Forex News
US President Donald Trump said that the value of the US Dollar (USD) is great when asked whether he thought it had declined too much, Reuters reported on Tuesday.
Key quotes
No, I think it's great, the value of the dollar ... dollar's doing great.
If you look at China and Japan, I used to fight like hell with them, because they always wanted to devalue.
Market reaction
The US Dollar Index (DXY) falls about 1.20% on the day at 95.85, posting its worst day since April 10, 2025. It touched its lowest level since February 2022.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.18% | -1.06% | -1.07% | -0.93% | -1.15% | -0.95% | -1.81% | |
| EUR | 1.18% | 0.12% | 0.11% | 0.25% | 0.02% | 0.23% | -0.64% | |
| GBP | 1.06% | -0.12% | 0.00% | 0.13% | -0.09% | 0.11% | -0.75% | |
| JPY | 1.07% | -0.11% | 0.00% | 0.13% | -0.09% | 0.10% | -0.76% | |
| CAD | 0.93% | -0.25% | -0.13% | -0.13% | -0.22% | -0.02% | -0.88% | |
| AUD | 1.15% | -0.02% | 0.09% | 0.09% | 0.22% | 0.20% | -0.67% | |
| NZD | 0.95% | -0.23% | -0.11% | -0.10% | 0.02% | -0.20% | -0.86% | |
| CHF | 1.81% | 0.64% | 0.75% | 0.76% | 0.88% | 0.67% | 0.86% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
- USD/JPY falls to around 152.30 in Tuesday’s early Asian session.
- Traders remain on alert to the prospect of a coordinated currency intervention by authorities in the US and Japan.
- Fed interest rate decision will take center stage on Wednesday.
The USD/JPY pair slumps to over three-month lows near 152.30 during the early Asian session on Wednesday. The Japanese Yen (JPY) strengthens against the US Dollar (USD) on speculation about a possible coordinated intervention by Japanese and US authorities. Traders await the Federal Reserve (Fed) interest rate decision later on Wednesday, with no change in rates expected.
Japan’s Chief Cabinet Secretary Minoru Kihara said on Monday that officials will closely coordinate with the US and act in accordance with their joint finance ministers’ agreement last September. His comments echoed the finance ministry’s top FX official, Atsushi Mimura, who said Japan was keeping close contact with the US.
"While there are several potential culprits for the dollar’s drop, the main driver is the fallout from reports that the US Treasury is considering direct currency intervention," Jonas Goltermann, deputy chief markets economist at Capital Economics, said in a note.
Additionally, US President Donald Trump stated that the value of the USD is "great" when asked whether he thought it had declined too much. His comments exert some selling pressure on the Greenback against the JPY.
The Fed is widely expected to hold interest rates steady at their current target range of 3.50% to 3.75% at the conclusion of their two-day meeting on Wednesday. This follows three consecutive rate cuts in 2025. Traders will closely monitor the Fed Press Conference following the policy meeting, as it could provide important clues for the months ahead. Any hawkish remarks from Fed officials could underpin the USD in the near term.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
- The Australian Consumer Price Index is forecast at 3.6% YoY in December.
- The Reserve Bank of Australia is increasingly expected to begin an interest rate hike cycle this year.
- The Australian Dollar runs against its battered American rival, with a test of 0.7000 on the table.
Australia will release the Consumer Price Index (CPI) report on Wednesday, and it is expected to show inflation rose 3.6% year over year in December, slightly above the previous reading of 3.4%. The monthly CPI is foreseen at 0.7% after posting 0% in November.
The Australian Bureau of Statistics (ABS) will also release the Trimmed Mean CPI, the Reserve Bank of Australia’s (RBA) favorite inflation gauge. The annual figure is expected to print at 3.2%, matching the previous reading, while on a monthly basis, the Trimmed Mean CPI is forecast at 0.2%, down from the 0.3% posted in the previous month.
Data will be released one week ahead of the RBA monetary policy meeting, scheduled for February 2-3. The central bank last met in December, when policymakers decided to leave the Official Cash Rate (OCR) on hold at 3.6%. The monetary policy statement showed that the Board noted inflation has picked up more recently, and that data “suggest some signs of a more broadly based pick-up in inflation, part of which may be persistent and will bear close monitoring.”
Ahead of the CPI release, the Australian Dollar (AUD) trades above 0.6900 against the US Dollar (USD), its highest since September 2024
What to expect from Australia’s inflation rate numbers?
ABS data is expected to confirm what market analysts suspect: that the RBA’s next monetary policy move will be a rate hike.
As previously noted, the ABS is forecast to report that the annual CPI rose by 3.6% in the year to December, higher than the 3.4% posted in November and above the RBA’s goal of keeping inflation between 2% and 3%.
Resurgent inflationary pressures, coupled with a pretty solid labor market, boosted the odds of an interest rate hike in Australia coming up next. The ABS recently reported that the country added 62,500 new jobs in December, and that the Unemployment Rate dropped to 4.1%, its lowest in seven months. Even further, underemployment fell to a multi-decade low.
Before the release of inflation data, the odds of an RBA rate hike at the February meeting stand at roughly 63%, according to Reuters.
Meanwhile, the AUD/USD pair trades at its highest since September 2024 amid broad US Dollar (USD) weakness. Market players continue to drop the Greenback amid skyrocketing levels of uncertainty, most stemming from United States (US) President Donald Trump’s decision.
President Trump resumed his trade war against the world after indicating that, since Norway did not award him the Nobel Prize, he would now focus on protecting his country rather than global peace. He kept escalating tensions with Europe amid his desire to possess Greenland, a Danish territory close to the US land, claiming it’s critical to US defense. Mid-January, however, he de-escalated tensions by announcing the framework of a deal, but without any details on the matter, market participants remain wary. Trump also threatened higher tariffs on South Korea on Tuesday, as the Asian country’s legislature still had not approved the trade deal achieved last year.
The US President claimed he will soon announce the next Chair of the Federal Reserve (Fed), as Jerome Powell’s mandate finalizes in May. Market participants clearly anticipate a hawk, regardless of the name, and keep betting on rate cuts throughout 2026, something still quite unclear.
How could the Consumer Price Index report affect AUD/USD?
In this scenario, the anticipated inflation data should confirm the RBA’s hawkish stance as previously noted, and hence, result in a firmer AUD. Higher-than-anticipated readings will have the same effect, further boosting demand for the Aussie.
If the data comes in softer than expected but still above 3%, the scenario should remain the same, though the AUD’s advance will be more restrained. However, in the unlikely event that annual inflation falls below 3%, market players will rush to bet against an RBA interest rate hike and could see AUD/USD fall as an immediate reaction to the news. Sustained losses, however, seem unlikely given the USD situation.
Valeria Bednarik, FXStreet Chief Analyst, notes: “From a technical point of view, the AUD/USD pair has room to extend its advance, despite overbought conditions clear in the daily chart. The pair is currently trading near a multi-month peak in the 0.6950 price zone, and shows no signs of slowing its advance. The rally could continue initially towards the 0.7000 threshold, while once above the latter, there’s little in the way towards 0.7100.”
Bednarik adds: “In the case of a retracement, the pair will find near-term support in the 0.6890 region, when the pair will finally close the weekly opening gap. A slide below the latter exposes the next static support at 0.6830.
Economic Indicator
Trimmed Mean CPI (MoM)
The Trimmed Mean Consumer Price Index (CPI), released by theAustralian Bureau of Statistics on a monthly basis, is a measure of underlying inflation. The Trimmed mean is calculated using a weighted average of percentage change from the middle 70% of the distribution of all CPI components in order to smooth the data from the more-volatile items. The MoM reading compares prices in the reference month to the previous month. Generally, a high reading is seen as bullish for the Australian Dollar (AUD), while a low reading is seen as bearish.
Read more.Next release: Wed Jan 28, 2026 00:30
Frequency: Monthly
Consensus: 0.2%
Previous: 0.3%
Source: Australian Bureau of Statistics
Economic Indicator
Trimmed Mean CPI (YoY)
The Trimmed Mean Consumer Price Index (CPI), released by the Australian Bureau of Statistics on a monthly basis, is a measure of underlying inflation. The Trimmed mean is calculated using a weighted average of percentage change from the middle 70% of the distribution of all CPI components in order to smooth the data from the more-volatile items. The YoY reading compares prices in the reference month to the same month a year earlier. Generally, a high reading is seen as bullish for the Australian Dollar (AUD), while a low reading is seen as bearish.
Read more.Next release: Wed Jan 28, 2026 00:30
Frequency: Monthly
Consensus: 3.2%
Previous: 3.2%
Source: Australian Bureau of Statistics
- EUR/USD surges over 1.3% after Trump signals comfort with Dollar weakness on Fox News.
- DXY tumbles to near four-year lows as tariffs on South Korea reignite the “sell America” trade.
- ECB officials strike a steady tone, reinforcing policy stability as Euro momentum accelerates.
EUR/USD skyrockets to a new five-year high of 1.2082 on Tuesday after US President Donald Trump expressed that he does not think the Dollar has fallen too much, triggering a sell-off of the Greenback, which is down so far over 1.31% in the day. At the time of writing, the pair trades at 1.2037 up more than 1.30%.
Euro rockets as Trump’s comments greenlight aggressive Dollar selling amid trade-war escalation fears
On remarks at Fox News, Trump showed no concern about the US Dollar, adding that “The Dollar is seeking its own level, which is fair.” He added that the Dollar could be “up or down like a yo-yo.”
This was a green light for traders, following Trump tariff threats on South Korea due to the country’s failure to approve the trading deal. The White House announced 25% duties on Korean goods.
The US Dollar Index (DXY) which measures the buck’s performance against six peers is down 1.30% at 95.79, slightly higher than the four-year low reached on Trump’s remarks.
Economic data in the US revealed that Consumer Confidence deteriorated according to the Conference Board. Earlier, the ADP Employment Change 4-week average showed signs of weakness compared to the prior’s reading, dipping from 8,000 to 7,750.
Across the pond, European Central Bank (ECB) policymakers crossed the wires. Joachim Nagel of the Bundesbank said that there is no good argument for changing rates In either direction. ECB’s Martin Kocher.
ECB's Nagel said there is no reason to change rates anytime soon and agrees with Chief Economist Lane that there is no good argument for changing rates in either direction. ECB's Kocher remarked officials must be ready to act if needed.
Euro Price This week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.41% | -1.31% | -1.37% | -0.91% | -1.19% | -1.31% | -1.66% | |
| EUR | 1.41% | 0.11% | 0.04% | 0.50% | 0.24% | 0.11% | -0.23% | |
| GBP | 1.31% | -0.11% | -0.38% | 0.39% | 0.12% | -0.01% | -0.34% | |
| JPY | 1.37% | -0.04% | 0.38% | 0.47% | 0.19% | 0.09% | -0.30% | |
| CAD | 0.91% | -0.50% | -0.39% | -0.47% | -0.40% | -0.38% | -0.73% | |
| AUD | 1.19% | -0.24% | -0.12% | -0.19% | 0.40% | -0.13% | -0.50% | |
| NZD | 1.31% | -0.11% | 0.00% | -0.09% | 0.38% | 0.13% | -0.33% | |
| CHF | 1.66% | 0.23% | 0.34% | 0.30% | 0.73% | 0.50% | 0.33% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Daily digest market movers: Euro is boosted by Trump comments
- US Consumer Confidence sank to its lowest level since 2014, with the Conference Board index sliding to 84.5 in January from an upwardly revised 94.2 in December.
- Dana M. Peterson, Chief Economist at the Conference Board, said that confidence “collapsed” in January, as worries about both current conditions and the outlook intensified. She noted that all five components of the index weakened, dragging confidence to its lowest reading since May 2014.
- On Wednesday, the Federal Reserve is widely expected to keep interest rates unchanged. However, markets will be closely focused on the press conference by Fed Chair Jerome Powell, particularly for any comments addressing questions around central bank independence.
- Speculation over a potential coordinated intervention by Japanese and US authorities to support the Yen pressured the US Dollar, looms. This following the Yen’s exchange rate check of the Federal Reserve Bank of New York with financial institutions.
- Prime Market Terminal data shows that traders are expecting 44 basis points of easing by the Federal Reserve towards the end of the year.
Technical outlook: EUR/USD rallies past 1.2000, eyes on 1.2100
The EUR/USD uptrend stays intact following Trump’s comments. This along with divergence between the Fed and the ECB might decrease the interest rate differential, increasing the prospects of the shared currency.
If EUR/USD climbs above 1.2100, the next resistance would be 1.2150 and the 1.2200 figure. Worth noting that bullish momentum is at its most extreme reading as depicted by the Relative Strength Index (RSI), which peaked at 76.90, shy of the most extreme high seen on July 30, 2020.
If the pair reverses below 1.2000, the first support would be 1.1950, followed by last year’s high of 1.1918 ahead of 1.1900. On further weakness, the next support would be the January 26 low of 1.1834.
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
- AUD/JPY halts its decline after intervention fears triggered a nearly 300-pip pullback.
- RSI stays bullish but flattens, signaling consolidation before a potential trend continuation.
- A break above 107.59 targets 108.00–109.00, while downside risks reemerge below 105.00.
The AUD/JPY halts its downtrend and trades flat during Tuesday’s US session after posting back-to-back bearish daily candles, on speculation of intervention in the FX markets to boost the Japanese Yen. Consequently, the Aussie dropped but as of writing, it has recovered some ground, capping its weekly losses and exchanges hands at around 106.61, virtually unchanged.
AUD/JPY Price Forecast: Technical outlook
The AUD/JPY is upwardly biased despite finding resistance at the top of an uptrend channel at 109.00. The intervention threats sparked a sell-off in the cross pair, which hit 106.08, dropping nearly 300 pips.
Even though the Relative Strength Index (RSI) made a U-turn, it remains bullish. But as the slope turned flat, traders should expect some sideways price action, before the uptrend resumes.
For a bullish continuation, the AUD/JPY must clear the January 26 high of 107.59. Once surpassed, the next stop would be 108.00 and 109.00, the yearly high.
Conversely, if AUD/JPY retreats below 103.00, this exposes the December 19 high turned support at 105.22, before the cross dives to 105.00. On further weakness, the next support would be the December 9 sing high turned support at 104.40.
AUD/JPY Price Chart – Daily
Australian Dollar Price This week
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies this week. Australian Dollar was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.32% | -1.25% | -1.30% | -0.85% | -1.13% | -1.33% | -1.57% | |
| EUR | 1.32% | 0.07% | 0.06% | 0.48% | 0.20% | 0.00% | -0.24% | |
| GBP | 1.25% | -0.07% | -0.38% | 0.42% | 0.12% | -0.07% | -0.32% | |
| JPY | 1.30% | -0.06% | 0.38% | 0.47% | 0.18% | 0.02% | -0.25% | |
| CAD | 0.85% | -0.48% | -0.42% | -0.47% | -0.41% | -0.45% | -0.73% | |
| AUD | 1.13% | -0.20% | -0.12% | -0.18% | 0.41% | -0.20% | -0.44% | |
| NZD | 1.33% | -0.01% | 0.07% | -0.02% | 0.45% | 0.20% | -0.25% | |
| CHF | 1.57% | 0.24% | 0.32% | 0.25% | 0.73% | 0.44% | 0.25% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
Standard Chartered's Christopher Graham discusses the resilience of the Euro-area labour market despite recent economic shocks. The report highlights that employment growth and vacancies indicate a more balanced labour market, which may lead to lower wage growth and inflation. While weak productivity growth remains a concern, the likelihood of a major labour-market shock is deemed remote.
Resilience and challenges in Euro-area
"The euro-area labour market has shown impressive resilience since the COVID-19 pandemic. Despite various economic shocks and increasing competition from abroad, unemployment is almost a full percentage point below its pre-COVID trough."
"However, labour-market resilience has compounded Europe’s long-running productivity problem. Recent data suggest a more balanced labour market in recent quarters: employment growth is slowing, the vacancy rate is now back below the pre-COVID peak and wage growth is moderating."
"We think a major loosening of the euro-area labour market is unlikely, but if trade pressures squeeze European firms’ profit margins this could limit incentives to boost employment and hoard labour to the degree that we have observed since COVID."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- Silver rises over 5% weekly as US trade-war tensions revive aggressive 'sell America' positioning.
- Shooting-star candle and RSI divergence signal waning momentum after Monday’s failed push near $118.
- Bulls need a break above $110, while sub-$100 risks a deeper corrective pullback.
Silver price trades choppy on Tuesday, after extending its gains on Monday, sponsored by heightened geopolitical tensions and the US trade war with its allies, reigniting the 'sell America' trade during the day. XAG/USD trades at $108.00 after bouncing off daily lows of $103.00, modestly up 0.05%
XAG/USD Price Forecast: Technical outlook
Silver’s technical picture shows a parabolic uptrend, but it seems that buyers are losing steam, following a run-up near $118.00 on Monday. The day ended at $108.52, forming a 'huge shooting star,' a bearish candle.
Worth noting that the Relative Strength Index (RSI), although showing signs that buyers remain in charge, diverges from price action. The latter had achieved a series of higher highs, contrary to the RSI, which registered lower highs. Therefore, a negative divergence looms and could pave the way for a retracement.
For a bullish continuation, traders must clear $110.00 to remain hopeful for higher prices. Otherwise, a pullback looms, and it could be exacerbated if Silver prices drop below the $100.00 mark.
In that event, the first support for XAG/USD would be the January 23 daily low at $96.14, followed by the January 21 swing low at $90.46.
XAG/USD Price Chart – Daily
(This story was corrected on January 27 at 20:03 GMT to say that the Silver closing price on Monday was $108.52.)
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
- The Canadian Dollar rose sharply against the US Dollar on Tuesday.
- Otherwise tepid Loonie markets are catching an accidental rising tide from falling USD flows.
- Trade tensions continue to simmer away between the US and Canada as dueling central bank rate calls loom.
The Canadian Dollar (CAD) caught a sharp rise against the US Dollar (USD) on Tuesday despite being an overwhelmingly low performer across global markets. The Loonie and the Greenback are in a race to the bottom, and the Greenback is clearly winning as the USD tumbles across the broader FX market, shedding weight against all major counter-currencies.
Crude Oil prices caught a general bullish leg up on Tuesday, providing further support for Loonie-Dollar markets. The CAD is now at a six-month high against the US Dollar, pushing the USD/CAD chart into a third straight month of accelerating declines.
Daily digest market movers: Canadian Dollar hitches a ride on softening Greenback flows
- The Canadian Dollar rose around three-quarters of one percent against the US Dollar on Tuesday, pushing USD/CAD into new half-year lows below 1.3600.
- Canadian Prime Minister cautioned US President Donald Trump that although Canada is not actively pursuing a fully-free trade agreement with China, Canada is still dedicated to seeking trade arrangements outside of the US’ influence. PM Carney made the soft threats regarding the US’ hegemony while in Davos, Switzerland. Trade tensions will likely remain high even as Trump pivots to ambiguous comments that Greenland is “progressing”.
- Crude Oil markets are on the bullish side on Tuesday, providing further structural support for the Loonie. US West Texas Intermediate (WTI) Crude Oil prices are up 2.5% on Tuesday, taking a multi-week recovery to 13.4% from eight-month lows posted in December.
- The Bank of Canada is due with its latest interest rate decision on Wednesday. The BoC is broadly expected to stand pat on interest rates for the time being.
- The Federal Reserve (Fed) will deliver its own interest rate call on Wednesday. The Fed is likewise forecast to leave rates unchanged in the 3.5-3.75% range, though investors will be listening intently for signs of a rhetorical shift toward further future rate cuts.
Canadian Dollar price forecast
The Canadian Dollar’s newfound bull run at the hand of a deflating US Dollar has given Loonie bulls plenty to cheer about. The USD has closed flat or lower against the Loonie for all but one of the last seven straight trading days, falling 2.4% top-to-bottom from mid-January.
Momentum indicators are cautioning that there could be room for a bounce or pullback with the Stochastic Oscillator poised to test oversold conditions. Price action north of the 1.3500 handle also faces a cluster of stiff technical support levels, and chart friction should be expected in the near-term.
USD/CAD daily chart
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
TD Securities analysts expect the FOMC to maintain current interest rates, with a cautious approach supported by recent data. They note that while Chair Powell may not commit to near-term rate cuts, the median official still anticipates easing this year. The analysts suggest that the FOMC meeting will not significantly impact the USD, and they maintain a bias to sell into any rallies.
FOMC meeting insights and USD outlook
"We expect the FOMC to keep rates on hold, with risk management cuts over and policy closer to neutral. Recent data support the FOMC adopting a cautious approach. There is now a higher burden to justify cuts."
"The FOMC meeting this week is unlikely to be a big driver of the USD with Powell remaining non-committal and data dependent. Structurally, our bias remains to sell into any USD rallies."
"Chair Powell is noncommittal towards the timing of future cuts. However, he notes that the Committee is biased towards further easing this year. He remains data dependent and notes that as of now, risks are balanced."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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