Forex News
- The Aussie hits highs above 0.6700 against the USDS, after bouncing at 0.6660.
- Investors are starting to price an RBA interest rate hike in 2026.
- The US Dollar remains on the defensive on hopes of further Fed moneary policy easing.
The Australian Dollar is the best performer among major currencies in an otherwise calm start tobe the year. The Aussie appreciates nearly 0.5% against the US Dollar in the daily chart, so far, buoyed by a positive market sentiment and heightened hopes that the next move by the Reserve Bank of Australia (RBA) will ber a rate hike.
The hawkish comments by RBA Governor Michelle Bullock, after the December 9 monetary policy decision, and the minutes of the meeting, revealed that policymakers’ concerns about inflation have taken center stage, and that the possibility of a rate hike was at the table last month.
Consumer inflation accelerated to a 3.8% yearly pace in October, from 3.6% in September and 3.2% in August. November’s inflation report is due next week, and wage growth figures suggest that price pressures might have continued growing. If that is the case, bets of an upcoming RBA rate hike are likely to underpin the Aussie’s appreciation.
In the US, on the contrary, the Federal Reserve (Fed) is still halfway through its easing cycle. Recent US data has been fairly positive, including Wednesday’s weekly Jobless Claims figures, but that will not deter US President Donald Trump from replacing Chairman Jerome Powell with a dovish partisan at the end of his term in May.
Trading volumes remain thin on Friday, with markets in Japan and China closed on New Year’s festivities. The only event worth mentioning will be the US S&P Global Manufacturing PMI release, which is expected to confirm that the sector’s business activity eased to 51.8 in December from 52.2 in November, still at levels consistent with moderate activity growth.
(This story was corrected on January 2 at 08:00 GMT to say US S&P Global Manufacturing PMI, not US S&P Global Marketing PMI, as previously reported)
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
- The Pound is ticking higher, but remains capped below 211.60 resistance.
- The Yen struggles amid a mild risk appetite and thin trading volumes.
- UK Manufacturing PMI is expected to confirm that business activity accelerated in December.
The Sterling has opened the year in a mild bullish trend against the Japanese Yen, despite the overall New Year’s market lull, but remains capped below the top of the last two weeks’ range, at the 211.50 area.
The Yen is on its back foot on Friday amid a moderate market sentiment, with trading volumes at low levels as markets in China and Japan remain closed for the New Year festivities.
In the UK, the final S&P Manufacturing PMI release is expected to confirm that the sector’s activity accelerated to 51.2 in December from 50.2 in November. The release, however, will have a limited impact on the Pound, unless there is a significant revision of the preliminary estimations.
Technical analysis: Intraday charts show a bearish divergence
The GBP/JPY trades at 211.17, after an unsuccessful attempt to break the 211.50 area earlier on the day. The Relative Strength Index (RSI) stands at 57.50, highlighting a modestly bullish tone, añthough a bearish divergence with price action suggests the pòsibility of a bearish reversal.
Immediate support remains at the area between the trendline resistance, around 210.15, and the December 24 low, at 210.05A clear break of these levels is likely to increase pressure towards the mid-December lows, around 208.90.
Bulls, on the contrary, need to break long-term highs, at 211.59 (December 22 high). Above here, the 127.2% Fibonacci extension of the December 15-22 rally, at 212.75, and the 161.8% extension of the same cycle, at 214.38, emerge as the next potential targets.
(The technical analysis of this story was written with the help of an AI tool)
Japanese Yen Price Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.01% | 0.04% | 0.00% | -0.17% | -0.35% | -0.20% | -0.02% | |
| EUR | 0.01% | -0.09% | 0.04% | -0.16% | -0.40% | -0.19% | -0.00% | |
| GBP | -0.04% | 0.09% | 0.11% | -0.10% | -0.32% | -0.10% | 0.09% | |
| JPY | 0.00% | -0.04% | -0.11% | -0.17% | -0.48% | -0.27% | -0.01% | |
| CAD | 0.17% | 0.16% | 0.10% | 0.17% | -0.22% | -0.06% | 0.16% | |
| AUD | 0.35% | 0.40% | 0.32% | 0.48% | 0.22% | 0.21% | 0.40% | |
| NZD | 0.20% | 0.19% | 0.10% | 0.27% | 0.06% | -0.21% | 0.19% | |
| CHF | 0.02% | 0.00% | -0.09% | 0.01% | -0.16% | -0.40% | -0.19% |
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 Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
Forex Market News
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