The euro fell in European trading on Monday against a basket of global currencies, continuing to trade in negative territory for a second straight session versus the US dollar, under the watch of European monetary authorities, who warned that excessive strength in the euro exchange rate could renew inflation pressures in Europe.

The US dollar continues to advance in the foreign exchange market, supported by broad investor approval of Donald Trump’s nomination of Kevin Warsh as the next Federal Reserve chair.

Price overview

The EUR/USD exchange rate fell by 0.1% today to $1.1839, from the day’s opening at $1.1851, and recorded an intraday high at $1.1875.

The euro ended Friday down 1.05%, marking its second daily loss in the past three sessions, due to correction and profit-taking from a five-year high at $1.2082.

Over January, the euro gained 1.1% against the dollar, posting its third consecutive monthly gain, supported by positive expectations for European economic growth and the assumption that European interest rates will be kept steady for as long as possible this year.

European monetary authorities

The euro’s rise above the $1.20 level for the first time in five years raised concerns among European monetary authorities, prompting European Central Bank policymakers to issue a series of warning remarks about the impact of currency strength on the outlook for inflation and economic growth.

Economists noted that a stronger euro could amplify the deflationary effect of strong Chinese exports, push the European Central Bank out of its “comfort zone,” and drive it toward further interest rate cuts.

Opinions and analysis

Geoff Yu, EMEA macro strategist at BNY, said that although the euro-dollar exchange rate stayed well above the ECB’s baseline scenario last year without triggering strong deflation risks, trade uncertainty remains in place.

Ray Attrill, head of FX strategy at National Australia Bank, said that ECB comments appear independent, but it is notable that the $1.20 level in EUR/USD seems to have acted as a trigger point.

Attrill added that the move in the euro/dollar pair, which was not especially strong until recently, somewhat masks broader euro strength, which will in turn be reflected in the ECB’s inflation expectations.

US dollar

The dollar index rose 0.15% on Monday, extending gains for a second straight session and recording a one-week high, reflecting continued strength in the US currency against a basket of global peers.

This rise comes as markets welcomed President Donald Trump’s nomination of Kevin Warsh to lead the Federal Reserve, a move that strengthened confidence about the future direction of monetary policy.

Expectations have increased that the Federal Reserve may adopt a more hawkish approach to fighting inflation, prompting traders to increase long positions in the US dollar against major and minor currencies.

John Higgins, chief economist at Capital Economics, said the market reaction to Trump’s nomination of Kevin Warsh as Federal Reserve chair broadly matches the view that the president made a relatively safe choice.

Higgins added that the prevailing impression is that Warsh is not fully under presidential influence and is unlikely to undermine Federal Reserve independence or intensify concerns about currency weakness.

The Japanese yen fell in Asian trading on Monday against a basket of major and minor currencies, extending its losses for a second straight session versus the US dollar and recording a two-week low, after remarks by Prime Minister Sanae Takaichi highlighting the benefits of a weaker domestic currency.

The US dollar continues to advance in the foreign exchange market, supported by broad investor approval of Donald Trump’s nomination of Kevin Warsh as the next Federal Reserve chair.

In addition, the yen remains under further negative pressure as expectations for a Japanese interest rate hike in March continue to fade, especially with easing inflation pressures on policymakers at the Bank of Japan.

Price overview

The USD/JPY exchange rate rose by 0.5% today to 155.51 yen, the highest level since January 23, up from Friday’s close at 154.75 yen, and recorded an intraday low at 154.75 yen.

The yen ended Friday down 1.1% against the dollar, marking its second daily loss in the past three sessions, amid continued correction and profit-taking from a three-month high at 152.09 yen, after weaker-than-expected core inflation data from Tokyo.

Over January as a whole, the Japanese yen gained 1.35% against the US dollar, posting its first monthly rise since August, supported by growing speculation about coordinated intervention by US and Japanese monetary authorities in the FX market.

US dollar

The dollar index rose 0.15% on Monday, extending gains for a second straight session and hitting a one-week high, reflecting continued strength of the US currency against a basket of global peers.

This advance comes as markets welcomed President Donald Trump’s nomination of Kevin Warsh to lead the Federal Reserve, a move that reinforced confidence about the future direction of monetary policy.

Expectations have increased that the Fed may adopt a more hawkish stance in tackling inflation, prompting traders to add to long dollar positions against major and minor currencies.

John Higgins, chief economist at Capital Economics, said the market reaction to Trump’s nomination of Kevin Warsh as Federal Reserve chair broadly aligns with the view that the president made a relatively safe choice.

Higgins added that the prevailing impression is that Warsh is not fully under presidential influence and is unlikely to undermine Federal Reserve independence or intensify concerns about currency depreciation.

Sanae Takaichi

Japanese Prime Minister Sanae Takaichi said on Saturday that a weak yen has positive aspects, in comments that appeared to contrast with repeated Finance Ministry warnings about possible intervention to support the currency.

In a campaign speech ahead of next week’s election, Takaichi said that despite criticism of yen weakness, it represents a valuable opportunity for export sectors from food industries to automobiles, noting that currency depreciation has acted as a buffer against US tariffs and provided tangible support to the economy.

A poll by Asahi newspaper showed Takaichi’s ruling party is likely to secure a strong victory in the upcoming lower house elections.

Japanese interest rates

Market pricing for a quarter-point rate hike by the Bank of Japan at the March meeting is currently below 10%.

To reprice those expectations, investors are waiting for more Japanese data on inflation, unemployment, and wages.

Yen outlook

Tony Sycamore, market analyst at IG, said the snap election on February 8 is likely to be the next key domestic catalyst for the yen.

He added that a Liberal Democratic Party majority win could push USD/JPY toward 160, while a coalition outcome could keep the pair near the 155.00 level, depending on the coalition partners.

Kevin Warsh has intermittently pursued the position of Chair of the Federal Reserve ever since US President Donald Trump first considered nominating him nearly a decade ago. Now, as he moves closer to taking the role, the scale of the challenge ahead is coming into sharper focus.

To be effective, Warsh must earn the confidence of at least three key constituencies: fellow Federal Reserve officials, whose votes he needs to change interest rates; financial markets, which could undermine his efforts to lower borrowing costs if they perceive him as acting on political motives; and, no less important, President Trump himself—a former real estate developer who understands precisely how interest rate moves affect heavily indebted borrowers, whether corporations, households, or even the government.

“He has to walk this tightrope,” said Raghuram Rajan, a professor of economics at the University of Chicago and former governor of the Reserve Bank of India. “If he appears too accommodating to the administration, he will lose the support of Fed members and become unable to build consensus.”

At the same time, Rajan added, alienating the White House carries its own risks, potentially placing the Federal Reserve back in the president’s crosshairs. Under Trump, current Fed Chair Jerome Powell has faced repeated criticism for not cutting interest rates as quickly as the president wanted and is now subject to a criminal investigation by the Justice Department. Powell has described the probe as a pretext aimed at pressuring him to lower rates.

Warsh may also face a difficult confirmation process in the Senate. Two Republican senators have already said they will oppose his nomination unless the criminal investigation is resolved. One of them, Senator Thom Tillis of North Carolina, sits on the Senate Banking Committee and could block the nomination from advancing if he votes against it alongside Democrats. Tillis reiterated on Friday that he would continue to oppose Warsh’s nomination until the Justice Department’s investigation concludes.

Democratic Senator Mark Warner of Virginia, also a member of the committee, said: “It is hard to trust that any Federal Reserve chair chosen by this president would be able to act with the independence the role requires, under an administration that threatens charges against any leader who sets interest rates based on economic facts and needs rather than Trump’s personal preferences.”

Further drama may lie ahead. Under the Federal Reserve’s complex structure, Powell could remain a member of the Board of Governors and the rate-setting committee even after his term as chair ends in May. That could leave Warsh facing an unprecedented situation not seen in 80 years: a former chair potentially acting as a counterweight to the new leader.

Demonstrating independence from the White House is likely to be Warsh’s greatest challenge. Alan Blinder, a former Fed vice chair and Princeton economics professor, said the biggest unknown is what assurances Trump may have extracted from Warsh in exchange for nominating him to lead the central bank. “We know Donald Trump—he wants some kind of loyalty pledge,” Blinder said. “I hope Kevin Warsh didn’t give him one.”

Blinder noted that Warsh brings market experience and monetary policy expertise—important qualifications for the role. But he stressed that equally critical are Warsh’s interpersonal skills and his ability to influence other Fed officials during policy deliberations. “What he has in abundance is interpersonal and diplomatic skill,” Blinder said. “He knows how to deal with people, he’s very good at it, and he’s widely liked.”

Don Kohn, a former Federal Reserve governor who served alongside Warsh, described him as “extremely smart—both intellectually and in his ability to read the room.” Kohn added: “He understands how important it is for the Federal Reserve’s decisions to be guided by a long-term view of its goals—price stability and maximum employment—rather than the short-term objectives of whoever happens to be in the White House.”

Copper prices fell during Friday’s trading on the London Metal Exchange, pressured by profit-taking and a stronger US dollar against most major currencies, after the red metal hit a record high in the previous session.

The most actively traded copper futures on the London Metal Exchange declined by 2.27% to $13,309.5 per tonne at 01:55 p.m. Mecca time, after touching a record high of $14,527 per tonne on Thursday.

Futures pared some of their losses after sliding to around $13,000 earlier in the session, coinciding with a one-hour delay to the opening of the London Metal Exchange following the detection of a potential technical issue during pre-opening checks.

Meanwhile, analysts at Citi Group maintained their forecast for average copper prices at $13,000 per tonne this year, citing increased scrap supply and softer demand as a result of higher prices, according to Bloomberg.

On the currency front, the US dollar index rose by 0.5% by 15:22 GMT to 96.7 points, having touched a high of 96.8 and a low of 96.1.

In US trading, March copper futures fell by 2.7% to $6.02 per pound at 15:17 GMT.