Forex News

• EUR/CHF holds steady as markets digest preliminary Eurozone inflation data.
• Cooling annual inflation supports the ECB’s wait-and-see stance on interest rates.
• Focus shifts to Swiss CPI on Thursday for fresh clues on the SNB outlook.

The Euro (EUR) holds firm against the Swiss Franc (CHF) on Wednesday as traders digest the latest preliminary Eurozone inflation figures. At the time of writing, EUR/CHF is trading around 0.9302, little changed on the day.

Data released earlier in the day by Eurostat showed that Eurozone inflation remained broadly stable at the end of 2025. The Harmonized Index of Consumer Prices (HICP) rose 2.0%YoY in December, matching market expectations and easing from 2.1% in November. On a monthly basis, headline inflation rose 0.2%, reversing November’s 0.3% decline.

Core inflation, which strips out volatile food and energy prices, softened slightly. Core HICP rose 2.3% YoY, coming in just below the 2.4% consensus estimate and down from 2.4% previously. On a monthly basis, core inflation rose 0.3%, reversing the 0.5% fall seen in November.

Overall, the data point to tentative cooling in annual inflation pressures, though the rebound in monthly readings suggests the disinflation trend remains uneven. With headline inflation sitting at the ECB’s 2% target, the figures support the central bank’s current stance to keep interest rates unchanged. particularly after Tuesday’s final Composite Purchasing Managers Index (PMI) figures came in slightly weaker than expected.

This comes after inflation data from Germany, the bloc’s largest economy, released on Tuesday, pointed to a sharper cooling in price pressure. Germany’s national Consumer Price Index (CPI) rose 1.8% YoY in December, easing notably from 2.3% in November, while the monthly reading was flat at 0%. Meanwhile, final Composite PMI figures also came in slightly weaker than expected.

According to a BHH Market View report, the swaps curve prices in steady interest rates over the next twelve months, followed by a 25 basis point (bps) increase to 2.25% over the next two years.

Looking ahead, attention now turns to Swiss inflation data due on Thursday. Economists expect the Consumer Price Index (CPI) to fall 0.1% month over month in December, following a 0.2% decline previously, while annual inflation is seen edging up slightly to 0.1% from 0.0%.

A weaker-than-expected print could reinforce worries over persistently low inflation and fuel talk of a possible return to negative rates. That said, Swiss National Bank (SNB) policymakers have repeatedly stressed that the bar for a return to negative interest rates remains high.

• EUR/JPY edges lower around 182.90 on Wednesday, pressured by renewed demand for the Japanese Yen.
• Eurozone inflation slows in December, confirming a gradual easing of price pressures.
• Rising geopolitical tensions in Asia and the BoJ’s still-hawkish tone support the Japanese currency.

EUR/JPY trades around 182.90 on Wednesday at the time of writing, down 0.10% on the day. The cross remains under pressure as the Japanese Yen (JPY) benefits from a more defensive market environment, amid rising geopolitical tensions in Asia and continued firm signals from the Bank of Japan (BoJ).

On the European side, the latest data published by Eurostat show that the Eurozone Harmonized Index of Consumer Prices (HICP) rose by 2% YoY in December, in line with market expectations, after 2.1% in November. On a monthly basis, inflation increased by 0.2%, following a 0.3% decline in the previous month. Core inflation, which excludes volatile components such as food and energy, also slowed to 2.3% on an annual basis from 2.4%, confirming a gradual easing of inflationary pressures across the monetary union.

These figures, however, come against a still-fragile economic backdrop, particularly in Germany. Retail Sales there declined by 0.6% in November, after a 0.3% drop in October, running counter to market expectations. At the same time, German Harmonized Index of Consumer Prices inflation slowed sharply in December, reinforcing the view that price dynamics remain subdued in the Eurozone’s largest economy. Activity indicators also point to some loss of momentum, with the Eurozone Services Purchasing Managers Index (PMI) revised lower for December.

In Asia, the Japanese Yen is supported by a clear deterioration in risk appetite. On Tuesday, tensions between China and Japan escalated after Beijing announced a ban on exports of dual-use goods to Japan, in retaliation for comments by Japanese Prime Minister Sanae Takaichi regarding Taiwan. This diplomatic escalation between the world’s second- and third-largest economies has reignited geopolitical concerns and boosted demand for the JPY as a safe-haven currency.

Additional support comes from remarks by BoJ Governor Kazuho Ueda, who reiterated the institution’s commitment to further monetary tightening. Although investors remain cautious about the exact timing of the next interest rate hike, this hawkish bias continues to provide structural support to the Japanese Yen. That said, concerns surrounding Japan’s fiscal situation could limit the enthusiasm of JPY bulls and cap the extent of EUR/JPY downside in the near term.

• EUR/USD remains steady below 1.1700 in a bearish trend from late-December highs.
• Eurozone Consumer inflation moderated further in December.
• FX volatility remains subdued on Wednesday, ahead of key US macroeconomic releases.

EUR/USD is practically flat, trading near 1.1690 at the time of writing, with the bearish bias from December highs intact. Eurozone inflation figures confirmed that price pressures remain weak, which left the pair trading sideways near three-week lows, with investors awaiting the release of key US employment figures.

Data released by Eurostat on Wednesday revealed that the Eurozone Harmonized Index of Consumer Prices (HICP) eased to a 2.0% yearly rate in December, as expected, from 2.1% in November. Likewise, the core HICP slowed down to a 2.3% year-on-year growth, from 2.4% in November, in this case beating expectations of a steady 2.4% reading.

Markets, however, remain calm in spite of the growing geopolitical risks. The US intervention in Venezuela is not triggering major government changes in the country, and US President Donald Trump has announced a $2 billion deal to export Venezuelan Oil to the US.

The main focus today remains on the release of the US JOLTS Job Openings data and the ADP Employment report. These figures will set the tone for Friday's key US Nonfarm Payrolls (NFP) report, and are expected to shed some light on the US Federal Reserve's (Fed) monetary policy plans.

Daily Digest Market Movers: Markets calm awaiting key US data

• The EUR/USD is moving within a tight range on Wednesday, with investors bidding their time ahead of the release of a string of US employment indicators that might help assess the scope of the Fed's monetary easing cycle.
• Data from Germany released earlier on Wednesday revealed that Retail Sales declined 0.6% in November, following a 0.3% drop in October, against market expectations of a 0.2% gain. Year-on-year, retail consumption grew 1.1% after a 0.9% rise in October.
• These figures come after a weaker-than-expected German Harmonized Index of Consumer Prices (HICP), which eased to a 2.0% year-on-year rate in December, from 2.6% in November, below the market consensus of 2.2%.
• Furthermore Eurozone's S&P Services PMI for December was revised down to 52.4 from the previously restimated 52.6 reading, and from 53.6 in November.
• In the US, on Wednesday, the ADP Employment report is expected to show a 47,000 increase in net employment in December, which would offset the 32,000 decline seen in November.
• Also on Wednesday, the US Bureau of Labor Statistics will release November's JOLTS Job Openings, which are seen easing to 7.6 million from 7.67 million in October.
• Investors will also be attentive to the US ISM Services PMI, which is expected to show a 52.3 reading in December, down from 52.6 in November, still at levels consistent with significant growth.

Technical Analysis: EUR/USD remains in a downtrend from 1.1800

The EUR/USD is in a bearish correction from late December highs of 1.1808, with support at the 1.1650 area. Technical indicators in the 4-hour chart show a neutral-to-negative bias. The 4-hour Moving Average Convergence Divergence (MACD) histogram bars are moving around the zero level, suggesting a lack of momentum, while the Relative Strength Index (RSI) remains in negative territory at 40.

To the downside, Monday's low of 1.1659 is closing the path towards the December 8 and 9 lows, in the area of 1.1615. On the other side, upside attempts remain capped below 1.1700 so far. Further up, the descending trendline from December highs, at 1.1735, and Tuesday's high, at 1.1740, are the next targets.

(This story was corrected on January 7 at 12:57 GMT to say that the upside could target the descending trendline from December highs, not from December lows.)

• The Pound Sterling trades slightly lower against the US Dollar ahead of key US employment and Services PMI data.
• This week, the notable release will be the US NFP data, which is scheduled for Friday.
• Investors expect the BoE to maintain a monetary easing approach amid weak job market conditions.

The Pound Sterling (GBP) edges lower near 1.3490 against the US Dollar (USD) during the European trading session on Wednesday. The GBP/USD is mildly under pressure as the US Dollar ticks up ahead of an array of United States (US) economic data, including ADP Employment Change and ISM Services Purchasing Managers’ Index (PMI) data for December, and the JOLTS Job Openings data for November, releasing in the North American session.

At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, edges higher to near 98.70.

Investors will closely monitor US employment-related data to get fresh cues on the Federal Reserve’s (Fed) monetary policy outlook.

Economists expect the US ADP to show that private employers added 47K fresh workers after firing 32K in November. Meanwhile, new job postings by overall employers, as measured by the JOLTS Job Opening, are expected to come in at 7.64 million, almost in line with October’s reading of 7.67 million.

Signs of improving US job market conditions would weigh on expectations for more interest rate cuts by the Fed in the near term. On the contrary, soft numbers would prompt them.

The US ISM Services PMI is expected to come in lower at 52.3 from 52.6 in November, indicating that the service business activity continued to expand, but at a moderate pace.

Weak UK job market to keep BoE on downward monetary path

• The Pound Sterling trades broadly stable against its major currency peers during European trading hours. The British currency remains steady while investors brushed off market jitters driven by the US military action in Venezuela during the weekend.
• Earlier this week, market sentiment turned risk-averse after the US attacked Venezuela and captured its President, Nicolas Maduro, over drug-trafficking charges.
• Domestically, the United Kingdom (UK) economic calendar is light; therefore, market sentiment will remain the key driver for the Pound Sterling.
• On the monetary policy front, the Bank of England (BoE) is unexpected to ease monetary conditions aggressively this year as inflation is well above the central bank’s 2% target. However, the monetary policy path will remain downwards as labor market conditions are weak. In the three months ending October, the UK Unemployment Rate jumped to 5.1%, the highest level seen since March 2021.
• This week, the notable event for the GBP/USD pair will be the Nonfarm Payrolls (NFP) data for December, which will be released on Friday. Investors will pay close attention to the US official employment data to get fresh cues on the current state of the labor market. In 2025, the Fed delivered three interest rate cuts of 25 basis points (bps) and pushed them lower to the 3.50%-3.75% range due to weak job market conditions.

Technical Analysis: GBP/USD sees more upside if it holds above 1.3500

GBP/USD trades at 1.3495 at the time of writing. The 20-day Exponential Moving Average (EMA) rises and sits at 1.3445, underpinning the immediate bullish bias. Price holds above the 20-day EMA, keeping the short-term uptrend intact.

The 14-day Relative Strength Index (RSI) at 60 (neutral-to-bullish) confirms firm momentum without overbought conditions.

Measured from the 1.3791 high to the 1.3017 low, Fibonacci retracements could signal interesting support and resistance zones. The 61.8% Fibonacci retracement at 1.3495 acts as an immediate support. A decisive close above it could open the way toward the 78.6% Fibonacci retracement at 1.3625. On the contrary, a failure to hold 1.3495 would leave scope for consolidation, with the rising EMA at 1.3445 providing a near-term floor.

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

(This story was updated on January 7 at 11:00 GMT to reflect a last-minute consensus change in the ADP Employment Change for December to 47K.)

• USD/JPY consolidates around 156.50 ahead of US employment data.
• The US ADP is expected to show a 47,000 net increase in employment in December.
• Growing tensions between Japan and China have provided support to the safe-haven yen on Wednesday.

The Japanese Yen remains trading within a tight range against the US Dollar on Wednesday. The pair moves without a clear bias, both sides of the 156.50 line, with traders looking from the sidelines ahead of the release of key US employment figures later on the day.

The market, however, remains calm ahead of the release of the US ADP Employment Change, which is expected to show that the US economy created 47,000 jobs in December, to offset the 32,000 net losses seen in November.

Later on, the US Bureau of Labor Statistics (BLS) will release November’s JOLTS Job Openings, which are expected to have ticked down to 7.6 million from October’s 7.67 million. These figures will set the tone for Friday’s Nonfarm Payrolls report, and might provide some boost to USD volatility later on Wednesday.

On Tuesday, rising tensions between China and Japan escalated, as Beijing announced a ban on exports of dual-use goods to Japan that might be used for military purposes, in retaliation for Prime Minister Takaichi’s comments about Taiwan. This, coupled with Bank of Japan (BoJ) Governor Ueda’s comments reiterating the bank's commitment to keep hiking rates, has provided some support to the Yen.

The Greenback lost ground earlier in the week, as weaker-than-expected US ISM Manufacturing PMI figures and some dovish-leaning comments by Minneapolis Fed President Neel Kashkari endorsed the market’s view that the Fed might be forced to cut rates more than once in 2026.

US ISM Services PMI Preview

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

The ISM is expected to show that activities in the services sector grew again, but at a moderate pace. The Services PMI is seen at 52.3, lower than 52.6 in November. Investors will pay close attention to the Services PMI data as the related sector accounts for two-thirds of the US economy.

Apart from the Services PMI, investors will also focus on subcomponents of data, such as the Employment Index, the New Orders Index, and Prices Paid.

Weaker-than-projected US ISM Services PMI data would prompt expectations for interest rate cuts by the Federal Reserve (Fed) as policymakers have remained concerned about the economic outlook. However, better figures would be a relief for Fed officials, but will unlikely act as a major drag on Fed dovish expectations.

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

EUR/USD trades flat at 1.1690 at the time of writing. The pair sits below the 20-day Exponential Moving Average at 1.1719, which has begun to turn lower and caps rebounds.

The 14-day Relative Strength Index (RSI) at 45.7 (neutral) is descending, confirming weakening momentum and a heavier near-term tone.

Though indicators show that the short-term structure is bearish, the odds of a bullish reversal are high as the price is close to its key support near the December 4 high around 1.1670, which used to act as a key barrier for the pair. The major currency pair could face fresh downside towards the November 28 low of 1.1555 if it breaks below the December 4 high of 1.1670.

On the contrary, the pair could revisit an over three-month high of 1.1800 if it recovers above the January 6 high of 1.1743.

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

Russian Oil exports are declining sharply, impacting the nation’s export and budget revenues. In the four weeks to 4 January 2026, Russia shipped 3.43 million barrels a day, a decrease by c.440,000 barrels from the period ending 21 December 2025. The value of Moscow's exports averaged $960 million a week, representing a 10% decrease from the preceding period, Commerzbank's FX analyst Tatha Ghose notes.

Urals Crude drops below $35/bbl amid US sanctions

"The article includes a telling chart in which Bloomberg estimated Oil export sales from various regions of the country: aggregate export revenue fell almost exponentially in recent weeks to levels last seen when the Oil price cap was first introduced in 2022. This time around, the new US sanctions on systemic Oil companies are likely to have been responsible for the drop. At present, Urals Crude is trading below $35/bbl in both the Baltic and Black Sea, about 60% of its price as of 1 October 2025."

"Russia’s current account was reported to have improved slightly in Q3 of last year, but this is misleading as it pertains to a prior period. In any case, the current account may or may not actually deteriorate as a result of the Oil revenue drop, because GDP growth has also sharply decelerated (to just 0.1% y/y as of November, the slowest in 2025), which can boost the surplus by dampening import demand."

"As a result of visibly weaker fundamentals, USD/RUB is now trading noticeably higher than a month ago. In order to conserve resources, the CBR will also reduce FX sales during H1 2026 to RUB 4.6bn per day (down from RUB 8.9bn a day through H2 2025). The combination of reduced Oil revenue, smaller FX sales by the CBR, and reduced investment by the wealth fund (NWF) is likely to result in a weaker rouble exchange rate during 2026."

USD/JPY remains under last year’s double-top around 158.90 as China imposes export controls on goods with potential military use, though the yen shows little immediate reaction. Despite rising tensions, analysts see Japan and China entering a 'managed rivalry', with trade and diplomatic channels likely helping to contain economic disruption, BBH FX analysts report.

China imposes dual-use export controls on Japan

"USD/JPY is holding under last year’s double-top around 158.90. China escalated its diplomatic feud with Japan, but JPY implications are neutral. Yesterday, China imposed controls on exports to Japan with any military use. According to Bloomberg, China’s dual-use export control list features more than 800 items, ranging from chemicals, electronics and sensors to equipment and technologies used in shipping and aerospace."

"China justified the measure by citing last year’s remarks by Japanese Prime Minister Sanae Takaichi on Taiwan, hinting at the possibility of military intervention in the Taiwan Strait."

"Finding an exit from these tensions will be difficult because the crisis sets Japan’s security goals against China’s enduring drive to reclaim Taiwan. Instead, we sympathize with the view that Japan and China are entering a 'managed rivalry' rather than a complete rupture. Too much mutual prosperity depends on continued trade while diplomatic channels in both capitals provide crisis management tools."

US Dollar (USD) is expected to edge higher to 157.15; based on the current momentum, any further advance is unlikely to reach 157.50. In the longer run, USD is likely to trade in a range between 155.60 and 157.50, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

USD is likely to trade in a range

24-HOUR VIEW: "USD traded in a choppy manner between 156.09 and 157.29 two days ago. Yesterday, we stated that 'the sharp but short-lived swings have resulted in a mixed outlook', and we were of the view that USD 'could continue to trade in a choppy manner, likely between 156.20 and 157.20'. However, USD traded within a narrower range than expected (156.14/156.79), closing modestly higher at 156.62 (+0.15%). Despite the relatively quiet price action, there has been a slight increase in upward momentum. Today, we expect USD to edge higher toward 157.15. Based on the current momentum, any further advance is unlikely to reach 157.50. Support is at 156.55, followed by 156.30."

1-3 WEEKS VIEW: "There is not much to add to our update from yesterday (06 Jan, spot at 156.70). As highlighted, USD 'is likely to trade in range for now, most likely between 155.60 and 157.50'."

AUD/USD is leading G10 currencies in early 2026, approaching resistance at 0.6800, supported by inflation tracking above the RBA’s target range. The RBA’s pause in easing, coupled with expectations of rate hikes and improving capacity utilization, underpins a constructive outlook for the Australian Dollar (AUD), BBH FX analysts report.

RBA signals end of easing, hikes priced for 2026

"AUD leads G10 currencies in the new year, with AUD/USD eyeing next resistance at 0.6800. Australia inflation eased in November but remains above the RBA’s 2-3% target range. Headline CPI was 3.4% y/y (consensus: 3.6%) vs. 3.8% in October and the policy-relevant trimmed mean CPI matched consensus at 3.2% y/y vs. 3.3% in October. Headline and trimmed mean inflation are tracking the RBA’s December projection of 3.3% and 3.2%, respectively."

"At its last December meeting, the RBA stressed it’s done easing, warning 'the risks to inflation have tilted to the upside'. RBA cash rate futures imply nearly 50bps of hikes to 4.10% in 2026 which bodes well for AUD. For now, this seems reasonable given modest excess demand in the economy. The NAB measure of capacity utilization has improved above its long-term moving average, suggesting businesses are using more of their available productive capacity to meet demand."