Forex News

• USD/CAD edges higher around 1.3690 in Thursday’s early European session. 
• The pair keeps the bearish outlook below the 100-day EMA on the daily timeframe. 
• The immediate resistance emerges at 1.3750; the initial support is seen at 1.3490.

The USD/CAD pair gathers strength to near 1.3690 during the early European trading hours on Thursday. Expectation of a slower pace for US Federal Reserve (Fed) rate cuts as Kevin Warsh is to succeed Jerome Powell as Fed Chair in May 2026 supports the US Dollar (USD) against the Canadian Dollar (CAD). Financial markets are pricing in nearly a 90% odds that the Fed will hold interest rates steady at its March policy meeting, with anticipation of a total of 50 to 75 basis points (bps) in easing by the end of the year. 

Meanwhile, rising geopolitical risks could boost crude oil prices and provide some support to the commodity-linked Loonie. It is worth noting that Canada is a major oil-exporting country, and high crude oil prices generally have a positive impact on the CAD. 

Technical Analysis:

In the daily chart, USD/CAD remains capped below the 100-EMA. The average slopes lower, preserving a bearish bias. RSI at 46 (neutral) has ticked higher, indicating momentum is stabilizing. Bollinger Bands tilt lower, and price trades beneath the middle band, reflecting persistent bearish pressure. Should bulls reclaim 1.3750, advances would face the 100-EMA at 1.3813 and the upper band at 1.4012, while a fresh slide would expose 1.3490.

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

Germany's Factory Orders unexpectedly jumped in December, suggesting that the country’s manufacturing sector activity continues to gain momentum, according to the official data published by the Federal Statistics Office on Thursday.

Over the month, contracts for goods ‘Made in Germany’ climbed by 7.8% in December after rising by a revised 5.7% in November. Data beat the estimated 2.2% decline.

Germany’s Industrial Orders surged by 13% year-over-year (YoY) in December, as against the previous rise of 10.6%.

FX implications

The Euro (EUR) has found some support from the strong German data, with EUR/USD trading marginally higher on the day near 1.1800, as of writing.

• The Bank of England is expected to keep its policy rate at 3.75%.
• UK inflation figures remain well above the BoE’s target.
• GBP/USD regains part of last week’s losses, hovering around 1.3700.

The Bank of England (BoE) will deliver its first monetary policy decision of 2026 on Thursday.

Most analysts think the ‘Old Lady’ will sit tight, keeping the base rate at 3.75% after the cut delivered back on December 18. Alongside the decision, the bank will also release the Minutes, which should shed a bit more light on how policymakers weighed the arguments around the table.

Markets are firmly priced for no move this time. However, the case for further easing hasn’t gone away, even if the BoE chooses to stay patient for now, as the UK economy struggles to gain any real traction and the fiscal backdrop continues to darken.

Inflation keeps running hot

The BoE’s December rate cut was a close-run thing. The 25 basis point move, which took the bank rate down to 3.75%, was carried by a narrow 5–4 vote. Indeed, members Breeden, Dhingra, Ramsden and Taylor all backed a cut, but it was Governor Bailey’s switch that proved decisive, underlining just how finely balanced the debate around further easing has become.

The message from the guidance was still cautiously dovish but noticeably more conditional. Policymakers stuck with the idea that rates are likely to move lower over time, describing a “gradual downward path”, while making it clear that each additional cut will be harder to justify. As policy drifts closer to neutral, the room for manoeuvre is shrinking, and the judgement calls are getting tougher.

The macro backdrop allows for further easing, but not with haste. Growth momentum has faded, with the economy expected to flatline in Q4, and inflation is projected to fall back more quickly in the near term, moving closer to the target by mid-2026. At the same time, lingering inflation bumps and a labour market that is only cooling slowly argue against flagging an aggressive cut cycle.

All told, December looks less like the start of a rush to ease and more like a careful recalibration. The Bank is still edging in an easier direction, but with rising caution as rates approach neutral and decisions become ever more dependent on incoming data.

According to the BoE’s Decision Maker Panel (DMP) published on January 8, businesses are growing a touch less punchy on pay, as firms now expect wages to rise by 3.7% over the 12 months from the final quarter of 2025, a shade lower than the pace they were expecting just a month earlier.

Additionally, companies are reducing their expectations for price increases in the upcoming year, which resulted in a 0.1 percentage point decrease to 3.6% in the three months to December.

And it’s not just wages and prices. Firms have also become slightly more cautious on hiring, with expectations for employment growth over the next year softening a little, according to the survey.

How will the BoE interest rate decision impact GBP/USD?

Many people expect the BoE will keep the reference rate at 3.75% when it makes its announcement on Thursday at 12:00 GMT.

The real focus will be on how the MPC votes, since a hold is already fully priced in. If the British Pound (GBP) moves in a way that isn't expected, it could be because it suggests a change in how policymakers are getting ready for future decisions.

Pablo Piovano, Senior Analyst at FXStreet, notes that GBP/USD has come under fresh downside pressure soon after hitting yearly peaks near 1.3870 in late January, an area last traded in September 2021.

“Once Cable clears this level, it could then attempt a move to the September 2021 high at 1.3913 (September 14) ahead of the July 2021 peak at 1.3983 (July 30)”, Piovano adds.

On the other hand, Piovano says that “the critical 200-day SMA at 1.3421 emerges as the immediate contention in case sellers regain the upper hand prior to the 2026 floor at 1.3338 (January 19).”

“Meanwhile, the Relative Strength Index (RSI) near 61 suggests further gains remain in the pipeline in the near term, while the Average Directional Index (ADX) near 30 indicates a pretty strong trend,” he concludes.

• The Indian Rupee continues to trade firmly against the US Dollar on the US-India trade truce euphoria.
• Investors expect the RBI to keep the Repo Rate steady at 5.25%.
• The Fed is unlikely to cut interest rates in the March and April policy meetings.

The Indian Rupee (INR) ticks up at open against the US Dollar (USD) on Thursday. The USD/INR pair trades subduedly around 90.50 as the Indian Rupee holds United States (US)-India trade truce-driven gains.

On Monday, US President Donald Trump and Indian Prime Minister (PM) Narendra Modi confirmed tariff reduction on New Delhi’s exports to Washington to 18% from 50%, which included punitive tariffs for buying oil from Russia.

The event led to a strong rally in the Indian stock market and the Indian Rupee, alongside significant buying by overseas investors. On Wednesday, the net investment by Foreign Institutional Investors (FIIs) in the cash segment of the Indian stock market was 5,236.28 crore.

However, the US-India trade truce is turning out to be insignificant for FIIs' return to the Dalal Street, given their nominal investment on Wednesday. Foreign investors poured mere Rs. 29.79 crore worth of investment in the Indian equity market the previous day.

The interest of foreign investors remaining subdued toward the Indian equity market, even after the confirmation of tariff truce between both nations, could be unfavorable for the Indian Rupee in the longer term. The Indian currency remained the top Asian underperformer in 2025 due to trade tensions between the US and India.

Daily Digest Market Movers: The RBI is expected to hold Repo Rate steady at 5.25%

• The Indian Rupee trades marginally higher against the US Dollar, even as the latter trades broadly firm on expectations that the Federal Reserve (Fed) will not cut interest rates in the near term.
• 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 97.80, the highest level seen in over a week.
• According to the CME FedWatch tool, traders seem confident that the Fed will leave interest rates unchanged in the range of 3.50%-3.75% in its policy meetings in March and April.
• Federal Reserve Governor Lisa Cook said in an event at the Economic Club in Miami on Wednesday that it is prudent to sit back and leave policy rates steady as long as inflation resumes progress toward the central bank’s 2% target.
• Meanwhile, expectations from the nominated new Fed Chairman, Kevin Warsh, that interest rate cuts won’t be aggressive in his tenure are also acting as a key drag on dovish central bank prospects. Warsh is known for his preference for a smaller balance sheet and a firmer US Dollar from his previous term as Governor at the Fed.
• Contrary to market expectations, United States (US) President Donald Trump is confident that Warsh will lower interest rates after returning to the Fed. “I mean, if he came in and said, ’I want to raise them [interest rates]’ he would not have gotten the job," Trump said in an interview with NBC on Wednesday when asked whether he expects Warsh to lower borrowing rates.
• On the economic data front, ADP Employment Change data for January has come in below expectations, while the ISM Services Purchasing Managers’ Index (PMI) expanded at a steady pace. The ADP reported that the private sector created 22K fresh jobs, lower than estimates of 48K and the prior reading of 37K. The Services PMI remained steady at 53.8, higher than the consensus of 53.5.
• In India, investors await the Reserve Bank of India’s (RBI) monetary policy announcement on Friday, in which it is expected to leave its Repo Rate steady at 5.25% as the impact of recent interest rate cuts is yet to be passed through to the economy.
• However, the Indian central bank is seen keeping the door open for interest rate cuts in upcoming policy meetings as India’s retail Consumer Price Index (CPI) has remained well below the central bank’s tolerance band of 2%-6% for several months.

Technical Analysis: USD/INR remains around three-week low of 90.50

In the daily chart, USD/INR trades at 90.5740. The pair holds below the 20-EMA, which has rolled over, keeping the near-term bias bearish. The downward slope of the average underscores fading upside pressure. RSI at 44.93 sits below its midline, confirming weak momentum. A rebound would face initial resistance at the 20-EMA at 91.0001.

Bearish traction persists while price remains under the declining average, and rallies are capped by supply. If the RSI fails to reclaim 50 and momentum stays soft, the pair could extend the pullback. A decisive close above the moving average would shift the bias toward stabilization and a recovery phase.

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

Commerzbank's Michael Pfister analyzes the Bank of England's current stance on interest rates, highlighting the potential for surprises despite no expected changes at the upcoming meeting. The report notes the delicate balance the BoE faces between persistent inflation and weakening growth, suggesting that the risks to the Pound may lean towards further interest rate cuts.

Bank of England's cautious approach

"If the vote is closer than expected, the market will likely bring forward its expectations of a rate cut and the pound will suffer."

"On the other hand, the new forecasts will be published, the first since the budget announcement at the end of November. It will be interesting to see how the decision-makers assess the impact."

"As inflation has repeatedly been lower than expected in recent months, the inflation forecast is likely to be revised downwards. The only question is how sharp the correction will be."

"However, we suspect that the risks to the pound are currently more one-sided and that there is a greater danger of seeing signs of further interest rate cuts."

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

• Japanese Yen remains on the back foot amid concerns about Japan’s fiscal situation.
• Political uncertainty ahead of the national snap election further undermines the JPY.
• The USD preserves its recent recovery gains and lends support to the USD/JPY pair.

The Japanese Yen (JPY) extends its sideways consolidative price move against a broadly firmer US Dollar (USD) and currently trades near a two-week low, touched earlier this Thursday. Investors remain worried about Japan's financial health on the back of Prime Minister Sanae Takaichi's expansionary fiscal plans. This, along with political uncertainty ahead of the snap election on February 8, has been another bearish development for the JPY and contributes to its relative underperformance.

Meanwhile, softer consumer inflation figures from Japan's capital city – Tokyo – released last week tempered bets for an early interest rate hike by the Bank of Japan (BoJ), further undermining the JPY. The USD, on the other hand, climbs to a two-week top and keeps the USD/JPY pair close to the 157.00 mark. That said, bets that the US Federal Reserve (Fed) will cut rates two more times in 2026 and speculations that authorities would step in to stem further JPY warrant caution for bearish traders.

Japanese Yen seems vulnerable as fiscal and political woes offset hawkish BoJ bets

• The incumbent Japanese Prime Minister Sanae Takaichi’s Liberal Democratic Party (LDP) is poised to score a strong victory in the lower house election on February 8. The outcome would give Takaichi a greater grip on Japan's parliament and more headroom to carry out her expansionary fiscal plans.
• Takaichi pledged to suspend the 8% consumption tax on food for two years as part of her election campaign, raising concerns about Japan’s fiscal outlook amid fears of debt-funded spending. This has been a key factor behind the Japanese Yen's relative underperformance since the beginning of this week.
• Moreover, Takaichi talked up the benefits of a weaker currency during a campaign speech. Although Takaichi later softened the stance, her comments raised doubts over whether authorities would intervene to support the domestic currency. This exerts additional downward pressure on the JPY.
• Meanwhile, data released last Friday showed that the headline Consumer Price Index (CPI) in Japan's capital city – Tokyo – fell last month to its weakest level since February 2022. This pointed to signs of softer demand-driven price pressure and reduced urgency for the Bank of Japan to tighten further.
• However, the Summary of Opinions from the BoJ's January meeting this week highlighted board members' hawkish view amid mounting price pressures from a weak JPY. Moreover, a private survey showed that Japan’s services sector growth accelerated in January at its fastest pace in almost a year.
• This suggests that a BoJ rate hike in the first half of 2026 remains on the table. In contrast, traders are pricing in the possibility of two more interest rate cuts by the US Federal Reserve this year, which caps the USD/JPY pair near the 157.00 mark, or a nearly two-week top set earlier this Thursday.
• In fact, US President Donald Trump said that he would have passed on Kevin Warsh as his nominee to lead the Federal Reserve if he had expressed a desire to hike interest rates. Trump further added that there was not much doubt that the US central bank would lower interest rates.
• The US Dollar, however, has climbed to a fresh high since January 23 in the wake of hawkish comments from Fed Governor Lisa Cook, saying that risks are skewed toward higher inflation. This could support the USD/JPY pair as traders now look to a duo of US labor market reports for a fresh impetus.
• Thursday's US economic docket features the delayed release of the JOLTS Job Openings data, along with the usual Weekly Initial Jobless Claims. This, along with speeches by influential FOMC members, would drive the USD and produce short-term trading opportunities around the USD/JPY pair.

USD/JPY looks to build on breakout momentum above 156.50 confluence

The overnight breakout through the 156.50 confluence – comprising the 100-period Simple Moving Average (SMA) on the 4-hour chart and the 61.8% Fibonacci retracement level of the 159.13-152.06 downfall – favors the USD/JPY bulls. The Moving Average Convergence Divergence (MACD) stands in positive territory while its histogram contracts, suggesting fading bullish momentum. The Relative Strength Index (RSI) prints 68.92, just below overbought.

This, in turn, suggests that the rebound could extend toward the 78.6% retracement at 157.64, while a rejection near resistance would risk a pullback to the 50% retracement at 155.60. A re-expansion of the MACD histogram and a firm RSI above 70 would strengthen the bullish case; otherwise, momentum looks prone to consolidation below resistance.

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

• WTI weakens after Iran confirmed talks with the US in Oman, easing Middle East supply disruption fears.
• Iranian Foreign Minister Araghchi said talks will be held in Oman on Friday, with US officials confirming continued nuclear engagement.
• EIA data showed US crude inventories fell 3.455 million barrels, beating expectations amid winter storm disruptions.

West Texas Intermediate (WTI) Oil price declines after two days of gains, trading around $63.50 per barrel during the Asian hours on Thursday. Crude Oil prices weakened after Tehran confirmed it would hold talks with the United States (US) in Oman on Friday, easing fears that a wider conflict could disrupt Middle East Oil supplies.

However, Oil prices jumped on media reports suggesting the talks might collapse, but officials from both sides later said discussions would proceed as scheduled, even though the agenda remains unsettled.

Iranian Foreign Minister Abbas Araghchi said talks will be held in Oman on Friday, while a White House official confirmed continued engagement on a potential nuclear deal. Uncertainty persists over the scope, with Tehran aiming to limit discussions to its nuclear program and Washington seeking to include missiles, regional militancy, and human rights.

Dollar-denominated Oil prices also face headwinds from a stronger US Dollar (USD), driven by hawkish Federal Reserve signals and expectations of slower rate cuts. Fed Governor Lisa Cook said she would not support further easing without clearer evidence that inflation is cooling, highlighting concerns over stalled disinflation.

Meanwhile, Energy Information Administration (EIA) data showed US crude inventories fell by 3.455 million barrels last week, far exceeding expectations for a 2 million draw, as winter storms disrupted supply.

• Gold meets with a fresh supply during the Asian session amid some follow-through USD buying.
• Dovish Fed bets support the commodity and limit further losses amid geopolitical uncertainties.
• Traders now look to a duo of US labor market reports for a short-term impetus later this Thursday.

Gold (XAU/USD) rebounds swiftly following the Asian session fall to sub-$4,800 levels and climbs back above the $4,900 mark in the last hour, though the upside potential seems limited. Wednesday's softer US ADP report pointed to labor market weakness and strengthened the case for interest rate cuts by the Federal Reserve (Fed), lending support to the non-yielding yellow metal. This, along with geopolitical uncertainties, contributes to limiting the downside for the safe-haven commodity.

Meanwhile, the US Dollar (USD) climbs to a two-week high and looks to build on its recent goodish recovery move from a four-year low, which might keep a lid on a further upside for the Gold price. On the geopolitical front, Iran and the US have agreed to hold talks in Oman on Friday, easing concerns over a military confrontation. This, along with a fall in China's gold consumption in 2025, should act as a headwind for the XAU/USD pair ahead of more US labor market reports later today.

Daily Digest Market Movers: Gold traders seem non-committal amid mixed fundamental cues

• China's gold consumption in 2025 fell 3.57% to 950.096 metric tons, the state-backed association said on Thursday. Gold output using domestic raw materials climbed 1.09% year on year to 381.339 metric tons, the association added.
• US President Donald Trump’s nomination of Kevin Warsh as the next Federal Reserve chair fueled speculation that the central bank will be less dovish than expected. This assists the US Dollar in gaining some follow-through positive traction.
• Trump, however, said that he would have passed on Kevin Warsh as his nominee for the Fed Chair if he had expressed a desire to hike interest rates and that there was not much doubt that the US central bank would lower interest rates.
• Moreover, traders are still pricing in the possibility that the Fed will lower borrowing costs two more times this year. The bets were further reaffirmed by Wednesday's disappointing release of the US private-sector employment data.
• In fact, the Automatic Data Processing (ADP) Research Institute reported that private-sector employers added 22K new jobs in January, down from the previous month's downwardly revised reading of 37K and 48K consensus estimates.
• Separately, the US ISM Services PMI held steady at 53.8 in January and pointed to another robust expansion in the sector, providing a modest lift to the USD and exerting pressure on the Gold during the Asian session on Thursday.
• Meanwhile, Iran and the US remain at odds over the latter's demand that negotiations cover Tehran's missile arsenal and Iran's insistence on discussing only its nuclear program. This could further act as a tailwind for the safe-haven commodity.
• Analysts at UBS in a recent note rated gold as an attractive hedge and suggested that the bull market is not yet over, projecting that prices can rise to $6,200 an ounce (oz) by mid-2026, up nearly 25% from the current levels.
• Traders now look to Thursday's US economic docket, featuring the release of the delayed JOLTS Job Openings data and the usual Weekly Initial Jobless Claims. This, along with Fed speak, could influence the buck and the XAU/USD pair.

Gold shows some resilience below $4,800; not out of the woods yet

The overnight failure ahead of the $5,100 mark and the subsequent downfall back the case for a further near-term depreciating move for the Gold. The Moving Average Convergence Divergence (MACD) line stands above the Signal line and above zero, while a contracting positive histogram suggests momentum is cooling. The Relative Strength Index (RSI) prints at 46, neutral and below its midline.

However, the 200-period Simple Moving Average (SMA) rises to $4,677.91, with the Gold price holding above it and retaining an upside bias. Measured from the $5,597.45 high to the $4,390.81 low, the 50% retracement level at $4,994.13 acts as initial resistance, and a breakout could target the 61.8% Fibonacci retracement at $5,136.51. A close above the said hurdle would strengthen the bullish tone and open the way for further recovery.

Near-term traction is mixed as MACD’s positive bias eases and RSI remains sub-50, keeping price action contained below nearby resistance. Failure to clear $4,994.13 would keep the range intact, while dips would be cushioned by the rising 200-period SMA around $4,677.91.

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