Forex News

• EUR/USD dips as strong US services PMI data supports the Dollar despite emerging labor market softness.
• Softer Eurozone HICP inflation boosts expectations of a rate cut by the European Central Bank.
• Focus turns to the ECB decision and remarks from Christine Lagarde on policy outlook and Euro strength.

The Euro falls during the North American session, down more than 0.10% as the Dollar recovers from Tuesday’s losses. Solid US business activity data is a headwind for the EUR/USD pair. A softer than expected inflation report in the Eurozone increases the chances that the European Central Bank (ECB) will need to lower rates to stimulate the economy. At the time of writing, the EUR/USD trades at 1.1800.

Euro edges lower near 1.1800 as resilient US activity contrasts with easing Eurozone inflation pressures

The US economic docket featured the Institute for Supply Management (ISM) Purchasers Management Index (PMI) for the services sector, which exceeded estimates amid increasing input costs. Other data show that private companies hired less people than expected by the economists, an indication of softness in the labor market.

The short US government shutdown has affected the release of crucial jobs data. The JOLTS report, which was expected to be released today, moved to February 5. Meanwhile, the Nonfarm Payrolls will be announced on February 11, while the Consumer Price Index (CPI) moved back to February 13.

Across the pond, the Harmonized Index of Consumer Prices (HICP) in January was softer than expected at 1.7% YoY, while core figures stood at 2.2% YoY. The Eurozone headline inflation had increased the odds for a cut, rather than a rate hike, for the ECB. Meanwhile, traders eye the ECB’s monetary policy outcome, along with the President Christine Lagarde’s press conference.

Of note would be if she spoke about the Euro’s strength, sponsored by overall US Dollar weakness.

Daily digest market movers: Upbeat US data weighs on the Euro

• A better-than-expected reading of the Institute for Supply Management Services PMI in January diminishes the chances of rate cuts in the near term. The index rose to 53.8 versus forecasts of 53.5 and matched December’s print.
• The ISM Employment Index sub-component rose for a second straight month, albeit at a slower pace than in December, while the Prices Paid Index increased to 66.6 from 65.1, marking its highest level in two months.
• The US ADP Employment Change report for January showed private-sector payrolls increased by just 22K, falling well short of expectations for a 48K gain.
• The US President Donald Trump said that he sustained an excellent telephone conversation with President Xi of China. Trump revealed that he would be traveling to China in April and that they discussed about trader, military, Taiwan, the Russia/Ukraine war, Iran and China’s purchasing oil and gas from the US.
• The US Treasury Secretary Scott Bessent revealed that is in the country’s interest the strong Dollar policy. When asked about whether Trump has the authority to fire Fed chair or board member of a policy disagreement, said that he has no opinion.
• Money markets had priced in 47 basis points of Fed easing towards the year end, revealed data from Prime Market Terminal data.
• On Thursday, the ECB is expected to hold rates unchanged. Nevertheless, companies revealing that they have experienced a decline in profits, in the latest ECB’s safety survey, increase the odds that the next move on interest rates would be a rate cut rather than a hike.

Technical outlook: EUR/USD trades sideways ahead of ECB’s meeting

The EUR/USD trades sideways as investors wait for the ECB’s decision and Lagarde’s press conference. The ongoing downtrend was halted after reaching February 2’s daily low of 1.1775. Since then, the pair consolidated around 1.1770-1.1837. If the top of the range is cleared, up next lies 1.1850 followed by 1.1900.

Conversely, a drop below 1.1770 would extend its losses to the 20-day SMA at 1.1759, followed by the 50-day SMA at 1.1719 and the 100-day SMA at 1.1678.

The Korean Won is under pressure despite a benign macro backdrop, with recent GDP data showing contraction. The Bank of Korea is expected to maintain its policy rate amid rising home prices and volatility in the KRW. Commerzbank FX Analyst Moses Lim notes that USD-KRW may remain within a specific range.

BoK's cautious approach to policy

"We expect BoK to leave the policy rate unchanged at 2.5% at the next meeting on 26 February."

"For BoK, it is likely to step up efforts to reduce excessive volatility rather than to target any particular level."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Here is what you need to know on Thursday, February 5:

United States (US) ADP Employment Change report revealed that the private sector added 22K jobs in January, falling short of expectations of 48K. Meanwhile, the ISM Services Purchasing Managers’ Index (PMI) for the same month recorded a value of 53.8, matching the previous month's reading and surpassing the expected figure of 53.5.

United States (US) President Donald Trump signed a bill late Tuesday to end the partial government shutdown, providing some immediate relief. He also announced that talks with Iran would take place later this week in Oman regarding the country's internal crisis.

DXY rises and is trading near 97.70 even after the mixed US data. Further details indicate that the Prices Paid Index, an indicator of inflation, increased to 66.6 from the previous 65.1, while the Employment Index declined from 51.7 to 50.3.

AUD/USD is trading near the 0.6970 level, losing all intraday gains as the US Dollar (USD) gains the upper hand. The Reserve Bank of Australia (RBA) raised its interest rate and struck a hawkish tone on policy outlook on Tuesday.

EUR/USD is trading near the 1.1800 price zone, seeing little movement as the Harmonized Index of Consumer Prices (HICP) flash data for January was released at 1.7%, lower than the 1.9% expected. Additionally, the European Central Bank (ECB) will announce its monetary policy decision on Thursday, with interest rates expected to remain on hold.

USD/CAD is trading near the 1.3680 price zone, having a little surge amid USD strength.

GBP/USD is trading near the 1.3640 price zone, seeing little movement as the pair awaits the Bank of England (BoE) to announce its monetary policy decision on Thursday.

USD/JPY is trading near a seven-day high at 156.70 as the USD remains fortified against all major currencies.

Gold is trading near $4,908, with little movement as the US government shutdown was resolved and geopolitical tensions appear to be easing.

What’s next in the docket:

Thursday, February 5:

• Australian December Trade Balance.
• Eurozone December Retail Sales.
• Bank of England (BoE) monetary policy decision.
• European Central Bank (ECB) monetary policy decision.
• US Jolts Job Openings.

Friday, February 6 :

• Canada January Net Change in Employment.
• US February Michigan Consumer Sentiment Index.

• CAD trades near 1.3635 against USD on Wednesday, little changed from the previous session.
• ADP private payrolls rose just 22,000 in January, well below expectations; official NFP delayed to next week.
• Treasury Secretary Bessent testifies before Congress; oil prices climb toward $64 on Middle East tensions.

The Canadian Dollar (CAD) held steady against the US Dollar (USD) on Wednesday, trading just below 1.3700 as markets adjusted to the end of the partial US government shutdown and digested a soft private payrolls report. The Loonie has pulled back from sixteen-month highs hit in late January, with the retreat driven by softer Canadian growth data and a modest rebound in USD demand following the nomination of Kevin Warsh as Federal Reserve (Fed) Chair.

President Donald Trump signed a $1.2 trillion funding package into law on Tuesday, ending the three-day partial shutdown. Federal agencies reopened Wednesday morning, though Department of Homeland Security funding was extended for only two weeks as lawmakers continue negotiations over immigration enforcement reforms. The quick resolution removed one source of market uncertainty, though the brief closure forced the Bureau of Labor Statistics (BLS) to delay this week's key labor data releases.

ADP misses estimates, NFP pushed to next week

The ADP National Employment Report showed private payrolls increased by just 22K in January, well below market expectations for a stronger reading. The report highlighted that job creation slowed considerably in 2025, with private employers adding only 398K positions for the full year, compared to 771K in 2024. The weak print carried extra weight given the postponement of official government data.

The BLS confirmed that the January Nonfarm Payrolls (NFP) report, originally scheduled for Friday, February 6, will be rescheduled once government funding is fully restored. The December Job Openings and Labor Turnover Survey (JOLTS) data was also delayed. Markets had expected NFP to show an increase of roughly 55K jobs with unemployment holding at 4.4%. The January release typically includes annual benchmark revisions and updated seasonal adjustment factors, making its eventual publication closely watched.

Bessent faces lawmakers on tariffs and inflation

Treasury Secretary Scott Bessent appeared before the House Financial Services Committee on Wednesday, facing sharp questions from Democratic lawmakers about the administration's tariff policies and their impact on consumer prices. In heated exchanges, Bessent acknowledged his earlier statements that tariffs could be inflationary were "mistaken," pointing to economic growth and declining inflation as evidence that tariff-related price pressures had not materialized as critics warned.

Bessent also warned against overregulation of the financial sector, characterizing the previous administration's approach as "regulation by reflex." The testimony came as markets await a Supreme Court ruling on whether the administration's trade duties exceeded presidential authority. Bessent is scheduled to appear before the Senate Banking Committee on Thursday.

Oil prices climb on Middle East tensions

West Texas Intermediate (WTI) crude oil futures climbed toward $64 per barrel on Wednesday after the US military downed an Iranian drone near a US aircraft carrier in the Arabian Sea. The incident unsettled energy markets, though President Trump emphasized that diplomatic channels with Iran remain open and talks are still scheduled. API data showing an 11.1 million barrel draw in US crude inventories, the largest since June if confirmed, added further support.

The US Dollar Index (DXY) held near 97.4 on Wednesday, pausing its recent rebound from a near six-year low. The index found mild support following the strong ISM Manufacturing print earlier this week, though the lack of official labor data kept traders cautious. Rate markets continue to price roughly a 70% chance the Fed will hold rates through April, with the first cut of 2026 expected around June.

Daily digest market movers: ADP disappoints as NFP gets pushed back

• USD/CAD trades near 1.3635, little changed on the session as the Loonie consolidates below sixteen-month highs.
• ADP private payrolls rose 22,000 in January, below expectations; full-year 2025 job creation totaled just 398,000.
• BLS delays January NFP and December JOLTS releases due to partial government shutdown; rescheduled dates pending.
• WTI crude climbs toward $64/bbl after US downs Iranian drone; API reports 11.1 million barrel inventory draw.
• Bessent tells Congress his earlier view that tariffs were inflationary was mistaken; faces lawmakers on economic policy.
• DXY holds near 97.4; rate markets see Fed on hold through April with first cut likely in June.

Canadian Dollar price forecast

USD/CAD trades near 1.3635 on Wednesday, holding within a familiar range after retreating from the late-January low near 1.3490. The pair has bounced off the 2025 swing lows as the US Dollar found renewed demand following the Warsh nomination and firmer ISM data. The 50-day Exponential Moving Average (EMA) near 1.3700 marks the first layer of resistance, with the 200-day EMA and the 2026 yearly open clustered around 1.3725-1.3735.

Support near 1.3540, resistance at 1.3700

On the downside, initial support lies near 1.3600, followed by the 2025 swing low at 1.3540. A weekly close below that threshold would signal renewed bearish momentum and open the door to a test of 1.3430. On the upside, a clear break above the 1.3725-1.3735 zone would suggest a more significant low is in place, with subsequent resistance at the 1.3930-1.3970 area.

RSI neutral as pair consolidates

The Relative Strength Index (RSI) on the daily chart hovers in the mid-range near 45-50, indicating neither overbought nor oversold conditions. This neutral reading matches the choppy price action as the pair consolidates after January's sharp decline. For now, the broader downtrend stays in place while USD/CAD holds below the key moving averages, though a break above 1.3735 would shift the near-term tone to consolidation or recovery.

USD/CAD daily chart

OCBC Bank's report, authored by Sim Moh Siong and Christopher Wong, discusses the recent rally of the Indian Rupee (INR) following headlines of a US-India trade deal. However, the report cautions that the lack of specifics may limit follow-through as investors return to fundamentals. The analysis highlights key technical levels for USD/INR and indicates downside risks in the near term.

INR rallies on trade deal news

"While the announcement provided a near-term sentiment boost to the INR, any follow-through is likely to be more measured, as markets refocus on relative rate dynamics, broader USD trends and global risk conditions rather than trade headlines alone."

"USDINR was last at 90.3 levels. Daily momentum turned mild bearish while RSI fell to near oversold conditions."

"Risks skewed to the downside for now. Support at 90 levels (23.6% fibo retracement of 2025 low to 2026 high)."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

• Gold retreats from $5,091 daily highs as modest US Dollar strength pressures prices near $4,900.
• Markets digest mixed US data, with softer employment signals offset by firm services activity and rising prices.
• Reduced tensions after talks between Donald Trump and Xi Jinping cap haven flows despite Middle East risks.

Gold price retreats during the North American session on Wednesday, down more than 1% after reaching a three-day high of $5,091. A mixed market mood and modest US Dollar strength keep XAU/USD trading with losses at around $4,901 at the time of writing.

XAU/USD pulls back from three-day highs as calmer geopolitics and resilient US data weigh on safe-haven demand

The yellow metal erased some of its earlier gains even though the latest round of US jobs data showed signs of weakness. At the same time, business activity in the services sector remained solid, yet showed mixed readings in the PMI’s sub-components of employment ─edging lower─ and the Price Index rising.

On the geopolitical front, a positive call between US President Donald Trump and his Chinese counterpart Xi Jinping keeps tensions calm between Washington and Beijing.

In the meantime, Iran and the US are poised to begin talks in Oman on Friday as tensions escalated after the US military shot down an Iranian drone approaching an aircraft carrier in the Arabian Sea on Tuesday.

The short US government shutdown delayed the January Nonfarm Payrolls report until February 11, revealed the US Bureau of Labor Statistics (BLS).

Worth noting that US Treasury Secretary Scott Bessent reiterated the strong US Dollar policy is in the interests of Washington, while adding that “tariff inflation was the dog that didn’t bark.”

Ahead this week, the US economic docket will feature the US JOLTS job openings and the release of jobless claims for the week ending January 31.

Daily market movers: Broad US Dollar strength, steady US yields weigh on Gold

• Gold is losing its shine due to overall US Dollar strength, with the US Dollar Index (DXY) rising 0.31% at the time of writing. The DXY, which measures the performance of six currencies against the Greenback, is at 97.67.
• Steady US Treasury yields capped Bullion’s advance. The US 10-year Treasury note is yielding 4.27%, unchanged.
• The US ADP Employment Change for January showed that private employers hired just 22K people, below the 48K projected.
• The Institute for Supply Management reported that the Services PMI for January came in above expectations, rising to 53.8 versus forecasts of 53.5 and matching December’s reading. The Employment Index expanded for a second consecutive month, though at a slower pace than in December. Meanwhile, the Prices Paid component climbed to 66.6 from 65.1, reaching its highest level in the past two months.
• US President Donald Trump said that he had an excellent telephone conversation with President Xi of China. Trump revealed that he would be traveling to China in April and that they discussed trade, military, Taiwan, the Russia/Ukraine war, Iran and China’s purchasing oil and gas from the US.
• Money markets had priced in 47 basis points of Fed easing towards the year-end, according to data from Prime Market Terminal.

Technical outlook: Gold drops towards $4,900, bears eye lower prices

Gold price is forming an ‘inverted hammer’ bearish candle pattern, which could shift to a ‘shooting star’ if Thursday’s price action is bearish. Momentum as measured by the Relative Strength Index (RSI) shows that buyers are losing steam, despite the index standing at bullish territory.

If XAU/USD ends on a daily basis below $4,900, traders could expect a test of the $4,850, followed by $4,800. A breach of the latter will expose the February 3 daily low of $4,643. Once cleared, the ‘shooting star’ pattern will be confirmed along with Gold’s bearish bias in the short-term.

On the flip side, if Bullion rises past $4,950, buyers could test the $5,000 once more.

• EUR/USD traded around 1.1800 on Wednesday, hovering below the four-year peak of 1.2082 touched last week.
• ECB expected to keep rates unchanged Thursday; Eurozone January flash HICP forecast at 1.7% YoY.
• Bessent reiterates strong Dollar policy during House testimony, says Fed lost trust over inflation.

EUR/USD trades mostly flat on Wednesday, drifting around 1.1800 during the European and American sessions. Fiber pulled back from last week's four-year high near 1.2082 but continues to hold comfortably near the 1.1800 handle. The EUR/USD pair has gained roughly 14% over the past 12 months, driven by narrowing interest rate differentials and persistent weakness in the Greenback.

Wednesday's session sees muted price action ahead of Thursday's European Central Bank (ECB) interest rate decision. Markets widely expect the ECB to hold its deposit facility rate steady at 2%, marking the fifth consecutive meeting without a change. The central bank has kept rates on hold since June 2025, and ECB President Christine Lagarde has repeatedly stated that policy is in a "good place."

Swedbank economist Nerijus Maciulis noted that Lagarde is likely to reiterate that the Euro-area economy is in a good place, though risks persist. "The first weeks of 2026 have clearly illustrated that trade deals and agreements are very fragile," Maciulis said, referencing ongoing global trade tensions.

Bessent reiterates strong US Dollar policy

Treasury Secretary Scott Bessent testified before the House Financial Services Committee on Wednesday, reiterating that the US "always supports a strong Dollar policy." Bessent also commented on Federal Reserve independence, noting that the Fed lost Americans' trust when it allowed inflation to "ravage" their incomes. He emphasized that the central bank must maintain a "very delicate balance" in fulfilling its dual mandate.

The US Dollar Index (DXY) hovers near 97.50 on Wednesday, consolidating after its recent recovery from near six-year lows. The Greenback found some support last week after President Trump nominated Kevin Warsh to succeed Jerome Powell as Federal Reserve Chair. Warsh, a monetary hawk and former Fed governor, is seen as a credible pick who may maintain the central bank's independence.

US shutdown delays key labor data

A partial US government shutdown has delayed key labor market releases, including January's Nonfarm Payrolls (NFP) report originally scheduled for Friday. The Bureau of Labor Statistics confirmed the postponement, leaving traders without fresh signals on employment conditions. The Fed held rates steady at 3.50%-3.75% at its January meeting, and markets see low odds of a cut in March given the data vacuum.

EUR/USD price forecast

Despite a recent bullish breakout, EUR/USD is consolidating within a broad sideways range that has defined price action since mid-2025. The pair trades above both the 50-day and 200-day Exponential Moving Averages (EMA), with the 50-day EMA near 1.1740 and the 200-day EMA around 1.1410. This bullish alignment confirms the medium-term uptrend, though the pace of gains has slowed as the pair approaches psychological resistance near 1.20.

Immediate resistance is seen at the recent swing high near 1.1870, followed by the critical 1.20 psychological barrier and the four-year peak at 1.2020. On the downside, the 50-day EMA at 1.1740 offers the first layer of support. A break below this level could expose the 1.1580 zone, the two-month low set in mid-January.

The 14-day Relative Strength Index (RSI) hovers near 53, reflecting neutral momentum with a mild bullish tilt. The indicator has pulled back from overbought levels above 70 seen earlier in January, suggesting the pair may need fresh catalysts to extend higher. For now, the broader bias tilts positive while EUR/USD holds above the 50-day EMA, but a sustained break above 1.1870 would be needed to confirm renewed bullish momentum toward the year's highs.

EUR/USD daily chart

• The Dow Jones gained around 300 points as Eli Lilly soared on blowout earnings and bullish 2026 guidance.
• Advanced Micro Devices plunged 14% after first-quarter guidance disappointed investors despite record Q4 revenue.
• ADP reported just 22K private-sector jobs added in January, well below expectations of 48K.
• ISM Services PMI held steady at 53.8, marking 19 consecutive months of expansion in the services sector.

The Dow Jones Industrial Average (DJIA) climbed about 600 points, or 0.6%, and tapped the 49,600 region on Wednesday, gaining ground on the back of climbing pharmaceutical stocks. The S&P 500 shed approximately 0.5% while the Nasdaq Composite dropped 1.4%, weighed down by continued weakness in semiconductor and software stocks. Markets remained in rotation mode, with investors moving out of technology and into economically sensitive shares amid ongoing concerns about AI-driven disruption.

Eli Lilly crushes estimates, revenue rises above Wall Street expectations

Eli Lilly and Company (LLY) surged more than 7% after the pharmaceutical giant posted fourth-quarter results that blew past analyst expectations. The company reported adjusted earnings of $7.54 per share on revenue of $19.29 billion, well ahead of estimates for $6.93 and $17.96 billion. Lilly's blockbuster weight-loss drug Zepbound and diabetes treatment Mounjaro continued to drive growth, with Zepbound generating $4.2 billion in US revenue for the quarter. The company provided guidance for 2026 revenue between $80 billion and $83 billion, significantly above the $77.62 billion analysts had forecast. The results stood in stark contrast to rival Novo Nordisk A/S (NVO), which warned earlier this week that it expects sales and profit to decline as much as 13% this year. Lilly's market share in the US obesity and diabetes drug market climbed to 60.5% in the fourth quarter.

AMD sinks despite record revenue as guidance disappoints

Advanced Micro Devices Inc. (AMD) plunged 14% on Wednesday after its first-quarter guidance fell short of elevated expectations amid the ongoing AI spending boom. The chipmaker projected revenue of approximately $9.8 billion for the first quarter, plus or minus $300 million, which topped the consensus estimate of $9.38 billion but disappointed analysts who had anticipated stronger guidance. AMD reported record fourth-quarter revenue of $10.27 billion and earnings of $1.53 per share, both beating estimates, but investors focused on the sequential revenue decline implied by the guidance. The stock's slide weighed heavily on the Nasdaq and added to pressure on the broader semiconductor sector, with Broadcom Inc. (AVGO) falling 2% and Micron Technology Inc. (MU) losing 3%.

ADP report shows sluggish hiring to start 2026

Private-sector employment barely budged in January, with companies adding just 22K jobs according to the ADP National Employment Report released Wednesday. The figure was well below the downwardly revised 37K increase in December and missed the Dow Jones consensus forecast of 48K. The lackluster reading would have been negative without a surge of 74K hires in the education and health services category. Financial activities added 14K positions while construction rose by just 9K. ADP Chief Economist Nela Richardson noted that hiring continues to soften in a pattern observed over the past three years. Wage gains were little changed, with job-stayers seeing growth of 4.5% year-over-year. The Bureau of Labor Statistics' (BLS) Nonfarm Payrolls (NFP) report, originally scheduled to release on Friday, has been delayed by the recent partial government shutdown.

ISM Services PMI holds steady, pointing to continued expansion

The ISM Services PMI registered 53.8 in January, unchanged from December's seasonally adjusted reading, marking the 19th consecutive month of expansion in the services sector. The Business Activity Index jumped to 57.4, up 2.2 points from December and the highest reading since October 2024. The Employment Index expanded for the second straight month at 50.3, though it slipped 1.4 points from December. The Prices Index rose to 66.6, slightly above its 12-month average, suggesting inflationary pressures remain in the services sector. ISM noted that the Services PMI reading corresponds to a 1.8 percentage point increase in real gross domestic product on an annualized basis, indicating continued economic expansion.

Software stocks extend global selloff on AI disruption fears

The rout in software stocks extended into a second day as concerns about artificial intelligence disrupting traditional business models continued to weigh on the sector. Salesforce Inc. (CRM), Oracle Corporation (ORCL), and CrowdStrike Holdings Inc. (CRWD) all extended losses from Tuesday's session. The iShares Expanded Tech-Software Sector ETF has dropped more than 14% over the past six sessions following a 15% decline in January. The selling has spilled over into global markets, with European software and data analytics names hitting fresh lows. Analysts at Jefferies described software sentiment as the worst ever, with traders in capitulation mode. Gold continued its recovery, climbing to around $5,050 per ounce as investors sought safe-haven assets amid the technology sector turmoil.

Dow Jones daily chart

Standard Chartered's report, authored by Carol Liao, Senior Economist and Moriarty Lam, Research Analyst, highlights that China's household consumption is likely underestimated due to unaccounted government transfers and strong RMB purchasing power. While boosting domestic demand is essential, it may not provide a quick fix for external imbalances and deflation. The report emphasizes the need for supportive measures and a shift in resources to expand the services sector to drive consumption growth.

Underestimating China's household consumption strength

"Official data likely underestimates strength of China’s household consumption. Understatement likely due to unaccounted-for government transfers and strong RMB purchasing power."

"However, we think this gap is overstated. The following factors suggest China’s consumption base is larger than conventional statistics imply."

"Boosting household demand is still important as China consumption’s share of GDP may be behind the global average even after adjusting for possible understatement effects; moreover, consumption growth has been softening."

"Supportive measures such as the goods trade-in programme are likely not sufficient to boost overall consumption, nor help resolve the external trade imbalance and deflation issues."

"In the foreseeable future, we expect China to maintain its export competitiveness – and therefore a sizeable C/A surplus – and domestic inflation to remain soft."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

• The New Zealand Dollar pulls back despite a solid increase in employment in the fourth quarter.
• An unexpected rise in the Unemployment Rate tempers optimism around the labor market.
• The US macro backdrop and monetary policy expectations weigh on the pair.

NZD/USD trades around 0.6000 on Wednesday at the time of writing, down 0.90% on the day, as investors digest mixed New Zealand labor market data and an uncertain global macroeconomic environment.

The New Zealand Dollar (NZD) fails to sustain gains following the release of strong employment figures for the last quarter of 2025. Employment Change rose by 0.5% on a quarterly basis, after a flat reading in the previous quarter, and beat the market consensus of 0.3%. This performance points to some resilience in economic activity and an underlying improvement in labor market conditions.

However, this positive signal is offset by an unexpected increase in the Unemployment Rate, which climbed to 5.4%, its highest level in nearly a decade, while analysts had expected a steady reading at 5.3%. According to BBH, this rise partly reflects stronger labor force participation, which puts the apparent deterioration into perspective but also confirms the presence of spare capacity in the New Zealand economy. The bank also notes that wage pressures remain contained, limiting near-term inflation risks.

Against this backdrop, prospects for monetary tightening by the Reserve Bank of New Zealand (RBNZ) remain limited. The easing in labor costs relative to expectations and the persistence of a negative output gap argue in favor of keeping monetary policy unchanged for an extended period, capping the appeal of the NZD.

On the international front, the US Dollar (USD) trades with a more mixed tone following the release of weaker-than-expected US employment data. The ADP report showed that private-sector job creation in the United States (US) totaled just 22,000 in January, well below market expectations. This figure reinforces the view of a gradual cooling in the labor market, even as some activity indicators, such as the Institute for Supply Management (ISM) Services Purchasing Managers Index (PMI), remained in expansion territory. The Services PMI printed at 53.8, unchanged from the previous month, but its Employment and New Orders components pointed to some loss of momentum.

In addition, delays in the release of official US labor market data, due to a temporary federal government shutdown, keep investors cautious. This combination of factors maintains some volatility in the Greenback and contributes to a bearish bias in NZD/USD, despite encouraging signals from New Zealand’s labor market.