Forex News
- USD/JPY extends its upside to near 156.85 in Thursday’s early Asian session.
- Takaichi’s aggressive fiscal expansion and tax cuts could raise Japan's fiscal concerns, weighing on the Japanese Yen.
- Potential intervention from Japanese authorities might help limit the JPY’s losses.
The USD/JPY pair extends the rally to around 156.85 during the early Asian session on Thursday. The Japanese Yen (JPY) weakens to a two-week low against the US Dollar (USD) amid concern over Japan's fiscal health under Prime Minister Sanae Takaichi's expansionary spending policy. Traders will closely monitor Japan's snap elections scheduled for Sunday.
Takaichi’s ruling Liberal Democratic Party (LDP) is expected to gain more seats in the national election as she seeks voter backing for increased spending, tax cuts, and a new security strategy. Her expansionary fiscal policies raise concerns about Japan’s fiscal outlook, due to fears of debt-funded spending, which drags the JPY lower and creates a tailwind for the pair.
Markets remain alert for potential intervention from Japanese authorities. Japan’s Finance Minister Satsuki Katayama said on Tuesday that she will continue to closely coordinate with US authorities as needed, based on a joint Japan and US statement issued in September last year, and respond appropriately. Intervention fears could boost the Japanese Yen and act as a headwind for the pair in the near term.
On the USD’s front, US President Donald Trump on Friday nominated Kevin Warsh to succeed Jerome Powell as the next Chairman of the US Federal Reserve (Fed). Expectations that Trump’s pick to head the US central bank would favour maintaining elevated interest rates could boost the Greenback against the JPY 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.
US Federal Reserve (Fed) Governor Lisa Cook said on Wednesday that risks are skewed toward higher inflation, adding that she’s optimistic about inflation's path yet cautious and vigilant.
Key quotes
Risks are skewed toward higher inflation.
US inflation has stalled persistently above 2% goal.
Optimistic about inflation's path yet cautious and vigilant.
See economy growing slightly better than 2 percent this year.
Concerned about possible timing mismatch between costs of AI investment and increase in productivity.
Best thing Federal Reserve can do is ensure inflation returns to and stays at target.
It is anticipated that disinflation could resume as tariff effects recede, but there is much uncertainty.
US economy solid although some signs of worsening outlook for low and moderate income households.
It is essential to return to a disinflationary path and achieve the inflation target in the near future.
Weak consumer sentiment does not reveal a signal about an increase in slack that can be tackled with Fed policy rate.
I believe the labor market will continue to be supported by last year's Federal Reserve rate cuts.
Labor market has stabilized and is approximately in balance, but highly attentive to potential for rapid shift.
Will not have anything today on recent legal proceedings. Will continue to carry out duties at Fed.
Look forward to getting to know Warsh but do not comment on candidates for Federal Reserve roles.
Last core personal consumption expenditures reading way above Federal Reserve target.
Goods inflation hopefully will dissipate quickly; once it does, we should be back on the disinflation path.
Have to monitor labor market very closely.
US monetary policy is somewhat restrictive.
It is the right time to sit back and wait to see what happens.
I want to wait to see what happens, considering long and variable delays.
Still a lot to monitor regarding financial stability, including credit.
Market reaction
At the time of writing, the US Dollar Index (DXY) is trading around 97.65, up 0.26% on the day.
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.
- Silver extends recovery to $88.20, shrugging off broad US Dollar strength after solid economic data.
- Momentum turns constructive as RSI improves, though parabolic downside move suggests recovery will be gradual.
- Break above $90.00 opens upside toward $95.00, $100.00, and January’s peak near $118.50.
Silver price extended its recovery for the second straight day, up by 3.75% shrugging off broad US Dollar strength, following the release of solid US economic data. At the time of writing, XAG/USD trades at $88.20, after bouncing off daily lows of $83.28.
XAG/USD Price Forecast: Technical outlook
Silver’s technical picture remains neutral to bullish biased, but due to the parabolic downside move, a recovery from around $80.00 to record highs past $120.00, would take some time. Nevertheless, momentum seems to favor buyers as depicted by the Relative Strength Index (RSI) which despite remaining below the neutral level, shows bulls gathering steam.
If XAG/USD surpasses $90.00, the next key resistance level would be $95.00, followed by the $100.00 mark. On further strength Silver can reach the January 30 high at $118.47, ahead of the all-time high of $121.66.
On the flip side, if Silver dives below $85.00, the first support would be $84.00, followed by the February 4 low of $83.28. A breach of the latter will expose the 50-day SMA at $77.01.
XAG/USD Price Chart – Daily
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.
- GBP/USD remains stuck in a rut just below 1.3700.
- Momentum remains thin as markets brace for the latest BoE rate call.
- US data remains delayed, but a new NFP release date gives investors something to look forward to.
GBP/USD remains trapped in a near-term cycling pattern on Wednesday, continuing to churn aimlessly between 1.3700 and 1.3650. Cable traders are unlikely to pick a meaningful direction until after the Bank of England’s (BoE) latest interest rate decision, due during Thursday’s London market session. However, it is unlikely that the BoE’s Monetary Policy Committee (MPC) will deliver anything of note that will actually shift long-term fundamentals.
After a razor-thin 5-4 vote to trim interest rates another 25 bps in December, the MPC is broadly expected to hold interest rates steady on Thursday; rate markets show a scant 4.1% chance of a February interest rate cut from the BoE.
On the American side, US ADP Employment Change and Initial Jobless Claims are due later on Thursday. However, traders will be looking ahead to the latest Nonfarm Payrolls (NFP) figures from January, which were postponed until February 11 thanks to the latest partial US government funding shutdown, which was once again avoided in the eleventh hour.
GBP/USD daily chart
Technical Analysis:
In the daily chart, GBP/USD trades at 1.3652. The 50-day exponential moving average rises to 1.3492 and remains above the 200-day at 1.3340, underscoring a bullish bias. Price holds above the faster average as both slopes point higher, keeping pullbacks contained and favoring further upside.
Stochastic (14,5,5) has retreated from overbought and prints 67.88, indicating momentum has cooled while staying positive. A renewed uptick would keep the advance in gear, while a drop below the 50 line could trigger consolidation toward the rising 50-day EMA at 1.3492.
In the 4-hour chart, GBP/USD trades at 1.3652. The 200-period exponential moving average rises to 1.3534 and underpins a bullish bias, with price holding decisively above this trend filter. Dips toward this average would meet initial support, while sustained trade above it keeps upside traction intact.
Momentum cools as the Stochastic (14,5,5) retreats from the 70s to the mid-50s, indicating fading immediate impulse rather than a trend break. A turn higher in the oscillator would re-energize bids and keep the topside in focus. A deeper slide toward the 40 area would point to extended consolidation before trend resumption.
In the 15-minute chart, GBP/USD trades at 1.3652. Price holds below a declining 200-EMA at 1.3689, maintaining an intraday bearish bias. The average continues to slope lower, highlighting persistent supply on rebounds. Stochastic (14,5,5) has eased from a brief push above the 50 line toward the mid-40s, flagging waning recovery momentum. Below the average, sellers keep control and dips remain favored.
The setup stays fragile while the 200-EMA trends lower and caps bounces. A decisive push back above the 50 line on Stochastic would improve momentum, whereas another roll-over from this area would keep pressure on the downside. A close above 1.3689 would be needed to neutralize the immediate bearish tone.
(The technical analysis of this story was written with the help of an AI tool.)
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling 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, its currency will benefit 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.
- EUR/USD dips as strong US services PMI data supports the Dollar despite emerging labor market softness.
- Softer Eurozone HICP inflation boosts expectations of a rate cut by the European Central Bank.
- Focus turns to the ECB decision and remarks from Christine Lagarde on policy outlook and Euro strength.
The Euro falls during the North American session, down more than 0.10% as the Dollar recovers from Tuesday’s losses. Solid US business activity data is a headwind for the EUR/USD pair. A softer than expected inflation report in the Eurozone increases the chances that the European Central Bank (ECB) will need to lower rates to stimulate the economy. At the time of writing, the EUR/USD trades at 1.1800.
Euro edges lower near 1.1800 as resilient US activity contrasts with easing Eurozone inflation pressures
The US economic docket featured the Institute for Supply Management (ISM) Purchasers Management Index (PMI) for the services sector, which exceeded estimates amid increasing input costs. Other data show that private companies hired less people than expected by the economists, an indication of softness in the labor market.
The short US government shutdown has affected the release of crucial jobs data. The JOLTS report, which was expected to be released today, moved to February 5. Meanwhile, the Nonfarm Payrolls will be announced on February 11, while the Consumer Price Index (CPI) moved back to February 13.
Across the pond, the Harmonized Index of Consumer Prices (HICP) in January was softer than expected at 1.7% YoY, while core figures stood at 2.2% YoY. The Eurozone headline inflation had increased the odds for a cut, rather than a rate hike, for the ECB. Meanwhile, traders eye the ECB’s monetary policy outcome, along with the President Christine Lagarde’s press conference.
Of note would be if she spoke about the Euro’s strength, sponsored by overall US Dollar weakness.
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 Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.36% | 0.30% | 1.27% | 0.39% | -0.65% | 0.19% | 0.67% | |
| EUR | -0.36% | -0.11% | 0.94% | 0.02% | -1.01% | -0.17% | 0.30% | |
| GBP | -0.30% | 0.11% | 0.92% | 0.12% | -0.90% | -0.07% | 0.39% | |
| JPY | -1.27% | -0.94% | -0.92% | -0.87% | -1.92% | -1.01% | -0.88% | |
| CAD | -0.39% | -0.02% | -0.12% | 0.87% | -1.00% | -0.17% | 0.26% | |
| AUD | 0.65% | 1.01% | 0.90% | 1.92% | 1.00% | 0.85% | 1.30% | |
| NZD | -0.19% | 0.17% | 0.07% | 1.01% | 0.17% | -0.85% | 0.46% | |
| CHF | -0.67% | -0.30% | -0.39% | 0.88% | -0.26% | -1.30% | -0.46% |
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: Upbeat US data weighs on the Euro
- A better-than-expected reading of the Institute for Supply Management Services PMI in January diminishes the chances of rate cuts in the near term. The index rose to 53.8 versus forecasts of 53.5 and matched December’s print.
- The ISM Employment Index sub-component rose for a second straight month, albeit at a slower pace than in December, while the Prices Paid Index increased to 66.6 from 65.1, marking its highest level in two months.
- The US ADP Employment Change report for January showed private-sector payrolls increased by just 22K, falling well short of expectations for a 48K gain.
- The US President Donald Trump said that he sustained an excellent telephone conversation with President Xi of China. Trump revealed that he would be traveling to China in April and that they discussed about trader, military, Taiwan, the Russia/Ukraine war, Iran and China’s purchasing oil and gas from the US.
- The US Treasury Secretary Scott Bessent revealed that is in the country’s interest the strong Dollar policy. When asked about whether Trump has the authority to fire Fed chair or board member of a policy disagreement, said that he has no opinion.
- Money markets had priced in 47 basis points of Fed easing towards the year end, revealed data from Prime Market Terminal data.
- On Thursday, the ECB is expected to hold rates unchanged. Nevertheless, companies revealing that they have experienced a decline in profits, in the latest ECB’s safety survey, increase the odds that the next move on interest rates would be a rate cut rather than a hike.
Technical outlook: EUR/USD trades sideways ahead of ECB’s meeting
The EUR/USD trades sideways as investors wait for the ECB’s decision and Lagarde’s press conference. The ongoing downtrend was halted after reaching February 2’s daily low of 1.1775. Since then, the pair consolidated around 1.1770-1.1837. If the top of the range is cleared, up next lies 1.1850 followed by 1.1900.
Conversely, a drop below 1.1770 would extend its losses to the 20-day SMA at 1.1759, followed by the 50-day SMA at 1.1719 and the 100-day SMA at 1.1678.
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.
The Korean Won is under pressure despite a benign macro backdrop, with recent GDP data showing contraction. The Bank of Korea is expected to maintain its policy rate amid rising home prices and volatility in the KRW. Commerzbank FX Analyst Moses Lim notes that USD-KRW may remain within a specific range.
BoK's cautious approach to policy
"We expect BoK to leave the policy rate unchanged at 2.5% at the next meeting on 26 February."
"For BoK, it is likely to step up efforts to reduce excessive volatility rather than to target any particular level."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Here is what you need to know on Thursday, February 5:
United States (US) ADP Employment Change report revealed that the private sector added 22K jobs in January, falling short of expectations of 48K. Meanwhile, the ISM Services Purchasing Managers’ Index (PMI) for the same month recorded a value of 53.8, matching the previous month's reading and surpassing the expected figure of 53.5.
United States (US) President Donald Trump signed a bill late Tuesday to end the partial government shutdown, providing some immediate relief. He also announced that talks with Iran would take place later this week in Oman regarding the country's internal crisis.
DXY rises and is trading near 97.70 even after the mixed US data. Further details indicate that the Prices Paid Index, an indicator of inflation, increased to 66.6 from the previous 65.1, while the Employment Index declined from 51.7 to 50.3.
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 New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.18% | 0.31% | 0.67% | 0.27% | 0.53% | 0.97% | 0.18% | |
| EUR | -0.18% | 0.13% | 0.50% | 0.10% | 0.35% | 0.79% | 0.00% | |
| GBP | -0.31% | -0.13% | 0.36% | -0.03% | 0.22% | 0.66% | -0.12% | |
| JPY | -0.67% | -0.50% | -0.36% | -0.39% | -0.13% | 0.30% | -0.48% | |
| CAD | -0.27% | -0.10% | 0.03% | 0.39% | 0.25% | 0.69% | -0.09% | |
| AUD | -0.53% | -0.35% | -0.22% | 0.13% | -0.25% | 0.44% | -0.34% | |
| NZD | -0.97% | -0.79% | -0.66% | -0.30% | -0.69% | -0.44% | -0.78% | |
| CHF | -0.18% | -0.01% | 0.12% | 0.48% | 0.09% | 0.34% | 0.78% |
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).
AUD/USD is trading near the 0.6970 level, losing all intraday gains as the US Dollar (USD) gains the upper hand. The Reserve Bank of Australia (RBA) raised its interest rate and struck a hawkish tone on policy outlook on Tuesday.
EUR/USD is trading near the 1.1800 price zone, seeing little movement as the Harmonized Index of Consumer Prices (HICP) flash data for January was released at 1.7%, lower than the 1.9% expected. Additionally, the European Central Bank (ECB) will announce its monetary policy decision on Thursday, with interest rates expected to remain on hold.
USD/CAD is trading near the 1.3680 price zone, having a little surge amid USD strength.
GBP/USD is trading near the 1.3640 price zone, seeing little movement as the pair awaits the Bank of England (BoE) to announce its monetary policy decision on Thursday.
USD/JPY is trading near a seven-day high at 156.70 as the USD remains fortified against all major currencies.
Gold is trading near $4,908, with little movement as the US government shutdown was resolved and geopolitical tensions appear to be easing.
What’s next in the docket:
Thursday, February 5:
- Australian December Trade Balance.
- Eurozone December Retail Sales.
- Bank of England (BoE) monetary policy decision.
- European Central Bank (ECB) monetary policy decision.
- US Jolts Job Openings.
Friday, February 6 :
- Canada January Net Change in Employment.
- US February Michigan Consumer Sentiment Index.
- CAD trades near 1.3635 against USD on Wednesday, little changed from the previous session.
- ADP private payrolls rose just 22,000 in January, well below expectations; official NFP delayed to next week.
- Treasury Secretary Bessent testifies before Congress; oil prices climb toward $64 on Middle East tensions.
The Canadian Dollar (CAD) held steady against the US Dollar (USD) on Wednesday, trading just below 1.3700 as markets adjusted to the end of the partial US government shutdown and digested a soft private payrolls report. The Loonie has pulled back from sixteen-month highs hit in late January, with the retreat driven by softer Canadian growth data and a modest rebound in USD demand following the nomination of Kevin Warsh as Federal Reserve (Fed) Chair.
President Donald Trump signed a $1.2 trillion funding package into law on Tuesday, ending the three-day partial shutdown. Federal agencies reopened Wednesday morning, though Department of Homeland Security funding was extended for only two weeks as lawmakers continue negotiations over immigration enforcement reforms. The quick resolution removed one source of market uncertainty, though the brief closure forced the Bureau of Labor Statistics (BLS) to delay this week's key labor data releases.
ADP misses estimates, NFP pushed to next week
The ADP National Employment Report showed private payrolls increased by just 22K in January, well below market expectations for a stronger reading. The report highlighted that job creation slowed considerably in 2025, with private employers adding only 398K positions for the full year, compared to 771K in 2024. The weak print carried extra weight given the postponement of official government data.
The BLS confirmed that the January Nonfarm Payrolls (NFP) report, originally scheduled for Friday, February 6, will be rescheduled once government funding is fully restored. The December Job Openings and Labor Turnover Survey (JOLTS) data was also delayed. Markets had expected NFP to show an increase of roughly 55K jobs with unemployment holding at 4.4%. The January release typically includes annual benchmark revisions and updated seasonal adjustment factors, making its eventual publication closely watched.
Bessent faces lawmakers on tariffs and inflation
Treasury Secretary Scott Bessent appeared before the House Financial Services Committee on Wednesday, facing sharp questions from Democratic lawmakers about the administration's tariff policies and their impact on consumer prices. In heated exchanges, Bessent acknowledged his earlier statements that tariffs could be inflationary were "mistaken," pointing to economic growth and declining inflation as evidence that tariff-related price pressures had not materialized as critics warned.
Bessent also warned against overregulation of the financial sector, characterizing the previous administration's approach as "regulation by reflex." The testimony came as markets await a Supreme Court ruling on whether the administration's trade duties exceeded presidential authority. Bessent is scheduled to appear before the Senate Banking Committee on Thursday.
Oil prices climb on Middle East tensions
West Texas Intermediate (WTI) crude oil futures climbed toward $64 per barrel on Wednesday after the US military downed an Iranian drone near a US aircraft carrier in the Arabian Sea. The incident unsettled energy markets, though President Trump emphasized that diplomatic channels with Iran remain open and talks are still scheduled. API data showing an 11.1 million barrel draw in US crude inventories, the largest since June if confirmed, added further support.
The US Dollar Index (DXY) held near 97.4 on Wednesday, pausing its recent rebound from a near six-year low. The index found mild support following the strong ISM Manufacturing print earlier this week, though the lack of official labor data kept traders cautious. Rate markets continue to price roughly a 70% chance the Fed will hold rates through April, with the first cut of 2026 expected around June.
Daily digest market movers: ADP disappoints as NFP gets pushed back
- USD/CAD trades near 1.3635, little changed on the session as the Loonie consolidates below sixteen-month highs.
- ADP private payrolls rose 22,000 in January, below expectations; full-year 2025 job creation totaled just 398,000.
- BLS delays January NFP and December JOLTS releases due to partial government shutdown; rescheduled dates pending.
- WTI crude climbs toward $64/bbl after US downs Iranian drone; API reports 11.1 million barrel inventory draw.
- Bessent tells Congress his earlier view that tariffs were inflationary was mistaken; faces lawmakers on economic policy.
- DXY holds near 97.4; rate markets see Fed on hold through April with first cut likely in June.
Canadian Dollar price forecast
USD/CAD trades near 1.3635 on Wednesday, holding within a familiar range after retreating from the late-January low near 1.3490. The pair has bounced off the 2025 swing lows as the US Dollar found renewed demand following the Warsh nomination and firmer ISM data. The 50-day Exponential Moving Average (EMA) near 1.3700 marks the first layer of resistance, with the 200-day EMA and the 2026 yearly open clustered around 1.3725-1.3735.
Support near 1.3540, resistance at 1.3700
On the downside, initial support lies near 1.3600, followed by the 2025 swing low at 1.3540. A weekly close below that threshold would signal renewed bearish momentum and open the door to a test of 1.3430. On the upside, a clear break above the 1.3725-1.3735 zone would suggest a more significant low is in place, with subsequent resistance at the 1.3930-1.3970 area.
RSI neutral as pair consolidates
The Relative Strength Index (RSI) on the daily chart hovers in the mid-range near 45-50, indicating neither overbought nor oversold conditions. This neutral reading matches the choppy price action as the pair consolidates after January's sharp decline. For now, the broader downtrend stays in place while USD/CAD holds below the key moving averages, though a break above 1.3735 would shift the near-term tone to consolidation or recovery.
USD/CAD daily chart
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.
OCBC Bank's report, authored by Sim Moh Siong and Christopher Wong, discusses the recent rally of the Indian Rupee (INR) following headlines of a US-India trade deal. However, the report cautions that the lack of specifics may limit follow-through as investors return to fundamentals. The analysis highlights key technical levels for USD/INR and indicates downside risks in the near term.
INR rallies on trade deal news
"While the announcement provided a near-term sentiment boost to the INR, any follow-through is likely to be more measured, as markets refocus on relative rate dynamics, broader USD trends and global risk conditions rather than trade headlines alone."
"USDINR was last at 90.3 levels. Daily momentum turned mild bearish while RSI fell to near oversold conditions."
"Risks skewed to the downside for now. Support at 90 levels (23.6% fibo retracement of 2025 low to 2026 high)."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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