On Wednesday, the broad US Dollar Index (DXY) surged 0.5%, propelled by persistent tariff concerns under the Trump administration and a slew of robust US economic indicators. Remarkably, even dovish overtones from Fed’s Chris Waller, a noted market mover, failed to temper the dollar’s ascent. Yet, with traders entrenched in heavy long dollar positions, there’s a palpable hesitation to dump the Euro, especially just before Thursday’s US holiday and ahead of the pivotal Non-Farm Payroll (NFP) report on Friday, which could significantly sway the currency market.

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In Japan, the latest wage data for November underscores a robust economic recovery, with significant wage increases that suggest an increasingly solid relationship between wage growth and inflation. This robust wage growth is tipping the scales for a potential Bank of Japan rate hike in January, which has seen the yen rally below 158 but might fall short of testing 157.50 as yen bulls worry about the looming prospect of 10-year U.S. Treasury yields reaching over 5%.

Meanwhile, China’s economic landscape is becoming increasingly worrisome as consumer prices further decline, amplifying deflation fears. This troubling scenario starkly contrasts with other major economies grappling with persistent inflation issues, underscored by recent comments from U.S. Federal Reserve officials and escalating price growth across the eurozone. China’s ongoing battle with deflation could significantly dampen household spending and corporate profits, potentially crippling economic momentum. Despite the gravity of these economic woes, the currency market remains relatively unaffected, cushioned by the People’s Bank of China’s heavy-handed interventions. The disappointing economic data hardly shocked market observers, as it reinforces the narrative of a stagnating Chinese economy, if not regressing.