Forex News

• EUR/JPY bounces at 184.60 and returns above 185.00 on Friday.
• Market concerns about the outcome of Japan's elections are hurting the Yen.
• The Euro shows a mild bullish tone supported by the ECB's "hawkish hold".

The Euro (EUR) has resumed its immediate bullish trend against the Japanese Yen (JPY) on Friday. The pair is trading at 185.25 at the time of writing, up from session lows at 184.40, with the JPY losing ground against its main peers ahead of this weekend’s snap elections.

The Yen has been one of the weakest-performing currencies among the G8 majors for the second consecutive week, as investors remain wary that the elections might grant Prime Minister Sanae Takaichi stronger support to continue her expansive fiscal policies, with risks of a debt crisis looming.

Takaichi is likely to obtain a landslidevictory

Takaichi is enjoying increasing popularity, and the latest polls are clearly favourable. A local newspaper reported that the ruling Liberal Democratic Party (LDP) and its coalition partner could secure as many as 300 of the 465 seats in the Japanese Lower House, a result that might allow Takaichi to rule without coalition restrictions, a scenario that spooks markets.

In Europe, data from Germany has been far from supportive on Friday, as December’s Industrial Production contracted well beyond expectations. The Euro, however, maintains a mild bullish tone supported by the hawkishly leaning message by the European Central Bank (ECB) on Thursday.

The ECB left interest rates on hold at 2% but also maintained its inflation projections steady and unchanged, downplaying concerns about the deflationary effects of a strong Euro. Christine Lagarde reiterated that monetary policy is in a “good place” and hinted at steady interest rates for the foreseeable future.

(This story was corrected on February 06 at 13:10 GMT to say that the Liberal Democratic Party (LDP) and its coalition partner could secure as many as 300 of the 465 seats in the Japanese Lower House, and not that the Liberal Democratic Party (LDP) could secure as many as 300 of the 450 seats as previously stated.)

There have been remarks from several European Central Bank (ECB) officials during the European trading session on Friday regarding the current state and outlook on inflation and interest rates. Also, a few members talked about the likely consequences of external environment on the Eurozone economy and monetary policy.

ECB policymaker and governor of Bank of France François Villeroy de Galhau

The ECB has no FX target, but it's important for activity.

We are in a good place on inflation.

Downside inflation risks are probably more significant.

ECB official and Finnish Central Bank Governor Olli Rehn

At our next meeting in March, we will receive new data and an update of the ECB's forecasts, which will allow us to refine our assessment of the euro area's growth momentum and inflation dynamics.

We must all be prepared for the fact that geopolitical developments may still bring new surprises, we must be ready to react to them.

ECB member and Governor of Bank of Spain José Luis Escrivá

Inflation is at target, expectations are anchored.

ECB policymaker and Governor of Bank of Greece Yannis Stournaras

We are monitoring exchange rates.

We are in a stable equilibrium.

We are quite confident in Europe.

Euro increase hasn't been dramatic.

Market reaction

There seems to be no major impact of comments from several ECB members on the Euro (EUR). The EUR/USD pair trades broadly sideways around 1.1800 from the start of the European trading session, holding early gains.

Rabobank's Teeuwe Mevissen discusses the European Central Bank's recent decision to maintain interest rates unchanged at 2% for the fifth consecutive meeting. The ECB's tone remains constructive, citing low unemployment and strong private-sector balance sheets, but it also warns of persistent geopolitical risks. The report highlights the recent EUR/USD rally and President Lagarde's acknowledgment that a stronger euro could contribute to lower inflation.

ECB maintains steady rates

"The ECB left rates unchanged yesterday, keeping the deposit rate at 2% for the fifth consecutive meeting. No forward guidance was provided, and the Governing Council judged that risks remain broadly balanced."

"The ECB struck a generally constructive tone, citing low unemployment, strong private-sector balance sheets, and ongoing investment in defence and infrastructure."

"As expected, questions arose about the recent EUR/USD rally, which briefly pushed the pair to 1.2044 eight days ago, yet President Lagarde remained calm despite acknowledging that a stronger euro could contribute to lower inflation."

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

• The Indian Rupee extends correction against the US Dollar after the RBI’s policy decision.
• The Indian central bank kept the Repo Rate steady at 5.25%, as expected.
• Accelerating dovish Fed expectations have put some pressure on the US Dollar.

The Indian Rupee (INR) falls sharply against the US Dollar (USD) during afternoon trading hours in India on Friday. The USD/INR pair recovers to near 90.85, even as the Reserve Bank of India’s (RBI) monetary policy announcement has held the Repo Rate unchanged at 5.25%, as expected.

The RBI was expected to maintain the status quo as it reduced the Repo Rate by 125 basis points (bps) in 2025, as price pressures have rebounded in the past few months, and the announcement of trade deals with the United States (US) and the European Union (EU) has lifted growth prospects. The Indian central bank has maintained a “neutral” stance on the monetary policy outlook, citing that India’s economy is in a “good spot” even as global uncertainties remain “elevated”.

In the post-monetary policy conference, Governor Sanjay Malhotra said, "The policy rates will continue to be at low levels for a long period of time (and) they will go down even further," The Hindu reported.

On the economic outlook, the RBI expects higher-than-projected real Gross Domestic Product (GDP) over the next two quarters on the back of trade deals and said it will provide fresh GDP projections at the April policy meeting.

The Indian Rupee has outperformed over the past few days following confirmations from India and the United States (US) that both will reduce tariffs. On Monday, US President Donald Trump said through a post on Truth Social that tariffs on imports from New Delhi will be lowered to 18%, from 50% prior, and there will be zero tariff charged on exports from Washington to India, which was later acknowledged by Indian Prime Minister (PM) Narendra Modi.

The event led to a sharp increase in the Indian Rupee, strong demand for Indian stocks, and a significant inflow of foreign funds into the Indian equity market. However, the lack of follow-up buying by Foreign Institutional Investors (FIIs) is weighing on market sentiment.

According to data from the National Stock Exchange (NSE), FIIs turned out to be net sellers on Thursday, offloading their stake worth Rs. 2,150.51 crore. On Tuesday, a day after the US-India trade truce, FIIs bought shares worth Rs. 5,236.28 crore.

Daily Digest Market Movers: US NFP to drive Fed expectations meaningfully

• The US Dollar struggles to extend its week-long rally on Friday as prospects of the Federal Reserve (Fed) reducing interest rates have improved, following a string of weak labor market data.
• At the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.1% lower to near 97.85. Still, the DXY is close to its weekly high of 97.98 posted on Thursday.
• The CME FedWatch tool shows that traders see a 22.7% chance that the Fed will cut interest rates by 25 basis points (bps) to 3.25%-3.50% in the March policy meeting, up from 9.4% seen on Wednesday.
• The US JOLTS Job Openings data for December showed on Thursday that employers posted 6.542 million fresh jobs, significantly lower than estimates of 7.2 million and the previous reading of 6.928 million.
• On Wednesday, the ADP reported that the private sector created 22K jobs in January, fewer than 37K in December.
• A majority of Federal Open Market Committee (FOMC) members have been expressing concerns over weak labor market conditions, citing the need for more interest rate cuts to support the same.
• For more cues on the current state of employment, investors will focus on the Nonfarm Payrolls (NFP) data for January, which will be released on Wednesday. The data has been delayed due to a partial federal shutdown, which resumed on Tuesday.

Technical Analysis: USD/INR reclaims 20-day EMA

USD/INR jumps to near 90.85 at the press time. The pair recovers to near the 20-day Exponential Moving Average (EMA) at 90.95.

The 14-day Relative Strength Index (RSI) rebounds to near 50 (neutral), indicating buying interest at lower levels.

As long as the spot remains under the 20-EMA, rallies could stall, and the pair would continue to test lower levels. A recovery through the 20-EMA at 90.9282 would improve tone and open room for stabilization, while failure to reclaim it would preserve downside risk.

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

MUFG’s Lee Hardman notes that the Japanese Yen remains weak against the Dollar ahead of Japan’s Lower House election, with short JPY positions yet to see the broad liquidation seen in other trades. He links the move to global risk-off conditions, a sharp correction in speculative assets, and weaker US labour data that support expectations for further Federal Reserve rate cuts and US Dollar weakness.

Position liquidation and labor market concerns

"The yen has continued to trade on a weaker footing ahead of this weekend’s Lower House election in anticipation that Prime Minister Takaichi’s decision to call a snap election will pay off and strengthen her grip on power in Japan."

"Short yen positions have not yet been caught up in the broad-based position liquidation that been taking place in other popular trades at the start of this year."

"The sharp correction lower in precious metals and cryptocurrencies has started to spill-over into global equity markets at the end of this week triggering more risk-off trading conditions heading into the weekend."

"The reports support our view that weak labour demand will keep pressure on the Fed to lower rates further this year under the new Fed chair, and support our forecasts for further US dollar weakness."

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

• Silver attempts to extend gains past $75.00 after bouncing from lows near $64.00.
• The precious metal has dropped nearly 30% over the last two weeks.
• XAG/USD technical picture remains bearish while below the $92.00 area.

Silver (XAG/USD) is trimming some losses during Friday’s early European session, trading right above $74.00 at the time of writing, after hitting fresh seven-month lows near $64.00 earlier on the day. The pair, however, remains capped below a previous support area, in the vicinity of $75.00.

The white metal has dropped nearly 30% over the last two weeks, weighed down by investors' relief after US President Trump appointed Kevin Warsh as the replacement for Jerome Powell as the central bank’s chairman, and by easing geopolitical tensions, as the US and Iran opened negotiations to avoid a conflict.

Technical Analysis: XAG/USD remains bearish while below $92.00Chart Analysis XAG/USD

XAG/USD is picking up from lows, with the technical picture showing a bearish scenario. The 50-period Simple Moving Average (SMA), which acted as a dynamic support during the bullish cycle, extends its decline, with the pair holding beneath it. The Moving Average Convergence Divergence (MACD) line has slipped back below the zero line, and the Relative Strength Index (RSI) remains below 50, indicating weak traction.

Silver's recovery found resistance at the $75.00 area, which is holding bulls for now. Further up, the pair might find resistance at an intraday level around $81.00. Key resistance is at Wednesday's high in the area of $92.00.

Immediate support is at the daily low of $64.08, below that level, the $60.00 round level, and early December lows, in the $56.00 area, might come into focus

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

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Silver prices (XAG/USD) fell on Friday, according to FXStreet data. Silver trades at $73.54 per troy ounce, down 0.14% from the $73.64 it cost on Thursday.

Silver prices have increased by 3.45% since the beginning of the year.

The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 65.90 on Friday, up from 65.34 on Thursday.

(An automation tool was used in creating this post.)

The European Central Bank (ECB) has decided to keep interest rates unchanged for the fifth consecutive meeting, following significant cuts in previous months. The ECB's current stance reflects a data-dependent approach, with inflation easing and growth remaining resilient despite global uncertainties. The outlook suggests rates will remain on hold over the medium-term, with a bias towards potential cuts if economic conditions deteriorate, notes Lee Sue Ann from UOB Group.

ECB keeps rates steady amid economic resilience

"The European Central Bank (ECB) kept rates unchanged for a fifth consecutive meeting, following 200 bps of cuts since Jun 2024, maintaining a data-dependent, meeting-by-meeting approach and judging policy and inflation dynamics to be 'in a good place'."

"We had previously expected a 25 bps rate cut this quarter, but now judge that the bar for further easing has risen, leading us to revise our view towards policy rates remaining on hold over the medium-term horizon."

"That said, if conditions change, the bias would still tilt towards a cut rather than a hike, reflecting downside risks to growth and the disinflationary influence of euro strength."

"Lagarde noted that a stronger euro could contribute to inflation undershooting the 2% target, but framed this in a largely analytical manner, stressing that recent currency moves remain broadly consistent with the ECB’s baseline assumptions and are not, for now, a source of concern."

"While the bias would still tilt towards a cut rather than a hike if conditions change — given downside growth risks, euro strength, and disinflationary forces — only a sustained undershoot of the 2% inflation target would meaningfully reopen the case for renewed easing."

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

ING's Chris Turner discusses the Bank of England's recent dovish stance, which was unexpected and has shifted market expectations towards potential rate cuts. Turner suggests that political pressures could delay the easing cycle, and expects EUR/GBP to find support at 0.8670/80, with a bias towards 0.88 in the coming month.

Market adjusts to dovish BoE

"We see plenty of room for sterling to take the strain here and would look for EUR/GBP to now find support at 0.8670/80."

"Our bias over the next month is towards 0.88 as political pressure remains on Starmer and data slowly adds to the case for a March BoE rate cut."

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

• Gold attracts strong dip buyers on Friday following an Asian session decline to a four-day low.
• A turnaround in the risk sentiment and Fed rate cut bets act as a tailwind for the precious metal.
• The USD preserves its recent strong recovery gains and limits the upside for the XAU/USD pair.

Gold (XAU/USD) sticks to an intraday positive bias through the first half of the European session on Friday, though it remains below the $4,900 mark amid mixed cues. A turnaround in the global risk sentiment drives flow toward traditional safe-haven assets and acts as a tailwind for the commodity ahead of the US-Iran nuclear talks. Furthermore, bets on more interest rate cuts by the US Federal Reserve (Fed) in 2026, bolstered by signs of weakness in the US job market, turn out to be other factors supporting the non-yielding yellow metal.

Adding to this, the emergence of some US Dollar (USD) selling provides an additional lift to the precious metal. Meanwhile, the White House said that diplomacy is US President Donald Trump's first choice for dealing with Iran, though it warned that he has military options at his disposal. This keeps geopolitical risks in play and further underpins the safe-haven Gold. However, expectations that the incoming Fed Chair, Kevin Warsh, will be less dovish might cap the non-yielding yellow metal, warranting some caution for bullish traders.

Daily Digest Market Movers: Gold remains supported by flight to safety and modest USD weakness

• Asian stocks extended losses into a second day as a selloff on Wall Street intensified amid a global rout in tech equities. Adding to this, prospects for lower interest rates in the US assist the non-yielding Gold to reverse an Asian session slide to the $4,655 area on Friday.
• According to the CME Group's FedWatch Tool, traders are currently pricing in the possibility that the US Federal Reserve will deliver at least two 25-basis-point rate cuts in 2026. The bets were reaffirmed by this week's US data, which pointed to weakness in the labor market.
• The Automatic Data Processing (ADP) Research Institute reported on Wednesday that private-sector employers added 22K new jobs in January. This marked a notable decline from the previous month's downwardly revised reading of 37K and missed estimates of a 48K rise.
• Adding to this, the Job Openings and Labor Turnover Survey (JOLTS) released on Thursday revealed that the number of job openings on the last business day of December stood at 6.542 million, compared to the previous month's downwardly revised print of 6.928 million.
• Furthermore, the US Department of Labor reported that the number of citizens submitting new applications for unemployment insurance rose to 231K for the week ending January 31 from the previous week’s 209K. The reading was also higher than estimates for a rise to 212K.
• Meanwhile, US President Donald Trump said on Thursday that he would have passed on Kevin Warsh as his nominee for the Fed Chair if he had expressed a desire to hike interest rates. Trump added that there was not much doubt that the US central bank would lower rates.
• The White House press secretary Karoline Leavitt told reporters that diplomacy is Trump's first choice for dealing with Iran, and he will wait to see whether a deal can be struck at high-stakes talks on Friday amid differences over the agenda, keeping geopolitical risks in play.
• Later during the North American session, traders will take cues from the preliminary Michigan Consumer Sentiment Index and Inflation Expectations. This, along with comments from influential FOMC members, would drive USD demand and the XAU/USD pair.

Gold needs to find acceptance above $4,900 to back the case for further gains

The overnight failure to build on momentum beyond the 50-period Simple Moving Average (SMA) on the 4-hour chart favors bearish traders. The subsequent fall, however, finds decent support near the 200-period SMA, warranting some caution. Meanwhile, the 50-period SMA remains above the 200-period SMA, which continues to rise, sketching a mixed backdrop and keeping a consolidative bias within the broader uptrend.

The Moving Average Convergence Divergence (MACD) line holds below the Signal line near the zero level. Its negative but contracting histogram suggests fading bearish momentum, while the Relative Strength Index (RSI) prints 45 (neutral). Near-term traction would improve on a close back above the 50-period SMA at 5,026.76, with that level acting as initial resistance, whereas failure to stabilize risks a drift toward the 200-period SMA at 4,691.87, which serves as dynamic support.

A MACD move back above the Signal line and into positive territory, alongside an RSI break through 50, would bolster the recovery; otherwise, momentum remains capped, and price could continue consolidating between these averages.

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