Forex News
- USD/CAD consolidates right below 1.3700 following a two-day rally.
- Risk aversion on concerns about a potential AI bubble is supporting the USD.
- Lower Oil prices are weighing down the commodity-sensitive Loonie.
The US Dollar (USD) appreciates for the second consecutive day against the Canadian Dollar (CAD). Bulls have failed to find acceptance above 1.3700 earlier on the day, but the pair remains bid, trading at 1.3685, with the safe-haven USD favoured by the dismal market mood.
Disappointing quarterly earnings from some of the US big tech firms, including Google's Alphabet, have triggered a rout in the sector, which has been weighing on equity markets around the world. Most European markets are showing moderate losses, heading into the lunch break, although Wall Street futures are pointing to a mixed opening.
US labour market's concerns reemerge
US data released on Wednesday showed mixed figures. The US ISM Services PMI showed stronger-than-expected business activity in January, although the poor employment sub-index and the sharp slowdown shown by the ADP Employment report resurfaced concerns about the US labour market.
In that sense, US Jobless Claims numbers and the JOLTS Job Openings figures, due later on Thursday, will be analysed in detail.
In Canada, the economic docket has been light this week, but the lower Oil prices are acting as a headwind for the Canadian Dollar’s recovery. The price of the benchmark US WTI crude barrel has bounced up from weekly lows but remains more than $2 below last week's highs above $66.00, weighed by easing supply concerns as tensions between the US and Iran de-escalate.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
Nomura analysts project that Euro area inflation will hover around the ECB’s 2.0% target until the end of 2027, with GDP growth expected to reach pre-pandemic levels by mid-2026. They foresee potential inflation overshooting in 2028, necessitating rate hikes. The report emphasizes a tight labor market contributing to inflationary pressures and anticipates the ECB will raise rates in the future.
ECB rate hikes anticipated in 2028
"We expect euro area HICP inflation to hover around the ECB’s 2.0% target until the end of 2027, and we forecast GDP growth to reach its pre-pandemic trend rate by mid-2026. Hence, we expect the ECB to leave rates unchanged through 2027."
"However, owing to a combination of the unemployment rate likely falling further below its equilibrium rate and our forecast of economic growth rising to a rate meaningfully above potential, we see a real risk that inflation will overshoot the ECB’s target in 2028."
"We believe the ECB will need to raise rates at least 50bp in 2028 (two 25bp hikes) to bring inflation back to target. The risk, however, is skewed to earlier hikes and more hikes should upward inflationary pressures prove stronger than we expect."
"The ECB is now squarely focused on its end-of-horizon forecast, which is currently 2028, rather than near-term deviations."
"A stronger euro could add disinflationary pressures, though at what level this may trigger a response from the ECB on account of the effect on inflation is debatable."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
The British Pound and gilts have declined sharply due to political uncertainty surrounding Prime Minister Keir Starmer's leadership. The Bank of England is expected to hold rates steady at 3.75% amid concerns that a potential change in leadership could lead to more left-leaning fiscal policies, note Brown Brothers Harriman (BBH) analysts.
Political turmoil impacts GBP and gilts
"GBP and gilts plunged driven by UK political uncertainty. Prime Minister Keir Starmer is facing intense leadership speculation over his decision to appoint Peter Mandelson as US ambassador, despite knowing about his connection to Jeffrey Epstein."
"The BOE is widely expected to keep rates on hold at 3.75% after voting 5-4 to cut rates by 25bps at the December 18 meeting. A 7-2 vote split is expected this time around, with staunch doves Swati Dhingra and Alan Taylor favoring a 25bps cut."
"Overall, persistently above target UK inflation suggests the BOE can afford to wait before resuming easing to support weakening labor market conditions."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- USD/JPY extends its rally to near 156.20 as the US Dollar continues to outperform.
- Investors expect that the Fed will not cut interest rates in the March and April meetings.
- US JOLTS Job Openings data for December is seen at 7.2 million.
The USD/JPY extends its winning streak for the fifth trading day on Thursday, trades 0.26% higher to near 156.20. The pair advances further due to continued outperformance from the US Dollar (USD).
During the day, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, posts a fresh weekly high at 97.90.
US Dollar Price Last 7 Days
The table below shows the percentage change of US Dollar (USD) against listed major currencies last 7 days. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.34% | 1.57% | 2.52% | 0.99% | 0.73% | 1.00% | 1.13% | |
| EUR | -1.34% | 0.23% | 1.19% | -0.35% | -0.61% | -0.33% | -0.21% | |
| GBP | -1.57% | -0.23% | 0.92% | -0.58% | -0.83% | -0.56% | -0.43% | |
| JPY | -2.52% | -1.19% | -0.92% | -1.51% | -1.75% | -1.51% | -1.37% | |
| CAD | -0.99% | 0.35% | 0.58% | 1.51% | -0.24% | 0.02% | 0.14% | |
| AUD | -0.73% | 0.61% | 0.83% | 1.75% | 0.24% | 0.27% | 0.40% | |
| NZD | -1.00% | 0.33% | 0.56% | 1.51% | -0.02% | -0.27% | 0.13% | |
| CHF | -1.13% | 0.21% | 0.43% | 1.37% | -0.14% | -0.40% | -0.13% |
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).
The US Dollar started rallying from Friday after United States (US) President Donald Trump nominated Kevin Warsh as the Federal Reserve’s (Fed) next Chairman.
Meanwhile, firm speculation that the Fed will leave interest rates at their current levels in upcoming policy meetings in March and April is also supporting the US Dollar. Fed dovish expectations have remained choked as inflationary pressures have remained above the 2% target for a longer period.
In Thursday’s session, investors will focus on the US JOLTS Job Openings data for December, which will be published at 15:00 GMT. US employers are expected to have posted 7.2 million fresh jobs, higher than the previous reading of 7.146 million.
On the Tokyo front, the Japanese Yen (JPY) is broadly underperforming on expectations that Japan’s Prime Minister (PM) Sanae Takaichi will unveil a big spending budget after the elections of parliament’s lower house on February 8.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
- Gold extends its reversal below $5,000 from $5,091 highs on Wednesday.
- The US Dollar appreciates due to risk aversion and uncertainty ahead of the ECB and BoE decisions.
- XAU/USD is struggling to take off from the $4790 support area.
Gold (XAU/USD) is accelerating its reversal from Wednesday’s highs near $5,100, trading at $4,865 at the time of writing, with downside attempts contained below $4,790 for now. Precious metals are losing ground despite the risk-averse sentiment, as the US Dollar appreciates across the board.
The Greenback is acting as a safe-haven again, drawing support in risk-off markets, as the quarterly earnings from US tech giants failed to convince investors, triggering a sell-off in the sector that has dragged down equity indexes across the globe.
Beyond that, investors’ cautiousness ahead of key monetary policy decisions by the European Central Bank (ECB) and the Bank of England (BoE) due later on Thursday is weighing on the Euro and the Pound, providing an additional impulse to the US Dollar.
Technical Analysis
The 4-hour chart, XAU/USD, shows price action trapped between Fibonacci retracement levels with technical indicators pointing to a weakening bullish momentum.
Price action has dropped below the 100-period Simple Moving Average (SMA), and the Moving Average Convergence Divergence (MACD) line is attempting to cross below the Signal line, a bearish sign. Apart from that, the Relative Strength Index (RSI) has dropped below the 50 midline, entering negative territory.
Immediate support is seen at the intra-day low of $4,790. Further down, the intraday support near the $4,600 level is likely to attract bears.
On the upside, 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, is likely to challenge bulls. Above those levels, the next target would be the 78.6% Fibonacci retracement, at the $5,330 area.
(The technical analysis of this story was written with the help of an AI tool.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
- EUR/GBP edges higher as investors assess mixed macroeconomic signals in the Eurozone.
- A sharp contraction in Eurozone Retail Sales tempers optimism sparked by a strong rebound in German Factory Orders.
- Monetary policy decisions in the Eurozone and the United Kingdom dominate market attention for the day.
EUR/GBP trades around 0.8670 on Thursday at the time of writing, up 0.30% on the day, supported by some weakness in the Pound Sterling (GBP) ahead of the Bank of England’s (BoE) monetary policy decision, which is due later in the day, despite mixed economic indicators from the Eurozone.
On the Euro (EUR) side, the latest macroeconomic data have sent conflicting signals. Eurozone Retail Sales fell by 0.5% in December, a much steeper contraction than the 0.2% decline expected by the market consensus. In addition, November figures were revised lower, now showing growth of just 0.1% compared with the previously estimated 0.2%. These data reinforce concerns about the strength of domestic demand and limit the positive impact of other, more encouraging indicators.
At the same time, German Factory Orders surged in December, rising by 7.8%, well above market expectations that had pointed to a 2.2% contraction. November figures were also revised higher, confirming a firmer momentum in Germany’s industrial sector. However, this positive development has not been enough to fully offset the disappointment stemming from weak consumption data, a key factor for the Eurozone growth outlook.
Investors also remain cautious ahead of the European Central Bank (ECB) decision, which is scheduled for later in the day. The central bank is widely expected to leave interest rates unchanged, reinforcing its wait-and-see approach. Markets will focus mainly on President Christine Lagarde’s rhetoric, as the recent strength of the Euro has revived concerns about deflationary pressures. Any dovish signal could renew downward pressure on the single currency against its major peers.
On the UK side, the Pound Sterling remains under pressure ahead of the Bank of England announcement. Investors broadly expect the central bank to keep interest rates unchanged at 3.75%, following the cut delivered at the previous meeting. Attention will instead turn to the Monetary Policy Report and Governor Andrew Bailey’s press conference, which could provide clues on the future pace of monetary easing.
The UK macroeconomic backdrop argues for a cautious stance from the BoE. The labour market continues to show signs of weakness, with the Unemployment Rate remaining elevated, while inflationary pressures are expected to gradually converge toward the 2% target over the medium term. These factors keep expectations alive for further rate cuts, weighing on the Pound Sterling and, in the near term, supporting the advance in EUR/GBP.
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.12% | 0.46% | 0.19% | 0.18% | 0.31% | 0.21% | 0.08% | |
| EUR | -0.12% | 0.33% | 0.07% | 0.07% | 0.18% | 0.09% | -0.04% | |
| GBP | -0.46% | -0.33% | -0.26% | -0.28% | -0.15% | -0.24% | -0.37% | |
| JPY | -0.19% | -0.07% | 0.26% | -0.01% | 0.12% | 0.00% | -0.10% | |
| CAD | -0.18% | -0.07% | 0.28% | 0.01% | 0.14% | 0.03% | -0.09% | |
| AUD | -0.31% | -0.18% | 0.15% | -0.12% | -0.14% | -0.09% | -0.22% | |
| NZD | -0.21% | -0.09% | 0.24% | -0.01% | -0.03% | 0.09% | -0.13% | |
| CHF | -0.08% | 0.04% | 0.37% | 0.10% | 0.09% | 0.22% | 0.13% |
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).
The upcoming Lower House election in Japan on February 8 is expected to have significant implications for the USD/JPY exchange rate. TD Securities analysts predict that if the ruling Liberal Democratic Party (LDP) secures an absolute majority, USDJPY could rise towards 160. The report assigns a 65% probability to this outcome, indicating that political stability may lead to a bullish sentiment in the currency market.
Election impact on USDJPY
"Based on polls from both Nikkei and Yomiuri and the Feb 1 poll results from Asahi, the momentum is in the LDP's favor. We assign a 65% probability to a Takaichi absolute majority outcome (winning > 261 seats). In this scenario, expect USDJPY to gravitate towards 160 and the JGB curve to bear steepen."
"An absolute majority in the Lower House would allow the ruling coalition to pass Takaichi's preferred policies/ legislation quickly and remove the need to compromise with the DPP and other opposition parties."
"USDJPY could pop higher by 2-3 figures, with the 160 level marking a key resistance level which also attracts onshore media attention. In case of a rapid move beyond 160, we expect the MoF to intervene in the FX market, possibly with the help of the US since the reaction in JGBs and the JPY may spill over to the US market."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- USD/CHF trades flat near 0.7780 after bouncing from 0.7740 lows
- The Greenback's recovery lost momentum following mixed US economic data.
- Elliott Wave analysis suggests an A-B-C correction towards the 0.7880 area.
The US Dollar is flat against the Swiss Franc on Thursday, trading around 0.7780 at the time of writing. The pair’s recovery from last week’s lows has been capped at 0.7818, but downside attempts remain limited above 0.7740, which keeps the immediate bullish trend in play.
The US Dollar rally, however, has lost momentum following Wednesday’s mixed US data. The ADP Employment report revealed that job creation slumped in January, offsetting better-than-expected US ISM Services PMI figures, which also showed an unexpected slowdown in labour demand.
Technical Analysis: Potential A-B-C correction towards the 0.7880 area
The USD/CHF is looking for direction with technical indicators showing a neutral-to-positive bias. The Moving Average Convergence Divergence (MACD) in the 4-hour chart highlights a fading bullish momentum, while the Relative Strength Index (RSI) remains above the 50 midline, reinforcing a modest upside bias.
Elliott Wave Analysis would suggest that the pair is in an A-B-C corrective impulse heading beyond February 2 highs at 0.7820 towards the resistance area between the 61.8% Fibonacci retracement level, at 0.7870, and the January 20 and 22 lows, near 0.7885.
On the downside, a confirmation below support at the 0.7740 area (February 3 low) invalidates this view and would increase pressure towards the January 30 low, near 0,7640.
(The technical analysis of this story was written with the help of an AI tool.)
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.17% | 0.59% | 0.25% | 0.23% | 0.42% | 0.33% | 0.14% | |
| EUR | -0.17% | 0.42% | 0.07% | 0.06% | 0.26% | 0.16% | -0.03% | |
| GBP | -0.59% | -0.42% | -0.34% | -0.36% | -0.16% | -0.26% | -0.45% | |
| JPY | -0.25% | -0.07% | 0.34% | -0.03% | 0.18% | 0.06% | -0.11% | |
| CAD | -0.23% | -0.06% | 0.36% | 0.03% | 0.20% | 0.10% | -0.09% | |
| AUD | -0.42% | -0.26% | 0.16% | -0.18% | -0.20% | -0.11% | -0.29% | |
| NZD | -0.33% | -0.16% | 0.26% | -0.06% | -0.10% | 0.11% | -0.19% | |
| CHF | -0.14% | 0.03% | 0.45% | 0.11% | 0.09% | 0.29% | 0.19% |
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).
- 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) trades higher against the US Dollar (USD) on Thursday. The USD/INR pair declines to near 90.27 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.
Meanwhile, India's Trade Minister Piyush Goyal has announced that a formal agreement of reduced tariffs will be signed between the US and India in March, and both nations will release a joint statement within a week, Reuters reported.
The table below shows the percentage change of Indian Rupee (INR) against listed major currencies today. Indian Rupee was the strongest against the British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | INR | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.01% | 0.21% | 0.11% | 0.11% | 0.12% | -0.31% | 0.03% | |
| EUR | 0.01% | 0.22% | 0.13% | 0.12% | 0.13% | -0.29% | 0.04% | |
| GBP | -0.21% | -0.22% | -0.09% | -0.10% | -0.08% | -0.50% | -0.18% | |
| JPY | -0.11% | -0.13% | 0.09% | -0.01% | 0.00% | -0.41% | -0.08% | |
| CAD | -0.11% | -0.12% | 0.10% | 0.01% | 0.02% | -0.40% | -0.08% | |
| AUD | -0.12% | -0.13% | 0.08% | -0.01% | -0.02% | -0.42% | -0.09% | |
| INR | 0.31% | 0.29% | 0.50% | 0.41% | 0.40% | 0.42% | 0.33% | |
| CHF | -0.03% | -0.04% | 0.18% | 0.08% | 0.08% | 0.09% | -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 Indian Rupee from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent INR (base)/USD (quote).
Daily Digest Market Movers: The US Dollar trades higher ahead of JOLTS Job Openings data
- 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 sees more downside near 89.50
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USD/INR falls to near 90.30 at the time of writing. 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.
The 14-day Relative Strength Index (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.)
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Forex Market News
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