Groundhog Day Ushers in February – Currency Thoughts
Groundhog Day Ushers in February
February 2, 2026
(154) The 1993 movie Groundhog Day showcased a seemingly endless loop of life, constantly reliving the same day. So it is that this Groundhog Day kicks of a new week and month but with a slew of familiar geopolitical tensions, central banking uncertainties, and one-hand/other-hand economic risks. Like most months, this opening day’s menu has been dominated by a slew of manufacturing sector purchasing manager surveys, and there’s been considerable overnight financial market volatility superimposed on some directionless trends. Another constant has been President Trump’s ability to dominate front page news. Indeed, this presidency represents a rare back-to-the-future moment, replicated only once but metaphorically many times in America’s 250-year-old history.
At one point early this Monday, gold and silver touched multi-month corrective lows of $4426 and $74,567, 21% and 41% below record peaks late last month. Bitcoin’s price swooned initially as low as $74,567, a 10-month low and also 41% below a record high touched last October. All three experienced strong rebounds later in the overnight period to show net rises from January closing levels. Alternatively, the price of West Texas Intermediate crude oil initially rallied overnight but now sports a net drop of about 5%.
In Japan, Prime Minister Takaichi and officials at the Bank of Japan do not seem to be on the same page regarding the risks and rewards of a soft currency. The prime minister commented over the weekend that yen weakness could provide a useful opportunity for Japanese exports, whereas the early summary of the Bank of Japan Board meeting on January 22-23 revealed a debate over whether interest rate normalization might be falling behind the curve, given the juxtaposition of selling pressure on the yen and rising long-term interest rates. Takaichi’s unexpected remark won the day, as the yen fell 0.3% against the dollar after rallying in the final third of January.
Debate continues to swirl over what kind of Fed Chairman Kevin Warsh might prove to be. As noted on this web site last week, his history has not been entirely consistent, but markets have approached Trump’s choice of Warsh positively, since the other front-runners were had unambiguous reputations as inflation doves. Time will tell, but the mood in that regard seems more hopeful than realistic. On the broad scope of personnel decisions that President Trump has made in this second term, the most consistent attribute has been loyalty to him. Why on this arguably most important team member of them all would he select the next Fed chairman somebody from whom he hadn’t secured a pretty definite commitment to cutting interest rates more responsively to the president’s ongoing cues? And why would Warsh accept the nomination if he anticipated the kind of treatment that Powell has elicited?
Reflecting relief in the choice of Warsh, the dollar also climbed today by 0.3% against the loonie, Aussie dollar, and euro, 0.4% versus the Korean won, and 0.2% relative to the Aussie dollar and sterling.
In Europe, 10-year sovereign debt yields are up 1-2 basis points among euro area members but 2 bps lower in Britain. The 10-year Treasury yield marked time, while the Japanese JGB dipped a basis point.
Pronounced declines were experienced on this first session of February in Asian stock markets, notably losses of 5.3% in South Korea, 4.9% in Indonesia, 2.5% in China and 1.3% in Japan. In contrast, major European and U.S. equity indices kicked off with gains of around 1.0% and 0.5%, respectively.
The U.S. January ISM-compiled U.S. purchasing managers index in January (52.6) was five full points above December’s reading, far better than anticipated, and perhaps too good to be true. The orders subindex catapulted nearly ten points higher, and the improved overall index was not contradicted in direction by the S&P Global manufacturing PMI that got revised higher than its preliminary estimate and December’s 51.8 level to a score of 52.4 in January.
Summarizing Euroland’s January manufacturing PMI, a 2-month high of 49.5, the compilers of the survey observed the best one can say is that progress toward a future recovery is progressing at “a snail’s pace.” Only 3 of 7 reporting countries had readings above 50, led by Greece’s 5-month high of 54.2. Most members of the euro area reported accelerating cost inflation, an inability to pass on input price increase, and a continuing push to reduce inventory levels. The Dutch (50.1) and Spanish (49.2) readings were represented 8- and 9- month lows.
The U.K. manufacturing PMI reading of 51.8 was at a 17-month high, while Switzerland‘s index stayed below 50 at a 2-month high of 48.8. In Eastern Europe, the Hungarian index plunged 4.7 points to a 6-month low of 49.3; the Czech PMI fell back below the 50 neutrality level to a 2-month low of 49.8; and Poland’s 2-month high was also under 50 at 48.8. So were Romania’s 2-month low of 48.1, Russia’s 8-month high of 49.4 and Turkey’s 2-month low of 48.8.
In Asia, the January PMI scores predominantly were on the north side of the 50 level separating improvement from deterioration. Japan’s 29-month high reading of 51.5 was unrevised from its preliminary estimate. India’s PMI was revised downward but at 55.4 still at a 2-month high and conveying solid growth. China’s PMI of 50.3 was its highest in 3-month. The government-compiled manufacturing and non-manufacturing PMI surveys separately revealed a 2-month low manufacturing barometer of 49.3 but a surprising 0.8-point drop in the non-manufacturing index to a 37-month low of 49.3.
South Korea’s 50.2 was at a 17-month high, while Taiwan’s PMI of 51.7 was the best in 13 months. Thailand’s reading fell 3.7 points below December’s level to a 2-month low of 52.7, while the Filipino index improved to a a 9-month high of 52.9. Malaysia’s PMI held its ground above 50, with a 20-month high of 50.2, and the Vietnamese index fell a point to a 4-month low of 52.5.
Australia’s 52.3 manufacturing PMI represents a 3-month high despite a marginal downward revision from its earlier estimate.
Brazil’s PMI fell 0.6 points further below 50 to a 4-month low of 47.0. The Absa-compiled South African PMI for January printed at 48.7, 3-month high. Canada’s PMI returned to the fifties with a one-year high of 50.4.
German retail sales edged up 0.1% on month and posted a December-over-December advance of 1.5%. Swiss retail sales did better, rising 1.0% on month and 2.9% on year in December.
Indonesian consumer price inflation rose further in January to a 32-month high of 3.55%. The low point last February was at -0.1%.
Indonesia’s trade surplus widened to $41.1 billion last year from $31.0 billion in 2024 and was also higher than $36.9 billion in 2023.
The British Nationwide house price index was only 1.0% higher in January than a year earlier. Back in March 2022 when the war between Russian and Ukraine was only starting, the index exceeded its year-earlier level by 14.3%.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: Bank of Japan summary of last board meeting, Indonesian trade and CPI, manufacturing purchasing manager surveys in January 2026, precious metal volatility
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