Forex News

• The Australian Dollar weakens against a firmer US Dollar amid hawkish signals from the US central bank.
• Australian trade data show a wider surplus in December, driven by higher exports and lower imports.
• Markets are awaiting a speech from the Australian central bank governor later in the day.

AUD/USD trades lower on Thursday and is hovering around 0.6965 at the time of writing, down 0.45% on the day. The pair remains under pressure as the US Dollar (USD) benefits from a firmer bias, supported by hawkish signals from the Federal Reserve (Fed), while Australian macroeconomic data fail to provide strong support for the local currency.

The Australian Dollar (AUD) reacts modestly to the release of Australia’s Trade Balance data, which showed the surplus widening to 3.373 billion AUD in December, from 2.597 billion previously and slightly above market expectations. Exports rose 1.0% MoM, following a sharp contraction in November, mainly driven by metals and mineral ores, while imports fall 0.8%, weighed down by other manufactured goods. Despite these seemingly solid figures, the impact on the Australian Dollar remains limited in an environment dominated by external factors.

Regional activity indicators provide mixed support. In China, a key trading partner for Australia, the Services Purchasing Managers Index (PMI) improved in January, pointing to better economic momentum. In Australia, PMI data released by S&P Global showed a sharp acceleration in activity in January, with strong expansion in the Services sector and the Composite PMI reaching its highest level in nearly four years. These data confirm the resilience of the Australian economy, but they are not enough to reverse the negative trend of the AUD against the Greenback.

On the monetary policy front, the Reserve Bank of Australia (RBA) recently raised its policy rate by 25 basis points to 3.85%, citing stronger-than-expected growth and persistent inflationary pressures. During the post-meeting press conference, Governor Michele Bullock stressed that inflation remains too high and that a return to target will take longer, while reaffirming a data-dependent approach. Market attention now turns to her speech scheduled later in the day, which could provide fresh guidance on the future direction of monetary policy.

On the US side, the US Dollar Index (DXY), which tracks the greenback’s performance against a basket of major currencies, holds up near 97.77. The US Dollar is supported by investors reassessing expectations toward a slower pace of rate cuts. Several Fed officials have emphasized the need for clearer evidence of easing inflation before considering further rate reductions, lending additional support to the US currency.

Against this backdrop, AUD/USD dynamics remain driven by the divergence in tone between central banks and the relative strength of the US Dollar, despite mixed signals from economic data.

ING analysts Min Joo Kang, Chris Turner, and Padhraic Garvey provide insights into the upcoming Japanese election and its implications for the economy, bonds, and the Yen. PM Sanae Takaichi is expected to secure a significant victory, which could lead to higher JGB yields and potential USD/JPY strength. The report discusses the balance between spending and fiscal sustainability in Japan's economic landscape.

Takaichi's election and economic implications

"Takaichi needs to find a balance between more spending and fiscal sustainability. Structural changes in the economy should send JGB yields higher. We believe it is a path towards a normal economy."

"If the LDP secures a majority in the lower house, Takaichi could speed up tax cut talks. She will argue that she has the public mandate. But a consensus still needs to be reached by the national council."

"We expect that the economy will return to a normal state after experiencing many years of deflation. While fiscal sustainability may contribute to higher yields, we think economic normalisation plays a stronger role in driving yields upward."

"A positive election result for the LDP that would pump more air into the 'Takaichi trade' is a USD/JPY positive. USD/JPY could even approach 160/162 levels again on the back of this."

"In all, we forecast USD/JPY to bounce around in a 155-160 range through the first half of the year and then 50bp of Fed rate cuts to drag it closer to 150 by year-end."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

MUFG's report, authored by Lee Hardman, Senior Currency Analyst, addresses the recent strength of the Swedish Krona and the Riksbank's response. Following strong gains, the Riksbank has expressed concern over the potential for disinflation risks due to the strengthening Krona. Minutes from the last policy meeting indicated that a rate cut could be considered if inflation continues to fall. This has led to a correction in the Krona's value against the Euro.

Riksbank's response to currency strength

"After such strong gains, the ongoing strength of the krona is starting to attract more concern amongst Swedish policymakers."

"Yesterday’s minutes revealed that Riksbank Deputy Governor Per Jansson couldn’t rule out voting for a rate cut at the next policy meeting on 18th March."

"The dovish comments from the Deputy Governor have encouraged the Swedish rate market to price back in a higher likelihood of further rate cuts this year, and triggered a sharp correction lower for the krona."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

• The Dow Jones sank 650 points on Thursday.
• Market rotation out of the AI rally has spread to ‘economic’ stocks.
• US economic data sours as job cuts soar and unemployment claims rise.

The Dow Jones Industrial Average (DJIA) took another header on Thursday, tumbling 650 points and following the rest of the market lower as investors rotate firmly into a flight for safety. Broader equity indexes are down across the board, and the VIX “fear index” is sitting at its highest levels since last November.

Equity rout drags crypto and metals markets lower

The Dow Jones’ 650-point (-1.3%) tumble was matched by a 100-point decline (-1.44%) in the S&P 500 and an accelerating 415-point (-1.82%) drop in the tech-heavy Nasdaq. Despite posting upbeat earnings, Google parent Alphabet (GOOGL) shares sank over 5% after investors balked at the tech giant’s expected AI capex rising to $185 billion in 2026. Qualcomm (QCOM) also fell around 8% as the global AI-fueled chip memory shortage forced the company to soften its forward guidance for the upcoming year.

Spot Gold and Silver prices are taking fresh hits on Thursday. Spot Gold prices are down 2.2% on the day, with Silver bids down sharply, sinking 15.5%. Bitcoin also turned even more bearish, falling nearly 8% and sinking below 68,000 for the first time since late 2024.

US economic data continues to sour

Investors are struggling to shrug off downbeat US economic data. US Initial Jobless Claims rose to 231K, well above the 212K forecast. US Challenger Job Cuts also soared, hitting 108.435K net job reductions, the worst January print since the tail end of the global financial crisis in 2009. JOLTS Job Openings also took a turn for the worse, sinking to 6.542M versus the expected upswing to 7.2M.

Dow Jones Daily chart

Technical Analysis

In the daily chart, DJIA trades at 48,846.92. Price sits above a rising 50-day EMA at 48,558.27 and remains well above the 200-day EMA at 46,128.31, keeping the medium-term trend pointed higher. The Stochastic (14,5,5) has eased from overbought to 52.65, signaling moderating upside momentum and scope for consolidation.

The trend bias stays bullish while the short-term EMA climbs and maintains its lead over the long-term measure. If momentum fades further, price could pull back toward support at 48,558.27, with deeper support at 46,128.31. A renewed uptick in the oscillator would revive the advance, keeping the focus on trend continuation rather than reversal.

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

• The ECB keeps interest rates unchanged and reaffirms a data-dependent approach.
• The Canadian Dollar remains weighed down by falling Oil prices.
• Investors await the Bank of Canada Governor’s speech later in the day.

EUR/CAD trades around 1.6130 on Thursday at the time of writing, virtually unchanged on the day, as markets digest the European Central Bank’s (ECB) policy decision and monitor Canada-specific factors.

The European Central Bank announced on Thursday, following its February meeting, that it kept its key interest rate unchanged at 2.15% in line with market expectations. In its statement, the ECB said that the Eurozone economy remains resilient in a challenging global environment, supported by low unemployment and solid private sector balance sheets.

The central bank nevertheless acknowledged that the outlook remains uncertain, particularly due to persistent geopolitical tensions and uncertainty surrounding global trade policies. 

Speaking at the press conference, ECB President Christine Lagarde stated that risks to growth and inflation are broadly balanced. She reaffirmed the institution’s determination to bring inflation back to its 2% target over the medium term, while stressing that future decisions will remain strictly data-dependent and taken on a meeting-by-meeting basis, without pre-committing to a specific rate path.

On the Canadian side, the economic calendar has been light this week, leaving the Canadian Dollar (CAD) more exposed to commodity price movements. Lower Oil prices are acting as a headwind to any recovery attempt by the currency. The price of West Texas Intermediate (WTI) US Oil falls by around 2.10% on the day and trades near $62.80 at the time of press, weighed down by easing supply concerns following a de-escalation of tensions between the United States and Iran.

Against this backdrop, market attention now turns to remarks from Bank of Canada (BoC) Governor Tiff Macklem, scheduled later in the day, which could provide fresh insight into the assessment of economic conditions and the outlook for monetary policy in Canada, with potential implications for EUR/CAD.

United States (US) Treasury Secretary Scott Bessent said he supports US President Donald Trump's call for a cap on credit card interest rates at 10%. At a Senate Banking Committee hearing on Thursday, he added that Trump's nominee to Fed Chair, Kevin Warsh, is "highly qualified" for the job.

Key quotes

Whether to sue Warsh over Fed interest rate policy is up to President Trump.

Warsh is highly qualified to be Fed chair.

Wholeheartedly supports Trump's call for cap on credit card interest rates at 10%.

Interested in Fannie Mae and Freddie Mac fulfilling their missions to keep mortgage rates low. Will absolutely not support lowering tariffs on Canadian goods.”

The report by Commerzbank, authored by Michael Pfister, discusses the challenges faced by the Swiss National Bank (SNB) in managing the strong Swiss Franc (CHF) and its implications for inflation. With EUR/CHF levels below 0.92, the SNB's options for intervention are limited, and the strength of the franc is contributing to lower imported inflation. The report highlights the potential for further appreciation of the CHF and the risks associated with the SNB's response.

Challenges for the Swiss National Bank

"With EUR-CHF levels below 0.92, discussions about the SNB's options for weakening the franc have picked up again. However, it is also important to assess how much of this movement was actually driven by the franc, and to what extent this will impact Swiss inflation."

"A strong franc means weaker imported inflation, which poses an additional problem for such an open economy facing already low inflationary pressure. Two questions are central to assessing this issue: How much franc strength could be too much for the SNB?"

"The most obvious short-term option for the SNB would be to respond to a stronger franc by intervening in the FX market to weaken the currency. This would enable the SNB to react quickly, particularly between meetings."

"If the pace of appreciation accelerates significantly, it will probably only slow it down. The SNB can do little to counter the main reasons for a stronger franc through intervention or negative interest rates anyway."

"In the coming months, hopes will likely rest solely on the euro to lift EUR-CHF. If growth finally picks up, especially in Germany, and politicians do not resist a stronger euro, the euro is likely to benefit from any turbulence in the US as an alternative."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

• GBP/USD slides after a 5–4 'dovish' hold by the Bank of England kept rates unchanged at 3.75%.
• Governor Andrew Bailey flagged scope for further easing as inflation is projected to undershoot the target.
• Weak US labor data lifted Fed cut bets, but Sterling losses persisted despite rising expectations of Federal Reserve easing.

The Pound Sterling (GBP) collapses against the US Dollar (USD) on Thursday after the Bank of England (BoE) decided to hold rates but opened the door for further easing, in a decision seen as a 'dovish hold.' Worse-than-expected US jobs data failed to halt the GBP/USD downfall, trading at 1.3529, down 0.90%.

Sterling tumbles after a split BoE decision signaled easing ahead

Earlier, the BoE, on a 5-4 vote split, kept the Bank Rate at 3.75%, though some of the comments of the BoE’s Monetary Policy Committee (MPC), despite voting for a pause, provided dovish signals. Governor Andrew Bailey said that there is scope for further easing, but it is not exactly clear when and expects “quite sharp” inflation drop.

In its projections, the BoE expects inflation to hit the 2% target in Q1 2028, projected to be at around 1.8%. Regarding economic growth, the GDP in 2026 is projected to rise 0.9%, in 2027 at 1.5%, and in 2028 will hit 1.9%. Wage growth is foreseen to remain steady at 3.25%.

After the data traders had fully priced in the first rate cut in April. Ahead of the meeting, money markets saw 72% chance of an interest rate reduction, according to Prime Market Terminal data.

Across the pond, a tranche of jobs data increased the odds for a rate cut by the Federal Reserve (Fed). The Challenger, Gray & Christmas job cuts report revealed that companies announced 108.435K layoffs, a 118% increase from a year before. The data showed that hiring intentions contracted 13%.

Initial Jobless Claims revealed by the Department of Labor missed estimates of 212K, rose sharply to 231K in the week ending January 31. In the meantime, the Job Openings and Labor Turnover Survey (JOLTS) for December fell, showing that companies are growing reluctant to hire people. Vacancies declined from 6.928 million in November to 6.542 million, beneath estimates of 7.2 million.

Weak US jobs data pushed traders to price in further easing by the Federal Reserve. Before the release of economic data, they priced 50 bps of rate cuts. As of writing, the needle increases to 56 bps.

What’s in the docket for February 6?

The UK schedule will feature a speech by BoE’s Chief Economist Huw Pill. In the US, the docket will feature Fed speeches and the University of Michigan Consumer Sentiment.

GBP/USD Price Forecast: Technical outlook

GBP/USD is plunging sharply, clearing bulls’ last line of support at 1.3567, the January 6 high. If the pair closes Thursday’s session below the latter, expect a test of 1.3500 in the short term. On further weakness, sellers could push prices to the 50-day SMA at 1.3471, ahead of the 200-day SMA at 1.3471.

Conversely, if buyers regain 1.3567, they could remain hopeful of testing 1.3600, but it would depend on further deterioration of the US economic outlook.