hand, just got fresh rocket fuel, and traders are piling into the BOJ tightening story with conviction.