The Yen played out the ‘buy the rumour, sell the fact’
- The LDP's landslide victory in Japan led to a pullback in USD/JPY.
- China has been buying gold for 15 months in a row, supporting the price.
Improved global risk appetite undermined the US dollar. The S&P 500 recorded its best daily rally since May amid easing fears about the negative impact of artificial intelligence on technology and other companies' shares. Bitcoin managed to bottom out and followed the rally in US stock indices. Gold returned above $5,000 per ounce, while demand for the greenback as a safe-haven asset declined.
Traders are taking profits on long positions in the USD index after the best week for the US dollar since early January, as important reports approach. Releases of data on employment, inflation and retail sales will clarify the situation with the US economy and allow conclusions to be drawn about the Fed's monetary policy. The futures market sees a 70% probability of a rate cut in June and a 33% chance for April. Growing confidence in a rate cut, if not undermined by US statistics, will inspire the EURUSD bulls.
USD/JPY quotes rose in anticipation of the vote outcome in the lower house. However, when the market opened, investors preferred to take profits, which strengthened the yen by almost 1%.
The Liberal Democratic Party won a record 316 seats in the lower house of Parliament. Together with its coalition partner, the Japan Innovation Party, it holds 354 of the 465 seats, allowing the LDP to pursue its policies without the approval of other parties. Takaichi contributed to the Nikkei 225's rise to a historic high.
Gold returned above $5,000 per ounce thanks to support from central banks. The People's Bank of China reported its 15th consecutive month of gold bar purchases. Its precious metal reserves grew by 40,000 ounces in January. The series began in November 2024 and has continued without interruption since then, despite price fluctuations.
The process of gold acquisition by central banks slowed down in 2025 to 860 tonnes after 1,000 tonnes over the previous three years. Nevertheless, regulators' activity in the precious metals market remains high, which supports the gold price.
Author
Alexander Kuptsikevich, a senior market analyst at FxPro, has been with the company since its foundation. From time to time, he gives commentaries on radio and television. He publishes in major economic and socio-political media.
