Forex News
US President Donald Trump is weighing a series of potential military options in Iran following deadly protests in the country, CNN reported on Sunday. The sources said Trump considers following through on his recent threats to strike the Iranian regime should it use lethal force against civilians.
Officials said a number of different agencies have been involved in helping prepare options for the president. More formal briefings are scheduled in the coming week, including one on Tuesday, when Trump is expected to meet senior national security officials to discuss how to proceed.
Market reaction
At the time of writing, the West Texas Intermediate (WTI) is trading 0.98% higher on the day to trade at $59.21.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
A group of European nations, headed by the United Kingdom (UK) and Germany, is discussing plans to increase its military presence in Greenland to show US President Donald Trump that the continent is serious about Arctic security, Bloomberg reported on Sunday.
The source said that Germany will propose setting up a joint NATO mission to protect the Arctic region. Meanwhile, UK Prime Minister Keir Starmer urged allies to step up their security presence in the High North and recently reached out to leaders, including French President Emmanuel Macron and German Chancellor Friedrich Merz to discuss the issue.
Market reaction
At the time of writing, the Gold price (XAU/USD) is up 0.70% on the day at $4507.65.
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.
- USD/JPY edges higher to around 158.05 in Monday’s early Asian session.
- Japan's Takaichi is considering calling a snap election for mid-February, weighing on the Japanese Yen.
- Nonfarm Payrolls rose by 50,000 in December, weaker than expected.
The USD/JPY pair gains ground near 158.05 during the early Asian session on Monday. The Japanese Yen (JPY) weakens against the US Dollar (USD) following a report that Japan’s Prime Minister Sanae Takaichi is considering calling a snap election for parliament's lower house in the first half of February.
Reuters reported on Sunday that Japan’s Prime Minister Sanae Takaichi may call an early general election, and it could be held as early as February. This would be the first time for the conservative Takaichi to face the voters, allowing her to capitalize on the strong public approval ratings she has enjoyed since taking office in October.
Data released by the US Bureau of Labor Statistics (BLS) on Friday showed slower than expected US jobs growth, suggesting the US Federal Reserve (Fed) could hold interest rates steady later this month. Nonfarm Payrolls (NFP) in the US rose by 50,000 in December. This reading followed November's 56,000 (revised from 64,000) and came in weaker than the market expectation of 60,000.
Meanwhile, the Unemployment Rate ticked lower to 4.4% in December from 4.6% in November, while the Average Hourly Earnings climbed to 3.8% YoY in December from 3.6% in the previous reading.
Dovish Fed expectations could weigh on the Greenback against the JPY in the near term. Fed funds futures are pricing in nearly a 95% probability that the US central bank leaves interest rates unchanged at its next two-day meeting on January 27 and 28, up from 68% a month ago, the CME FedWatch tool showed.
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.
Japan’s Prime Minister Sanae Takaichi may call an early general election, the head of her party's coalition partner said on Sunday, after Reuters reported that snap election could be held as early as February.
It would be the first time for the conservative Takaichi, Japan's first female prime minister, to face the voters, giving her an opportunity to capitalise on the strong public approval ratings she has enjoyed since taking office in October.
Market reaction
The USD/JPY pair is gaining 0.11% on the day to trade at 158.05 at the press time.
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.
- EUR/USD slides for the week as Dollar strength overshadows mixed US payrolls and housing data.
- Eurozone Retail Sales beat forecasts, but gains fail to shift sentiment away from US-driven flows.
- Markets eye inflation data and central bank speakers in Europe and the US next week.
EUR/USD prolonged its agony throughout the week, poising to print losses of 0.70%, as it fell 0.20% on Friday, despite the release of mixed economic data in the US. In the European Union, Retail Sales exceeded forecasts, but traders’ focus remains around the dynamics of the US and the Dollar. The pair trades at 1.1636 after hitting a daily peak of 1.1662.
Euro remains under pressure despite mixed US data, as investors stay focused on Dollar dynamics
December’s US Nonfarm Payroll figures were mixed as the economy added 50K jobs, below forecast for a 60K increase, also below November’s 64K print. Nevertheless, the Unemployment Rate edged lower from 4.6& to 4.4%, revealed the US Bureau of Labor Statistics (BLS).
Other data revealed that the housing market continued to lose momentum, as Building Permits and Housing Starts in October both declined relative to November’s readings. Meanwhile the University of Michigan Consumer Sentiment preliminary report for January came in stronger than expected.
In the Eurozone, consumers consumption increased in November, up 0.2% MoM an improvement compared to October’s flat reading and beat estimates. German data was also mixed during the day, as Industrial Production exceeded forecasts, though the trade balance narrowed as exports declined.
Next week: Busy schedule in Europe and the US
The Eurozone economic docket will feature speeches by European Central Bank policymakers, the release of the Sentix Investor Confidence, the Harmonized Index of Consumer Prices (HICP) in the bloc, Germany, Spain and Italy.
In the US, the calendar will feature consumer and producer price indices, Retail sales, jobless claims and Fed officials’ comments.
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 Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.78% | 0.45% | 0.66% | 1.22% | -0.18% | 0.47% | 1.07% | |
| EUR | -0.78% | -0.34% | -0.04% | 0.44% | -0.95% | -0.31% | 0.29% | |
| GBP | -0.45% | 0.34% | 0.19% | 0.78% | -0.63% | 0.03% | 0.62% | |
| JPY | -0.66% | 0.04% | -0.19% | 0.53% | -0.87% | -0.22% | 0.42% | |
| CAD | -1.22% | -0.44% | -0.78% | -0.53% | -1.24% | -0.75% | -0.15% | |
| AUD | 0.18% | 0.95% | 0.63% | 0.87% | 1.24% | 0.66% | 1.26% | |
| NZD | -0.47% | 0.31% | -0.03% | 0.22% | 0.75% | -0.66% | 0.60% | |
| CHF | -1.07% | -0.29% | -0.62% | -0.42% | 0.15% | -1.26% | -0.60% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Daily digest market movers: Euro weighed by US Dollar strength
- Beyond the US jobs data report, October’s US Building Permits slipped 0.2%, easing from 1.415 million to 1.412 million. Housing Starts also softened, with starts falling 4.6% MoM to 1.246 million, down from 1.306 million in September.
- The University of Michigan Consumer Sentiment preliminary reading for January rose to 54, up from November’s final 52.9, and beating forecasts of 53.5. American’s inflation expectations for one-year were unchanged at 4.2%, while five-year expectations edged up to 3.4% from 3.2%.
- Money markets continued to price in 50 basis points of easing towards the year’s end, reveled the CME FedWatch Tool.
- Atlanta’s Fed President Raphael Bostic said that job growth “was modest,” adding on inflation that it “will take more time to make up for missing reports from last fall.”
- Later, Richmond Fed Thomas Barkin revealed that the Labor market is steady, but hiring remains uncomfortable narrow. He added that it will take through April for inflation data to be fully caught up.
Technical outlook: EUR/USD slumps as sellers pile in, pushing the pair below 1.1650
The technical picture shows the EUR/USD as neutral to downward biased, as bearish momentum picked up, due to the fall of the pair, which cleared key support levels like the 100- and the 50-day Simple Moving Averages (SMAs) each at 1.1663 and 1.1641, respectively.
The Relative Strength Index (RSI) shows that bears are gathering strength after the index hit the 38 thresholds, being closer to oversold territory. Therefore, the path of least resistance is downwards.
The EUR/USD first support would be 1.1600. A breach of the latter will expose the 200-day SMA at 1.1565, the last line of defense for bulls, before the pair turns bearish. Further downside lies below at 1.1500 and the August 1 low of 1.1391.
On the other hand, if buyers regain the 50 and 100-day SMAs, 1.1700 would be the next resistance level. Once cleared, traders will eye the 20-day SMA at 1.1730.
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.
Nonfarm Payrolls FAQs
Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.
The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation. A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work. The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.
Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower. NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.
Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa. Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold. Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components. At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary. The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.
Forex Market News
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