Forex News

The Pound has continued to strengthen ahead of the Bank of England's policy meeting. EUR/GBP has broken below support from the 200-day moving average at around 0.8650. This strengthening is attributed to reduced UK fiscal and political risks and signs of growth momentum in the UK, notes Lee Hardman, MUFG Senior Currency Analyst.

Pound strengthens before BoE meeting

"The pound has continued to strengthen at the start of this week ahead of tomorrow’s BoE policy meeting."

"Stronger growth momentum has encouraged market participants to push back the timing of the next BoE rate cut."

"We continue to expect the BoE to lower rates further this year but recently pushed back our forecast for the timing of the next BoE rate cut from March to April."

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

• Gold appreciates for the second consecutive day and consolidates above $5,000.
• Bulls have been capped below 5,100 resistance, awaiting US Employment figures.
• Technically, the immediate trend remains bullish while above $4,885.

Gold (XAU/USD) is trading higher for the second consecutive day on Wednesday, standing above the $5,000 psychological level, trading at $ 5,050 at the time of writing, with markets calm ahead of the release of the US ADP Employment Change Report, due later on Wednesday.

Precious metals remain weighed by a steady US Dollar, buoyed by the end of a two-day shutdown and the positive reaction to the nomination of Kevin Warsh as the next Fed Chairman. The Greenback's rally seen over the last few days, however, seems stalled. In this context, the ADP is likely to set the near-term direction for the USD, and probably also for Gold.

Technical Analysis: Resistance at $5,100 is holding bulls

The immediate XAU/USD trend remains positive, and technical indicators endorse that view. Price action has returned above the 100-period Simple Moving Average (SMA), the Moving Average Convergence Divergence (MACD) histogram is positive and expanding, and the Relative Strength Index (RSI) prints 55, neutral with a slight bullish tilt.

Upside attempts have been capped ahead of a confluence of resistances, between the January 29 low, at the $5,100 area, and the 61.8% Fibonacci retracement of last week's sell-off, at $5,135. Further up, the next target is the 78.6% Fibonacci retracement, at the $5,330 area.

Immediate support is at the February 3 high of $4,990, and the mentioned 100-period SMA, now at $4,885, a confirmation below here, negates the immediate bullish outlook.

(The technical analysis of this story was written with the help of an AI tool.)

The United States (US) Institute of Supply Management (ISM) Services Purchasing Managers’ Index (PMI) data for January is scheduled to be published today at 15:00 GMT.

The ISM report is expected to show that the service sector activity expanded again, but at a moderate pace. The Services PMI is seen at 53.5, lower than 54.4 in December. Investors will pay close attention to the Services PMI data as the related sector accounts for two-thirds of the US economy.

Apart from the Services PMI, investors will also focus on sub-components of data, such as Employment Index, New Orders Index, and Prices Paid. ISM Services Employment Index is expected to come in higher at 52.3 from the previous reading of 52.0.

Weaker-than-projected US ISM Services PMI data would prompt expectations for interest rate cuts by the Federal Reserve (Fed) in the near term, as officials have remained concerned over the economic outlook. However, better figures would be a relief for Fed officials, but will unlikely act as a major drag on Fed dovish expectations due to weak job market conditions.

How could US ISM Services PMI data affect EUR/USD?

EUR/USD trades slightly lower at around 1.1809 at the time of writing. The major currency pair holds just above the rising 20-day Exponential Moving Average (EMA) at 1.1794, keeping a modest upward bias intact.

The 14-day Relative Strength Index (RSI) at 52.8 (neutral) reflects balanced momentum after recent consolidation.

Measured from the 1.1578 low to the 1.2074 high, the 50% Fibonacci (Fibo) retracement at 1.1826 and the 61.8% Fibo retracement at 1.1768 define a nearby pivot band that supports pullbacks, keeping the broader recovery structure in focus.

A clear push back above the 50% retracement at 1.1826 would re-open topside scope and put the recovery back on track. Looking up, the round level of 1.1900 would be an initial hurdle on the way up.

On the downside, failure to hold the 61.8% Fibo retracement at 1.1768 would signal fading momentum and expose a deeper correction towards 78.6% Fibo retracement at 1.1684. Until either trigger gives way, rangebound trade around the mid-1.18s could persist.

(The technical analysis of this story was written with the help of an AI tool.)

Looking up, the round level of 1.1900 would be an initial hurdle on the way up.

• The US ADP Employment Change report is expected to show that job creation remains subdued.
• The ADP report is more important than usual as Nonfarm Payrolls data is delayed due to the partial US Government shutdown.
• Kevin Warsh’s appointment as the next Fed Chair and strong US economic data are boosting a US Dollar recovery.  

The Automatic Data Processing (ADP) Research Institute will release its monthly report on private-sector job creation for January on Wednesday. The so-called ADP Employment Change report is expected to show that the United States (US) economy added 48K new jobs, following the 41K new payrolls witnessed in December.

These figures will be observed with particular interest this time, as the US Bureau of Labour Statistics (BLS) announced on Monday that the release of Friday’s key Nonfarm Payrolls (NFP) report will be delayed due to a partial US government shutdown. With the ADP report as the main reference for US employment this month, a significant deviation in the final figures might have a strong impact on the US Dollar (USD).

ADP Jobs Report will test the strength of the US economic recovery

January’s ADP Employment Change report comes in a context of improving optimism about the US economic outlook. A string of positive macroeconomic releases, namely the Q3 Gross Domestic Product (GDP) report and strong manufacturing activity, coupled with sticky inflation levels, have prompted traders to dial down bets of interest rate cuts by the Federal Reserve (Fed), at least until June.

This has boosted a recent US Dollar recovery, also triggered by investors’ relief after US President Trump confirmed that former Fed governor Kevin Warsh will replace Jerome Powell as Fed Chair at the end of his term.

The US economy showed a robust 4.4% anualized growth in the third quarter, according to the final GDP estimation released in January. Apart from that, factory activity expanded at its fastest pace in more than three years, according to January’s ISM Manufacturing PMI report, retail consumption bounced up strongly in November, and consumer sentiment data show a steady improvement over the last three months.

Bearing this in mind and considering that consumer inflation remains steady at levels well above the Fed’s 2% target for price stability, employment figures will be the last piece in the puzzle to assess the US central bank’s near-term monetary policy path.

January’s ADP report is expected to confirm that the labor market remains steady. Market consensus suggests that employment growth remains sluggish, but that employers are not firing either, or at least not to a large extent. This scenario cements the Fed’s stance of a cautious approach to rate cuts. 

Atlanta Federal Reserve President Raphael Bostic stated at a panel speech on Monday that the central bank is close to the neutral rate and that monetary policy should remain “mildly restrictive” to get inflation back to the target. Unless the ADP shows a severe setback, this view would apply to the vast majority of the central bank’s monetary policy committee.

When will the ADP Report be released, and how could it affect the USD?

ADP will release the US Employment Change report on Wednesday at 13:15 GMT, and it is expected to show that the private sector added 48K new jobs in January.

The immediate US Dollar trend is positive. The US Dollar Index (DXY), which measures the value of the Greenback against six major currencies, appreciated 2% in the past week. Market’s relief following the appointment of former Fed Governor Kevin Warsh as the next Fed Chairman halted the US Dollar’s bleeding, while bright US economic data, a trade deal with India, and hopes that negotiations with Iran might de-escalate tensions in the Middle East, keep the Greenback supported.

Guillermo Alcala, FX Analyst at FXStreet, highlights resistance levels in the 98.00 area and 98.48 as the main hurdles for USD bulls: “The US Dollar Index is on a bullish correction amid a broader bearish trend, and bulls need to breach resistance at a previous support area around 98.00 to confirm a larger recovery and expose the January 23 high, at 98.48, ahead of the 100.00 round level.

On the downside, Alcalá sees the 97.05 level as key to maintain the immediate bullish recovery alive: “A bearish reaction below the 97.00 level would put the current recovery in question and increase pressure towards the January 28 close, at the 96.35 area.

TD Securities reports on Eurozone inflation, which has dropped to 1.7% year-on-year, primarily due to energy prices. The analysis indicates that this disinflationary trend is not expected to influence the ECB's upcoming meeting, as it has been anticipated. The core inflation measure also slowed, suggesting a broader easing in price pressures.

Eurozone inflation insights

"Euro area inflation dropped as expected to 1.7% y/y on headline measure."

"As we discussed previously, the biggest contributor to this disinflationary pace was energy at -4.1% y/y, predominantly on the back of base effects."

"This will not move the ECB off its perch at their meeting on Thursday, nor should it feature in the statement given that this move has been anticipated and explained in the past."

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

• The Pound Sterling rises against its peers on expectations that the BoE will hold interest rates steady on Thursday.
• BoE officials Swati Dhingra and Alan Taylor could vote in favor of a 25 bps rate cut to 3.5%.
• Investors await the US ADP Employment Change and the ISM Services PMI data for January.

The Pound Sterling (GBP) trades higher against its major currency peers on Wednesday as investors await the Bank of England’s monetary policy announcement on Thursday. The British currency gains on expectations that the BoE will leave interest rates unchanged at 3.75% in its first policy meeting of 2026.

Market participants anticipate the United Kingdom (UK) central bank to hold borrowing rates steady after slashing them by 25 basis points (bps) in December, while guiding that the monetary policy will remain on a “gradual downward path". Out of the nine-member-led-Monetary Policy Committee (MPC), Swati Dhingra and Alan Taylor are expected to vote for an interest rate cut.

In mid-January, Taylor said in a summit in Singapore that he sees inflation returning to the central bank’s 2% target in “mid-2026, more quickly than having to wait until 2027”, and projected that interest rates could “normalise to the neutral (level) sooner rather than later”.

In the December policy meeting, officials also expressed confidence that “inflation will come closer to 2%” in the second quarter of 2026.

Alongside the BoE’s interest rate decision, investors will focus on the quarterly Monetary Policy report that will show inflation expectations over the next two years and the current state of the economy.

Daily Digest Market movers: US private employment, Services PMI data come under the spotlight

• The Pound Sterling is up marginally to near 1.3700 against the US Dollar (USD), and higher around 0.8635 against the Euro (EUR) during European trading hours on Wednesday. The GBP/USD pair edges higher as the Pound Sterling trades broadly firm. The US Dollar has also risen ahead of the release of the United States (US) ADP Employment Change and the ISM Services Purchasing Managers’ Index (PMI) data for January during the North American trading session.
• At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.15% higher to near 97.50..
• Investors will closely monitor the private-sector employment and the Services PMI data to get fresh cues on the state of the US economy and labor market, key factors for the Fed when setting interest rates. Economists expect US private employers to have added 48K workers, higher than 41K in December. The ISM Services PMI is expected to come in lower at 53.5 from the prior reading of 54.4, indicating that the service sector activity advanced again but at a moderate pace.
• Upbeat US private job market and ISM Services PMI data would force traders to pare bets supporting interest rate cuts by the Fed in the near term. On the contrary, soft numbers would boost these odds.
• According to the CME FedWatch tool, the Fed is expected to deliver its first interest rate cut in the June policy meeting after leaving them unchanged in the range of 3.50%-3.75% in March and April.
• Meanwhile, the US House has approved the funding to end the partial government shutdown on Tuesday. However, the US Nonfarm Payrolls (NFP) data for January will not be published on Friday, as per the latest reports.

Technical Analysis: GBP/USD aims to reclaim four-year high at 1.3865

GBP/USD trades higher at around 1.3712 at the time of writing. The pair holds above the rising 20-day Exponential Moving Average (EMA) at 1.3605, keeping the short-term trend pointed higher. The 20-day EMA has firmed over recent sessions, signaling increasing upside pressure.

The 14-day Relative Strength Index (RSI) at 62 (positive) confirms bullish momentum without overbought conditions.

Maintaining daily closes above the 20-day EMA at 1.3605 would preserve the upward bias and encourage follow-through towards reclaiming the four-year high of 1.3866. However, a decisive close back below that gauge would soften the tone and invite a deeper retracement towards the psychological level of 1.3500.

(The technical analysis of this story was written with the help of an AI tool.)

• AUD/USD ticks down to near 0.7020 ahead of key US data releases.
• The ADP employment data is expected to significantly influence market expectations for the US interest rate outlook.
• The Australian Dollar remains broadly firm on RBA’s hawkish interest rate hike.

The AUD/USD pair trades marginally lower around 0.7020 during the European trading session on Wednesday. The Aussie pair ticks down as the US Dollar (USD) trades higher ahead of the key United States (US) economic data releases in the North American session.

At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, is up 0.2% to near 97.55.

In Wednesday’s session, investors will pay close attention to the US ADP Employment Change and the ISM Services Purchasing Managers’ Index (PMI) data for January.

The ADP is expected to report that the private sector created 48K fresh jobs, higher than 41K in December. The impact of the private sector job market data is expected to be significant on market expectations for the Federal Reserve’s (Fed) monetary policy outlook, as the Nonfarm Payrolls (NFP) data is unlikely to be released this week due to the partial government shutdown. However, the US federal government has reopened after the House cleared a bill to fund federal agencies on Tuesday.

Currently trades seem confident that the Fed will not cut interest rates in the March and April monetary policy meetings, according to the CME FedWatch tool.

The ISM Services PMI is seen lower at 53.5 from 54.4 in December, indicating that the service sector activity advanced again, but at a moderate pace.

Meanwhile, the Australian Dollar (AUD) trades broadly firm as the Reserve Bank of Australia (RBA) has kept the door open for further interest rate hikes even after raising them by 25 basis points (bps) to 3.85% on Tuesday.

• EUR/JPY trades higher, supported by Japanese Yen weakness linked to fiscal and political concerns in Japan.
• Eurozone activity indicators disappoint, with the services sector slowing more than expected in January.
• Cooling inflation and a cautious European Central Bank limit the Euro’s upside potential.

EUR/JPY trades around 185.10 on Wednesday at the time of writing, up 0.55% on the day and reclaiming the 185 level. The cross is mainly supported by the persistent underperformance of the Japanese Yen (JPY), as investors remain concerned about Japan’s fiscal outlook and political uncertainty ahead of the snap lower house election.

The Japanese Yen remains under pressure ahead of this weekend’s election. Prime Minister Sanae Takaichi’s ruling Liberal Democratic Party is expected to strengthen its majority, backed by a platform focused on higher public spending, tax cuts and a new security strategy. This expansionary fiscal stance has revived concerns over the sustainability of Japan’s public debt.

The Prime Minister’s remarks, initially interpreted as favoring a weaker JPY to support exports, reinforced the perception of official tolerance for a softer currency, even though she later clarified her comments. Fears of coordinated Japan-US intervention and the Bank of Japan’s (BoJ) slightly more hawkish tilt are, however, limiting a sharper depreciation of the Japanese currency.

In the Eurozone, the latest macroeconomic data send mixed signals. The Eurozone HCOB Services Purchasing Managers Index (PMI) came in at 51.6 in January, a four-month low, below market expectations and down sharply from December. In Germany, the downward revision of the HCOB Services PMI to 52.4 confirms that activity in the region’s largest economy remains sluggish. These figures highlight the fragility of the economic recovery and cap the Euro’s (EUR) fundamental appeal.

On the inflation front, price pressures continue to ease. The Eurozone Harmonized Index of Consumer Prices (HICP) rose by 1.7% YoY in January, in line with expectations but down from 1.9% in December, while core inflation remained steady at 2.3%. This cooling inflation backdrop supports the case for a cautious monetary policy stance.

According to Deutsche Bank, the European Central Bank (ECB) is likely to keep interest rates unchanged through 2026, with the next move potentially being a hike in 2027. "The path of monetary policy in 2026 will depend on who wins the contest between external conditions and internal conditions. Our baseline assumes that domestic resilience will dominate and that leads to hikes in 2027", noted the bank’s research team.

In this environment, EUR/JPY dynamics are driven more by structural Japanese Yen weakness than by Euro strength. As long as political and fiscal uncertainties weigh on the Japanese currency, the cross may remain supported, despite still-fragile fundamentals in the Eurozone.

• The Indian Rupee shows strength against the US Dollar, continuing its strength from the US-India trade deal confirmation.
• FIIs turned out to be net buyers in the Indian stock market on the US-India trade deal euphoria.
• Investors await US data and the RBI monetary policy announcement.

The Indian Rupee (INR) demonstrates strength against the US Dollar (USD) on Wednesday, with the USD/INR pair holding onto losses near 90.55.

The near-term trend of the pair seems fragile as the broader outlook of the Indian Rupee has improved, following the trade deal announcement between the United States (US) and India by President Donald Trump. The acknowledgement of the long-awaited US-India trade deal appears to have improved the sentiment of foreign investors toward the Indian equity market.

On Tuesday, Foreign Institutional Investors (FIIs) turned out to be net buyers and purchased stocks worth Rs. 5,236.28 crore, the highest inflow of overseas funds seen since October 28, 2025, Economic Times (ET) reported.

While market participants were cautious about whether the Indian government had sacrificed its “non-compromise” policy on critical sectors, such as agriculture and dairy, Commerce Minister Piyush Goyal has clarified that these sectors were protected from international exposure during negotiations.

Going forward, investors will focus on the Reserve Bank of India’s (RBI) monetary policy announcement on Friday, in which it is expected to leave the Repo Rate unchanged at 5.25%.

Daily Digest Market Movers: Investors await key US economic data

• The US Dollar trades broadly calm against its other currency peers ahead of the release of US ADP Employment Change and the ISM Services Purchasing Managers’ Index (PMI) data for January, which will be published during the North American session.
• At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades slightly higher to near 97.50. The DXY is close to its weekly high of 97.73 posted on Monday.
• The US ADP employment report is expected to show that private employers added 48K fresh workers, slightly higher than 41K in December. A slight improvement in the job data is unlikely to provide relief to Federal Reserve (Fed) officials, who have been expressing labor market concerns for months.
• The US ISM Services PMI is seen arriving at 53.5, lower than 54.4 in December, indicating that the service sector activity continued to advance but at a moderate pace.
• Upbeat US data would dampen market expectations for an interest rate cut by the Fed in the near term. Currently, traders seem confident that the Fed will leave interest rates unchanged in the range of 3.50%-3.75% in the March policy meeting, according to the CME FedWatch tool.
• Meanwhile, the US government's partial shutdown has ended as the House advanced the bill to fund federal agencies on Tuesday.
• The US Dollar had a strong rally in the past few trading days, following President Trump's nomination of Kevin Warsh as the new Fed Chairman. The event was positive for the US Dollar, but unfavorable for precious metals and US equities, given Warsh’s preference for a firmer US Dollar in his previous work at the Fed.

Technical Analysis: USD/INR stays below 20-day EMA

USD/INR trades marginally lower at around 90.55 as of writing. The pair holds below the 20-day Exponential Moving Average (EMA) at 91.0466, which slopes lower and caps rebound attempts. The declining 20-day EMA keeps the near-term trend tilted lower.

The 14-day Relative Strength Index (RSI) at 44.82 (neutral) slips beneath the midline, confirming waning upside momentum.

A close back above the 20-day EMA would temper bearish pressure and could pave the way for stabilization. Failure to reclaim it, alongside an RSI that stays under 50 or drifts toward 40, would maintain downside risk and keep rallies vulnerable to supply. Momentum would improve only if RSI returns above 50 and price establishes acceptance over the average.

(The technical analysis of this story was written with the help of an AI tool.)

• EUR/USD ticks lower to 1.1815 and turns negative on the day.
• Eurozone HICP confirms that inflation growth eased to 1.7% in January.
• Previously, Eurozone and German Services PMIs were revised lower.

The Euro has pulled back from session highs and is trading at 1.1815 against the US Dollar (USD), at the time of writing, showing marginal losses in the daily chart. The Eurozone's preliminary Harmonized Index of Consumer Prices (HICP) has confirmed the cooling inflationary pressures, and the region's services activity growth has been revised lower.

Preliminary Eurozone HICP figures revealed that consumer inflation slowed down to a 16-month low of 1.7% in January, although the core inflation, more relevant from a monetary policy point of view, remained steady. Beyond that, producer prices posted a slightly shorter-than-expected contraction, which might have kept the Euro from retreating further.

The US Dollar remains steady. US President Trump has signed a bill into law that ends a two-day government shutdown, easing markets, which are still celebrating the pick of Kevin Warsh as the replacement for Federal Reserve Chairman Jerome Powell. Warsh is a respected policymaker who is expected to be cautious with rate cuts and guarantee the central bank's autonomy.

Investors maintain a cautious mood on Friday, awaiting the release of the ADP Employment Change report, due later on Wednesday, which will be observed with particular interest, as the key Nonfarm Payrolls report will be delayed due to the recent government shutdown.

Daily Digest market Movers: Weak services data and soft inflation hurt the Euro's recovery

• The Euro turned lower after Eurostat data revealed that yearly inflation eased to 1.7% in January from 2% in December. The core inflation, however, grew at a steady 2.3% year-on-year pace. The monthly HICP accelerated to 2% from 0.2% in the previous month. The core HICP grew at a 0.3% monthly rate, unchanged from December.
• Eurozone's Producer Prices index contracted 0.3% in December, as expected, from a 0.7% growth in November. Year-on-year, the PPI fell by 2.1% following a 1.4% conttraction in November, but above market expectations ops a sharper, 2.3% contracion.
• Earlier on Tuesday, HCOB Services PMI data revealed that the sector's activity slowed down to a four-month low of 51.6, below the preliminary expectations of a 51.9 reading, down from December's 52.4.
• Likewise, the German HCOB Services PMI has been revised lower to 52.4 from preliminary estimations of a 53.3 reading, and also down from the 52.7 reading seen in December. These figures confirm that business activity in the Eurozone's main economy remains sluggish.
• In the US, the focus will be on January's ADP private payrolls report, which will be the main employment data this week. Net job creation is expected to have increased to 48K last month from 41K in December, still at relatively low levels.

Technical Analysis: EUR/USD must break above 1.1875 to confirm a trend shift

EUR/USD shows a moderate recovery from Monday's lows at 1.1775, with indicators on the 4-hour chart highlighting a fading bearish pressure. The Moving Average Convergence Divergence (MACD) line seems about to cross above the signal line, in what would be a bullish move, and the Relative Strength Index (RSI) has reached levels right below the 50 line, which divides the bearish from the bullish area.

Price action, however, remains trapped within Monday's trading range. Bulls would need to break the weekly top at the 1.1875 area to confirm the pair's recovery and aim for the resistance area between the January 29 high, at 1.1995, and the 1.2000 psychological level.

Immediate support is at the February 2 and 3 lows, in the mentioned 1.1775 area. Further down, bears might be attracted by the January 21 low, near 1.1660.

(The technical analysis of this story was written with the help of an AI tool.)