CFD Markets Analysis: News and forecasts for 20 January 2025

23:18

USD/CAD weakens to near 1.4300 as Trump delays tariffs policy USDCAD

USD/CAD softens to around 1.4300 in Tuesday’s early Asian session.
Trump did not impose tariffs on US trading partners on his first day in the White House.
BoC’s latest Business Outlook Survey suggested that the overall economic sentiment remains subdued.

The USD/CAD pair remains on the defensive around 1.4300 during the early Asian session on Tuesday, pressured by the weakening of the US Dollar (USD). The Greenback trades in choppy trading as traders await further details on President-elect Donald Trump’s economic plans, including tariff policies.

Bloomberg reported on Monday that Trump will not announce tariffs immediately after his inauguration on Monday but will call federal agencies to study tariff policy and the United States' trade ties with Canada, Mexico, and China. The USD faced some selling pressure following this report.

The US Federal Reserve (Fed) is anticipated to hold its benchmark overnight rate steady in the 4.25%-4.50% range at its January meeting. However, investors expect Trump’s policies could fuel inflation pressures, which may only allow the Fed to cut rates once more. This, in turn, might help limit the USD’s losses in the near term.

On the Loonie front, the Bank of Canada’s (BoC) Business Outlook Survey showed Canadian firms see improved demand and sales in the coming year, fuelled by rate cuts, but are concerned about the potential risks from promised US trade policies from Trump’s administration. Meanwhile, the decline in crude oil prices might drag the commodity-linked Canadian Dollar (CAD) lower. Canada is the largest oil exporter to the US, and lower crude oil prices tend to have a negative impact on the CAD value.

Canadian Dollar FAQs

What key factors drive the Canadian Dollar?

The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.

How do the decisions of the Bank of Canada impact the Canadian Dollar?

The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.

How does the price of Oil impact the Canadian Dollar?

The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.

How does inflation data impact the value of the Canadian Dollar?

While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.

How does economic data influence the value of the Canadian Dollar?

Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.

23:14

GBP/USD gains ground ahead of UK labor figures GBPUSD

GBP/USD climbed one and a third percent on Monday.
Markets are selling off the Greenback after President Donald Trump caved on day-one tariffs.
Pound Sterling traders await UK labor and employment figures early Tuesday.

GBP/USD rose 1.35% on Monday, gaining ground and climbing back over the 1.2300 handle as markets breathe a collective sigh of relief after freshly-minted US President Donald Trump made a last-minute pivot away from a broad, sweeping policy of day-one trade tariffs. Back for a second term, Donald Trump is still actively pursuing a policy of reviewing trade circumstances with most of the US’ strongest allies in trade terms, however the returning president has already begun waffling on his campaign promises to use executive orders to apply tariffs of at least 20% across the board, with a 65% import tariff threatened against China specifically.

UK Claimant Count change figures are expected to climb 10.3K in December, a sharp uptick from the previous month’s 0.3K print. However the UK’s ILO Unemployment Rate for the three months ended in November is still expected to hold steady at 4.3%.

Data releases on the US side remain tepid until Friday’s S&P Global Purchasing Managers Index (PMI). Median market forecasts are expecting a mixed bag result, with the Services component expected to decline but survey results from the Manufacturing component expected to tick upwards slightly.

GBP/USD price forecast

With the Pound Sterling catching a bid on Monday, GBP/USD rose over 1.3% and cleared the 1.2300 handle, though near-term bullish momentum rests purely on the shoulders of broad-market Greenback weakness. GBP/USD is still trading well below the 200-day and 50-day Exponential Moving Averages (EMA) near 1.2730 and 1.2540, respectively.

Cable knocked into a fresh 15-month low at the 1.2100 handle last week, capping off a four-month backslide. The pair has closed either flat or in the red for all but two of the last 15 consecutive trading weeks.

GBP/USD daily chart

Pound Sterling FAQs

What is the Pound Sterling?

The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).

How do the decisions of the Bank of England impact on the Pound Sterling?

The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

How does economic data influence the value of the Pound?

Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.

How does the Trade Balance impact the Pound?

Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

22:02

USD/CHF Price Forecast: Dips below 0.9100 on soft US Dollar USDCHF

USD/CHF continues downward, breaking below key SMAs, signaling potential for further consolidation.
Persistent downtrend may test critical support at 0.9000 after breaching October trendline.
Recovery above 50-day SMA at 0.9082 could push towards 20-day SMA at 0.9110 and 0.9150.

The USD/CHF reverses course and drops below 0.9100 for the fourth consecutive day. Broad US Dollar weakness keeps most G8 FX currencies in the green territory as US President Donald Trump begins his second term. The pair trades at 0.9068, down 0.87%.

USD/CHF Price Forecast: Technical outlook

The USD/CHF has fallen below the 20 and 50-day Simple Moving Averages (SMAs) each at 0.9110 and 0.9082, respectively, an indication that some consolidation lies ahead. If sellers regain control, they could challenge a support trendline drawn from October lows, which if broken opens the door for testing 0.9000.

On the other hand, if USD/CHF edges above the 50-day SMA at 0.9082, buyers could target the 20-day SMA at 0.9110. If cleared, the next stop would be the 0.9150.

USD/CHF Price Chart - Daily

Swiss Franc FAQs

What key factors drive the Swiss Franc?

The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.

Why is the Swiss Franc considered a safe-haven currency?

The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.

How do decisions of the Swiss National Bank impact the Swiss Franc?

The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.

How does economic data influence the value of the Swiss Franc?

Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.

How does the Eurozone monetary policy affect the Swiss Franc?

As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.

21:48

NZD/USD Price Analysis: Pair surges, strengthening bullish signals NZDUSD

NZD/USD jumps 1.65% on Monday, reaching 0.5675 on fresh buying interest.
RSI climbs to positive terrain, reflecting steady bullish momentum and room for further gains.
MACD histogram shows rising green bars, indicating an accelerating upward trajectory.

NZD/USD rallied on Monday, notching a 1.65% advance to settle around the 0.5675 mark. This robust performance comes amid a notable shift in sentiment, with traders appearing more inclined to favor the Kiwi dollar after its recent stretch of subdued price action. The mood has turned convincingly bullish, supported by technical studies pointing to ongoing upside potential.

According to the Relative Strength Index (RSI), which has pushed up to 52 and crossed the 50 middle point, the pair still has room to extend its climb despite trending on the higher side of the scale. In the meantime, the Moving Average Convergence Divergence (MACD) histogram continues to print progressively taller green bars, confirming that buying pressure remains intact. Together, these indicators hint at a market biased toward additional gains in the near term.

On the immediate horizon, any pullback may initially target the 0.5650 region, with stronger support near 0.5620 if the pair faces stronger selling. To the upside, a break beyond 0.5700 could open the door toward 0.5730, further reinforcing the pair’s shift in favor of the bulls.

NZD/USD daily chart