Forex News
Federal Reserve (Fed) Board of Governors member Christopher Waller said he dissented in favor of a 25 bps interest rate cut this week because monetary policy is still restricting economic activity too much, in a statement released on Friday.
Key takeaways
Dissented in favor of 25-basis point cut at last meeting because policy is still restricting activity too much.
Labor market remains weak despite solid economic growth.
Labor market does not look remotely healthy, and while supply was a factor, demand is weak.
Inflation is elevated from tariffs but monetary policy should look through those effects given anchored expectations.
Expects weak job numbers from last year to be revised lower to reflect virtually no growth in payroll employment in 2025.
Policy should be closer to neutral, perhaps around 3% vs current rate range of 3.50% to 3.75%.
Heard of multiple layoffs planned for 2026 with considerable doubt about job growth and significant risk of a substantial deterioration.
Inflation excluding tariffs is near fed's 2% goal and on path to reach it.”
- GBP/USD falls as Trump names Kevin Warsh Fed Chair nominee, triggering a rebound in the US Dollar.
- US PPI surprises higher, backing the Fed’s decision to hold rates amid persistent inflation pressures.
- Focus turns to next week’s BoE meeting and guidance on the future policy path.
The Pound Sterling (GBP) retreats on Friday, remaining below 1.3800 against the US Dollar (USD) after the Trump administration announced that Kevin Warsh would lead the Federal Reserve (Fed). Additionally, a red-hot inflation report on the producer front boosted the Greenback’s appeal.
Sterling weakens as Kevin Warsh’s Fed nomination, strong PPI reinforces a firmer Dollar tone
GBP/USD trades at 1.3720, down 0.60% at the time of writing. US President Donald Trump announced via Truth Social that he is nominating Warsh to serve as Chairman of the Fed. Since the breaking news emerged, the buck has recovered some ground, according to the US Dollar Index (DXY).
The DXY, which measures the performance of the buck’s value against six currencies, is up 0.50% to 96.64.
The US Bureau of Labor Statistics reported that the Producer Price Index (PPI) for December rose by 3% YoY, unchanged from November but exceeding forecasts for a drop to 2.7%. Core PPI, which excludes food and energy prices, expanded even higher by 3.3% YoY, missing estimates of 2.9%, above the prior month 3% increase.
The data support the Fed’s decision to hold rates on Wednesday. Fed Chair Jerome Powell expressed that the labor market has stabilized but that inflation remains too high.
A scarce economic docket in the UK kept traders focused on dynamics linked to the US Dollar. Nevertheless, investors' focus is on next week’s Bank of England (BoE) monetary policy meeting in which the Bank Rate is expected to remain on hold.
Data from Prime Market Terminal suggests that the BoE would ease policy by 37 basis points toward the end of the year.
Aside from this, traders’ eyes are on the vote split and the update to economic projections, which could pave the way for the path of interest rates.
Next week, the UK economic docket will feature speeches by BoE policymakers and the central bank’s monetary policy decision. In the US, the ISM Manufacturing and Services Purchasing Managers Indices (PMI), speeches by Fed officials, jobs data and the University of Michigan Consumer Confidence.
GBP/USD Price Forecast: Technical outlook
GBP/USD is still biased upward even though it retreats to new three-day lows. Momentum as depicted by the Relative Strength Index (RSI) shows that sellers are stepping in, but unless they push the pair below January 6 high turned support at 1.3567, further upside is seen.
If GBP/USD drops below the January 6 peak, it will clear the way to challenge 1.3500. A breach of the latter will expose the 50-day SMA at 1.3433.
On the upside, GBP/USD must remain above 1.3700. The next key resistance levels are 1.3800, followed by the yearly peak at 1.3869.
Pound Sterling Price This Month
The table below shows the percentage change of British Pound (GBP) against listed major currencies this month. British Pound was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.18% | -1.75% | -1.25% | -1.20% | -4.79% | -4.46% | -2.85% | |
| EUR | 1.18% | -0.64% | 0.06% | 0.05% | -3.30% | -3.25% | -1.62% | |
| GBP | 1.75% | 0.64% | 0.68% | 0.70% | -2.68% | -2.63% | -0.99% | |
| JPY | 1.25% | -0.06% | -0.68% | -0.02% | -3.48% | -3.69% | -1.49% | |
| CAD | 1.20% | -0.05% | -0.70% | 0.02% | -3.45% | -3.67% | -1.67% | |
| AUD | 4.79% | 3.30% | 2.68% | 3.48% | 3.45% | 0.05% | 1.73% | |
| NZD | 4.46% | 3.25% | 2.63% | 3.69% | 3.67% | -0.05% | 1.67% | |
| CHF | 2.85% | 1.62% | 0.99% | 1.49% | 1.67% | -1.73% | -1.67% |
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 British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
White House advisor Kevin Hassett said that he is not disappointed about being passed over for the Federal Reserve (Fed) Chairman position and that US President Donald Trump made "a great choice" nominating Kevin Warsh. He also claimed that legal issues with the Fed should be resolved quickly, in an interview for CNBC on Friday.
Key quotes
Not disappointed about being passed over for Fed chair.
Warsh can speak to what president wants from monetary policy.
A confident can have high growth with low inflation.
PPI inflation data is different than consumer inflation data.
Inflation is not far from its target, fed made mistake not cutting rates this week.
Legal issues with fed should be resolved quickly.
Trump white house wants Warsh confirmed quickly.
Market interest rates should go down because of lower deficits.
Trump government is being 'super fiscally responsible'.
Warsh can speak for himself on monetary policy.
There are a lot of good reasons to want a strong dollar.”
(This story was corrected on January 30 at 16:26 GMT to correct a mispelling of Kevin Hassett's surname in the headline.)
Rabobank analysts expects the ECB to maintain the deposit rate at 2.00% through 2026, with two rate hikes anticipated in March and June 2027. Analysts notes that while the Euro's appreciation may prompt verbal intervention, it believes the currency can rise further before necessitating any policy changes.
ECB policy outlook and Euro performance
"We expect the ECB to leave the deposit rate unchanged at 2.00%."
"The burden of proof for any cut or hike is very high. We see the ECB on hold through 2026."
"The euro’s gains may draw some verbal intervention, but we believe the currency can appreciate quite a bit further before it would warrant another cut."
"We still have two rate hikes pencilled in, in March 2027 and June 2027."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- USD/CAD rebounds as easing fears over Fed independence and stronger US inflation data lift the US Dollar.
- Markets take comfort from a more institutional Fed leadership outlook, despite lingering political pressure on the central bank.
- Canada’s GDP stalls in November, offering limited support for the Loonie.
The Canadian Dollar (CAD) weakens against the US Dollar (USD) on Friday, as the Greenback regains some ground after concerns over the Federal Reserve’s (Fed) independence eased somewhat following US President Donald Trump’s decision to nominate a former Fed Governor as the next Fed Chair.
At the time of writing, USD/CAD is trading around 1.3520, up 0.22% on the day, but the pair remains on track for a second consecutive weekly decline.
Concerns over the Fed’s independence were a key driver behind the US Dollar’s recent slide to a four-year low. However, investors have taken some comfort from the prospect of Kevin Warsh, who is widely viewed as a more institutional candidate and likely to preserve the central bank’s independence.
Given Trump’s repeated calls for lower interest rates, markets had feared that his choice for the next Fed Chair could tilt US monetary policy onto a more politically driven and dovish path. While Kevin Warsh has recently aligned himself with Trump’s calls for more aggressive rate cuts, he is traditionally known as an inflation hawk, leading investors to view him as less supportive of deep and rapid interest rate reductions.
That said, broader concerns over the Fed’s independence have not fully faded. Trump has continued to publicly criticise Fed Chair Jerome Powell for not cutting interest rates and has also attempted to remove Fed Governor Lisa Cook, a case that is now before the US Supreme Court. In addition, reports of a recent criminal investigation involving Powell have kept political risk around the central bank in focus.
The US Dollar also finds support from hotter-than-expected Producer Price Index (PPI) data. Headline PPI rose by 0.5% MoM in December, accelerating from 0.2% in November and beating market expectations. On an annual basis, producer prices increased by 3.0%, matching the previous reading and coming in above forecasts of 2.7%.
Core PPI surprised even more to the upside, rising 0.7% MoM in December, well above expectations of 0.2% and the prior 0.0% reading. On a yearly basis, core producer prices climbed to 3.3% from 3.0%, also exceeding market estimates of 2.9%.
The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, is trading around 96.80, rebounding after hitting a four-year low near 95.56 earlier this week.
On the Canadian side, data showed that the economy stalled in November, with GDP flat on the month after contracting by 0.3% previously and missing expectations for a 0.1% increase, offering little support to the Loonie.
However, rising Oil prices help limit the downside for the Loonie, as Canada is a major crude exporter. WTI is hovering near $65.24 a barrel, its highest level since September 26.
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.
The UBS Weekly Blog by Paul Donovan discusses the rapid decline of the US Dollar this year. It highlights that while a weaker currency typically correlates with higher inflation, modern trading behaviors have diminished this narrative. The report emphasizes that the Dollar's decline may be less impactful on the US affordability crisis compared to tariffs, and any inflationary effects are likely to be gradual due to existing contracts.
Impact of Dollar weakness on inflation
"Traditionally, a weaker currency is associated with higher inflation. Modern trading behavior has weakened that narrative, however."
"The dollar’s decline is likely to be less relevant to the US affordability crisis than were tariffs."
"The result is that while dollar weakness might have some effect on US inflation (mainly via commodity prices), the impact is less severe than with tariffs."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- The AUD/USD pair corrects after reaching a three-year high, amid profit-taking.
- Australian producer price data confirm stable inflation at the end of the year.
- The US Dollar regains some ground, supported by political and budget-related developments in the US.
AUD/USD trades around 0.7000 on Friday at the time of writing, down 0.60% on the day, after retreating from a three-year high reached earlier this week. The pair thus snaps a three-day winning streak, amid a technical correction and a modest recovery in support for the US Dollar (USD).
The Australian Dollar (AUD) remains under pressure following the release of Australia’s Producer Price Index (PPI), which rose 3.5% YoY in the fourth quarter of 2025, unchanged from the previous quarter. These figures point to stable upstream inflation, with no further acceleration, limiting immediate enthusiasm for the Australian currency. Nevertheless, the Australian Dollar retains underlying support after hotter-than-expected consumer inflation data released earlier this week strengthened expectations of near-term monetary tightening.
Markets now price in more than a 70% probability of a 25-basis-point rate hike by the Reserve Bank of Australia (RBA) at its next meeting, from a current cash rate of 3.6%. Rate expectations also point to levels near 3.85% by May and around 4.10% by September, which could eventually limit the extent of the AUD/USD pullback.
On the US side, the US Dollar (USD) manages to recover part of its recent losses. The announcement of Kevin Warsh’s appointment as head of the Federal Reserve (Fed), replacing Jerome Powell, has reassured investors about the central bank’s independence. In addition, reports suggesting that a budget agreement between Democrats and Republicans in Congress remains possible have revived hopes of avoiding another government shutdown, providing additional support to the Greenback.
In the background, the latest US producer price data show inflation remaining firm. The Producer Price Index rose 3% YoY in December, above market expectations, while the core component also accelerated to 3.3% YoY. This combination of factors contributes to a temporary rebalancing in favor of the US Dollar, weighing on AUD/USD in the short term despite still-supportive monetary policy prospects in Australia.
Australian Dollar Price Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.41% | 0.37% | 0.82% | 0.25% | 0.39% | 0.09% | 0.38% | |
| EUR | -0.41% | -0.04% | 0.37% | -0.16% | -0.02% | -0.34% | -0.03% | |
| GBP | -0.37% | 0.04% | 0.45% | -0.11% | 0.03% | -0.28% | 0.01% | |
| JPY | -0.82% | -0.37% | -0.45% | -0.57% | -0.43% | -0.75% | -0.45% | |
| CAD | -0.25% | 0.16% | 0.11% | 0.57% | 0.13% | -0.18% | 0.12% | |
| AUD | -0.39% | 0.02% | -0.03% | 0.43% | -0.13% | -0.31% | -0.02% | |
| NZD | -0.09% | 0.34% | 0.28% | 0.75% | 0.18% | 0.31% | 0.29% | |
| CHF | -0.38% | 0.03% | -0.01% | 0.45% | -0.12% | 0.02% | -0.29% |
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 Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
TD Securities' Ryan McKay highlights a shift in oil market fundamentals, suggesting a potential pull-back in prices. The report indicates that a loosening of near-term fundamentals could reduce crude oil prices by at least $2-3/bbl, while geopolitical risks may also impact market dynamics. The analysis notes that supply issues are easing, with increased export flows from key regions.
Oil market facing bearish pressures
"We expect that a loosening of near-term fundamentals could shave at least $2-3/bbl off the latest crude oil rally, and should see the aggressive backwardations ease. We note that a major supply-altering event in Iran would nullify this, but also highlight that additional downside is possible should the easing of geopolitical risk premium coincide with the weakening fundamentals."
"Supply side issues that supported the market are now easing. Export flows from the port of Novorossiysk should recover notably as the third mooring (SPM-3) at CPC terminal is back from maintenance."
"Near-term demand could also take a hit as it appears the Chinese inventory stockpiling impulse has paused in January, with inventories actually drawing throughout the month. Furthermore, peak refinery turnaround season is around the corner, which will reduce refiner demand, leaving additional barrels available to the market."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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