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US President Donald Trump's press secretary Karoline Leavitt said late Tuesday that the plan to impose Canada and Mexico with punishing tariffs on February 1 is still in play.
Trump initially promised 25% across-the-board tariffs in response to what he called the failure of both countries to control the illicit flow of people and drugs over the border.
Market reaction
At the time of writing, the USD/CAD pair is trading 0.02% higher on the day to trade at 1.4400.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
23:29
United Kingdom BRC Shop Price Index (YoY): -0.7% (January) vs -1%
EUR/USD shed 0.6% on Tuesday as market sentiment pulls back.
Latest Fed rate call expected to be a hold, investors waiting to see changes in narrative.
Tariff threats continue to hang over trader risk appetite, keeping Greenback bid.
EUR/USD pared recent gains on Tuesday, shedding six-tenths of one percent and inching back toward the 1.0400 handle as markets gear up for another outing from the Federal Reserve (Fed) on Wednesday. Markets are overwhelmingly expecting a flat rate hold from the Fed in January, but investors will be keeping a close eye on not only Fed Chair Jerome Powell’s press conference, but any tweets from US President Donald Trump.
The economic calendar is lacking any meaningful data on the European side for the front half of the week. Fiber traders will have to wait until Thursday’s Gross Domestic Product (GDP) updates from both Germany and the pan-EU area for the fourth quarter.
Late Monday, US President Donald Trump swiftly resumed his aggressive tariff agenda, reiterating his intention to impose hefty import fees on a broad spectrum of foreign goods and industries. This latest version of his plan involves vague tariffs on steel, copper, aluminum, various semiconductors, and foreign microprocessors in general, aimed at compelling foreign businesses to relocate their factories to the US.
Persuading these sectors to shift production domestically is a challenging task, as establishing factories in the US is typically costly, and US labor demands significantly higher wages compared to countries that produce industrial goods on a large scale. As a result, import fees are unlikely to influence production decisions significantly; instead, they may lead to inflation and reduced consumer spending.
The Federal Reserve is expected to announce its latest interest rate decision on Wednesday. While no change in the fed funds rate is anticipated this week, traders will closely watch for updates on the ongoing tensions between Fed Chair Jerome Powell and President Trump. The Fed's considerable autonomy limits the White House's influence over interest rates, a situation President Trump has expressed frustration about in the past. Trump’s recent claims that he will “demand” lower interest rates are expected to impact Chair Powell’s upcoming press conference.
EUR/USD price forecast
The Euro’s backslide against the Greenback on Tuesday puts the Fiber in a tenuous technical scenario: a bearish turnaround in EUR/USD bids is forming a technical rejection from the 50-day Exponential Moving Average (EMA) declining into 1.0460. The pair is poised for further losses on a technical basis, unless bidders are able to muscle price action back into the green and on a path toward the 200-day EMA, floating just south of the 1.0700 handle.
EUR/USD daily chart
Euro FAQs
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro 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 then its currency will gain in value 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.
Reserve Bank of New Zealand Chief Economist Paul Conway said late Tuesday that the interest rate will tend towards neutral in the absence of future shocks to the system as pandemic-related disruptions fade, per Reuters.
Key quotes
Given uncertainty, we will need to 'feel our way' as the (official cash rate) gets closer to our estimate of neutral.
At 4.25%, the OCR is currently still restrictive, against Reserve Bank estimates of the long-term nominal neutral interest rate being between 2.5% and 3.5%.
With declining inward migration and weak productivity growth, potential output growth is likely to be modest.
The Monetary Policy Committee is confident that remaining persistent domestic inflation pressures will abate.
Easing domestic pricing intentions and a drop in inflation expectations will help open the way for some further easing of the OCR, as signalled in November.
Market reaction
At the time of writing, the NZD/USD pair is trading 0.08% lower on the day to trade at 0.5665.
RBNZ FAQs
The Reserve Bank of New Zealand (RBNZ) is the country’s central bank. Its economic objectives are achieving and maintaining price stability – achieved when inflation, measured by the Consumer Price Index (CPI), falls within the band of between 1% and 3% – and supporting maximum sustainable employment.
The Reserve Bank of New Zealand’s (RBNZ) Monetary Policy Committee (MPC) decides the appropriate level of the Official Cash Rate (OCR) according to its objectives. When inflation is above target, the bank will attempt to tame it by raising its key OCR, making it more expensive for households and businesses to borrow money and thus cooling the economy. Higher interest rates are generally positive for the New Zealand Dollar (NZD) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken NZD.
Employment is important for the Reserve Bank of New Zealand (RBNZ) because a tight labor market can fuel inflation. The RBNZ’s goal of “maximum sustainable employment” is defined as the highest use of labor resources that can be sustained over time without creating an acceleration in inflation. “When employment is at its maximum sustainable level, there will be low and stable inflation. However, if employment is above the maximum sustainable level for too long, it will eventually cause prices to rise more and more quickly, requiring the MPC to raise interest rates to keep inflation under control,” the bank says.
In extreme situations, the Reserve Bank of New Zealand (RBNZ) can enact a monetary policy tool called Quantitative Easing. QE is the process by which the RBNZ prints local currency and uses it to buy assets – usually government or corporate bonds – from banks and other financial institutions with the aim to increase the domestic money supply and spur economic activity. QE usually results in a weaker New Zealand Dollar (NZD). QE is a last resort when simply lowering interest rates is unlikely to achieve the objectives of the central bank. The RBNZ used it during the Covid-19 pandemic.
USD/CAD posts modest gains to near 1.4400 in Wednesday’s early Asian session.
The Fed is set to hit the pause button on rate cuts at its January meeting on Wednesday.
US trade tariff risk and expectation of BoC rate cuts weigh on the CAD.
The USD/CAD pair trades with mild gains around 1.4400 during the early Asian session on Wednesday. The renewed US Dollar (USD) demand provides some support to the pair. Later on Wednesday, all eyes will be on the US Federal Reserve (Fed) and the Bank of Canada (BoC) monetary policy meetings.
The Fed is widely anticipated to leave interest rates unchanged at its current range between 4.25% to 4.5% at its January meeting on Wednesday, but traders will closely monitor the statement for more cues about the outlook for rates.
A hawkish stance of the Fed could lift the USD, while a dovish approach could drag the USD lower against the Canadian Dollar (CAD). Analysts expect the US central bank to take a wait-and-see approach to the Trump administration's policies, which could fuel inflationary.
Mounting economic pressures amid the threat of US trade tariffs could exert some selling pressure on the CAD. "The loonie continues to trade in limbo, awaiting the crystallization of US tariff risks," said Nick Rees, senior FX market analyst at Monex Europe Ltd.
Additionally, the BoC is expected to cut its benchmark interest rate by 25 basis points (bps) to 3.0% on Wednesday. The interest rate differential between Canada and the United States (US) might contribute to the CAD’s downside.
However, the recovery of crude oil prices from multi-week lows might help limit the commodity-linked Loonie’s losses. Canada is the largest oil exporter to the US, and higher crude oil prices tend to have a positive impact on the CAD value.
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.
NZD/JPY edged higher to 88.15 on Tuesday after recovering from early weakness.
RSI shows a sharp rise but remains in negative territory, indicating hesitant bullish momentum.
MACD signals waning buying interest, with green bars decreasing as volatility persists.
The NZD/JPY pair posted a modest gain on Tuesday, rising to 88.15 after earlier fluctuations. The pair experienced an initial dip to 87.55 but managed to recover, showing resilience despite broader bearish pressures. However, the broader outlook remains mixed as the pair struggles to establish a clear directional bias.
Technical indicators provide contrasting signals. The Relative Strength Index (RSI) has risen to 47, signaling some recovery in momentum but remaining in negative territory, which underscores the tentative nature of the rebound. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram continues to print decreasing green bars, suggesting waning buying interest and the potential for further downside risks.
Immediate support is seen at 87.55, with a breach likely exposing the pair to further losses toward the 87.00 handle. On the upside, resistance lies at 88.20, which aligns with the 20-day SMA. A sustained break above this threshold would be needed to confirm a more bullish short-term outlook.
NZD/JPY daily chart
21:50
United States API Weekly Crude Oil Stock increased to 2.86M in January 24 from previous 1M
USD/CHF rebounds from 50-day SMA and support trendline, indicating potential reversal.
For sustained recovery, pair needs to break January 23 high of 0.9108, targeting mid-January peak at 0.9153.
A drop below 0.9000 could trigger further declines to trendline support at 0.8990 and 50-day SMA at 0.8982.
The USD/CHF recovers some ground after posting 0.45% losses on Monday amid broad US Dollar weakness. Although the pair tested the confluence of the 50-day Simple Moving Average (SMA) and a support trendline drawn from October 2024’s lows touched at 0.8982, buyers moved in and pushed spot prices above the 0.9000 figure, gaining over 0.26% on Tuesday.
USD/CHF Price Forecast: Technical outlook
The daily chart suggests the USD/CHF could be forming a reversal pattern, that it could open the door for further upside. However key resistance levels must be surpassed, if bulls are going to test year-to-date (YTD) highs reached January 13 at 0.9201.
If USD/CHF clears the January 23 daily high at 0.9108, it could open the door to test the January 17 cycle high at 0.9153. On the other hand, if sellers stepped in and achieve a daily close below 0.9000, the first support would be the trendline drawn from last October’s low passing near 0.8990 – 0.9000. A breach of the latter will expose the 50-day SMA at 0.8982, followed by the November 22 swing high at 0.8957.
USD/CHF Price Chart – Daily
Swiss Franc FAQs
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.
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.
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.
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.
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.
NZD/USD closed lower on Tuesday at 0.5670, reflecting a bearish session.
Technical indicators signal a weakening momentum, with the RSI declining and the MACD showing reduced bullish activity.
The NZD/USD pair continued its downward movement on Tuesday, closing at 0.5670 as selling pressure persisted for a second straight day. The session highlighted a bearish tone, with the pair opening lower and failing to recover any significant ground during the day.
From a technical perspective, the Relative Strength Index (RSI) dipped to 51, still within positive territory but sharply declining, indicating weakening bullish momentum. Similarly, the Moving Average Convergence Divergence (MACD) histogram shows a reduction in green bars, reflecting a noticeable slowdown in buying activity. These indicators align with the bearish sentiment dominating the session.
Traders are closely monitoring support near 0.5630 where the 20-day Simple Moving Average stands, which, if breached, could pave the way for a test of the 0.5600 psychological level. On the upside, resistance lies at 0.5705, and a break above this could provide the foundation for a potential rebound. Until then, the pair remains vulnerable to further downside pressures.
The Australian monthly Consumer Price Index is foreseen at 2.5% in December.
Quarterly CPI inflation expected to ease further below 3%, with core figures nearing RBA’s goal.
The Reserve Bank of Australia will meet on February 18 to decide on monetary policy.
The Australian Dollar falls ahead of the announcement amid prevalent risk aversion.
Australia will release fresh inflation-related data on Wednesday, and financial markets anticipate price pressures eased further at the end of 2024, paving the way for a Reserve Bank of Australia (RBA) interest rate cut when it meets in February.
The Australian Bureau of Statistics (ABS) will publish two different inflation gauges: the quarterly Consumer Price Index (CPI) for the fourth quarter of 2024 and the December monthly CPI, which measures annual price pressures over the past twelve months. The quarterly report includes the Trimmed Mean CPI, the RBA’s favorite inflation gauge.
The RBA has maintained the Official Cash Rate (OCR) steady at 4.35% since November 2023, claiming inflation needs to “sustainably” return to its target band of 2% - 3% before considering a rate cut. The latest Board meeting took place in December, and officials claimed they were “gaining confidence” that inflation was moving in the right direction.
It is worth remembering, however, that the RBA has a dual mandate, as full employment is also part of it. Nevertheless, inflation figures will be crucial to determine whether an interest rate cut is finally reaching Australian shores.
What to expect from Australia’s inflation rate numbers?
The ABS is expected to report that the monthly CPI rose by 2.5% in the year to December, higher than the 2.3% posted in November. The quarterly CPI is foreseen to increase by 0.3% quarter-on-quarter (QoQ) and by 2.5% year-on-year (YoY) in the final quarter of 2024. Additionally, the central bank’s preferred gauge, the RBA Trimmed Mean CPI, is expected to rise by 3.3% YoY in Q4, easing from the 3.5% advance posted in the previous quarter.
Finally, the RBA Trimmed Mean CPI is forecast to increase by 0.6% QoQ, the lowest quarterly result since mid-2021. The anticipated figures will be below the central bank’s forecast, boosting the odds of an interest rate cut when the Board meets in February.
But it is not just about inflation falling to target. Economic growth in the country has been tepid, to say the least. Australian Gross Domestic Product (GDP) rose 0.3% in the third quarter of 2024 and by 0.8% since Q3 2023. Economic progress may not be part of the RBA’s mandate, but officials can not ignore the effects of monetary policy on economic growth.
Meanwhile, Donald Trump has become the 47th president of the United States (US). The Republican leader has pledged to impose massive tariffs on imports, spurring concerns about global trade costs.
Just recently, Treasury Secretary Scott Bessent pushed for new universal tariffs on US imports starting at 2.5% and rising gradually, the Financial Times reported on Monday. However, President Trump quickly responded by saying that he wanted much bigger uniform levies. Tariffs could affect global manufacturing costs and, hence, push inflation higher. With that in mind, central banks may refrain from trimming interest rates.
However, Trump’s trade war against China may end up benefiting Australia. The US President may push tariffs into all major rivals, yet the higher levies will be on Chinese goods and services. With that in mind, RBA Governor Michelle Bullock recently noted that “If there are large tariffs on China, Chinese trade will probably try to find other ways to find an outlet. Australia might even be a beneficiary of that. So we might, in fact, find some deflationary impacts for Australia if it rolls out that way.”
How could the Consumer Price Index report affect AUD/USD?
Inflation figures are, then, crucial. Easing inflationary pressures coupled with Bullock’s recent comments will fuel bets on an RBA rate cut on February 18.
Generally speaking, higher CPI figures will be bullish for the AUD amid expectations of a persistently hawkish RBA. However, the opposite scenario is also valid: easing inflation could push policymakers to shift towards a more dovish stance.
Heading into the CPI release, the AUD/USD pair trades around 0.6250, down for a second consecutive day.
Valeria Bednarik, FXStreet Chief Analyst, says: “The AUD/USD pair is gaining bearish traction ahead of Australian CPI figures amid a risk-averse environment. The USD is firmer as tariffs-related concerns dominate financial boards. Further slides are likely should inflation data result as expected or below expectations. On the contrary, higher-than-anticipated figures may trigger some near-term AUD/USD gains, yet if fears prevail, the advance will likely be short-lived.”
Bednarik adds: “The AUD/USD pair could fall towards the 0.6200 region as an immediate reaction to the news, while a bearish breakout exposes 0.6164, the January 17 low. Should that level give up, the next bearish target is the January 13 low at 0.6130. Technical readings in the daily chart suggest a limited bullish potential. Still, a recovery beyond the 0.6300 threshold may result in the pair testing the 0.6330 price zone before fresh selling resurges.”
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
Economic Indicator
Monthly Consumer Price Index (YoY)
The Monthly Consumer Price Index (CPI), released by the Australian Bureau of Statistics on a monthly basis, measures the changes in the price of a fixed basket of goods and services acquired by household consumers. The indicator was developed to provide inflation data at a higher frequency than the quarterly CPI. The YoY reading compares prices in the reference month to the same month a year earlier. A high reading is seen as bullish for the Australian Dollar (AUD), while a low reading is seen as bearish.
Silver shows resilience, finding support at the 200-day SMA of $30.08 amid the downtrend.
To gain momentum, silver must surpass 50-day SMA at $30.28, targeting 100-day SMA at $30.99.
Breaking above these SMAs could position silver to retest its December 2024 high of $32.32.
Silver prices advanced by 0.81% late in the North American session on Tuesday, as market participants seeking security bought precious metals like XAU and XAG, which are posting solid gains. XAG/USD trades at $30.42 a troy ounce at the time of writing.
XAG/USD Price Forecast: Technical outlook
The daily chart suggests Silver is consolidated and found support at the 200-day Simple Moving Average (SMA) at $30.08. Although XAG/USD has carved successive series of lower highs and lower lows, hinting at a short-term downtrend, bears must clear the December 19 swing low of $28.74 to shift the bias downwards.
For a bullish continuation, XAG buyers must clear dynamic resistance at $30.28, where the 50-day SMA resides, followed by a challenge of the 100-day SMA at $30.99. Once those levels are taken out, bulls could challenge December’s 2024 peak at $32.32.
XAG/USD Price Chart – Daily
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
Gold rebounds from lows, benefiting from safe-haven demand amid Trump's trade stance and US stock volatility.
New Treasury Secretary Bessent proposes 2.5% starting tariffs; Trump seeks higher, escalating trade war fears.
Markets cautious ahead of FOMC meeting; Fed likely to hold rates, monitoring trade policies and economic signals.
Gold prices bounced off after refreshing four-day lows and rose on Tuesday as United States (US) equities recovered following Monday’s sell-off, while the precious metal benefited from safe-haven flows. Trade comments by US President Donald Trump keep investors nervous, which turned to the yellow metal, as XAU/USD is seen changing hands at $2,763, up by 0.88% at the time of writing.
Scott Bessent, appointed by Trump as US Treasury Secretary, was approved by the Senate. He said that he supports universal tariffs on imports, which would start at 2.5% and could be gradually increased. However, Trump said that he wants much larger tariffs, adding that if companies don’t like duties, they should produce in the United States.
Trump added fuel to the “trade war” saying that he will apply tariffs to chips, pharmaceuticals, steel, aluminum and copper. After those comments, Bullion consolidated near the $2,730 – $2,744 range before rallying past the $2,750 figure as traders eyed the record-high at $2,790.
Safe-haven flows boosted the Greenback, as the US Dollar Index (DXY) hit a daily peak at around 108.05 before reversing to 107.92 and it is now up 0.47%.
Data-wise, US Durable Goods Orders were mixed, as total figures contracted deeper for the second straight month, while core orders improved, according to the US Department of Commerce. The Conference Board (CB) revealed that Consumer Confidence deteriorated in December, as Americans are concerned about the labor market.
Ahead of the week, the US Federal Open Market Committee (FOMC) has begun its two-day meeting, in which the Federal Reserve (Fed) is expected to hold rates as the disinflation process has halted. This, along with Trump’s 2.0 controversial trade policies, suggests that Fed officials could be patient in assessing its impact on monetary policy.
Daily digest market movers: Gold price climbs above $2,750 amid strong US Dollar
Gold prices rose as US Real yields remain firm. The 10-year Treasury Inflation-Protected Securities (TIPS) yield sits at 2.128%, unchanged on Tuesday.
The US 10-year Treasury bond yield edges up one bps during the day to 4.538%.
US Durable Goods Orders fell sharply by -2.2% MoM in December, significantly missing the expected 0.8% increase and worsening from November’s -2% decline.
The Conference Board reported that US Consumer Confidence dropped to 104.1, falling short of analysts’ expectations of 105.6. All five components of the index showed deterioration.
Money market futures, based on CME FedWatch Tool data, have priced in 54 basis points of Federal Reserve rate cuts for 2025.
XAU/USD technical outlook: Gold surges towards $2,770 as bulls target ATH
Gold prices are trying to resume their ongoing uptrend after a day in which XAU/USD lost more than 1% amid Trump’s trade rhetorics. He even went further late on Monday, which sparked XAU/USD’s jump above $2,750, opening the door for bulls to open fresh long positions as they eye the record-high at $2,790.
If XAU/USD surpasses $2,790, it could challenge the $2,800 figure. Psychological levels like $2,850 and $2,900 would follow.
On the other hand, if bears moved in and pushed Bullion prices below $2,750, the next support would be the confluence of 50and 100-day Simple Moving Averages (SMAs), each at $2,663 and $2,658. If surpassed, the 200-day SMA at $2,524 would follow.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Aussie pair falls 0.80% to 0.6245 on Tuesday, testing 0.6250 support.
Trump’s universal tariff plan on Colombia rattles markets, fueling risk aversion.
Fed set to hold rates at 4.25%-4.50% on Wednesday; investors eye forward guidance.
Australia’s Q4 CPI in focus with subdued inflation likely to bolster RBA rate cut bets.
AUD/USD extends its losing streak near 0.6250 as US President Trump’s proposed incremental tariffs on Colombia heighten trade war anxieties. The Federal Reserve (Fed) is widely expected to keep its benchmark rate steady midweek, although markets remain on edge about the central bank’s policy stance amid Trump’s push for immediate cuts. Meanwhile, the Aussie struggles under persistent speculation of RBA easing, and a moderate US Dollar recovery in the face of deepening risk-off sentiment.
Daily digest market movers: Aussie fell as the US Dollar recovered on a sour market mood
President Trump endorsed a universal 2.5% levy on Colombia, which could climb monthly up to 20%. Investors see the plan as granting leverage in potential renegotiations, hence the rise in safe-haven demand for the Greenback.
Sentiment soured further after China’s DeepSeek demonstrated affordable AI success, spurring a tech sector shakeout and driving up USD’s safe-haven appeal.
Fed decision on deck as it is set to leave rates at 4.25%-4.50% on Wednesday. Traders will comb through policymakers’ remarks, especially given Trump’s calls for quick rate cuts.
Australia’s CPI will be pivotal as the fourth-quarter inflation is seen slowing to 2.5% YoY (from 2.8%), whereas quarterly CPI growth could rise to 0.3% (versus Q3’s 0.2%). A weak figure might amplify chatter of the RBA unwinding its restrictive policy in February.
Domestically, the RBA remains poised for a potential February rate cut if inflation persists below target and the economy fails to pick up steam.
AUD/USD technical outlook: Indicators diverge in a narrow trading range
The AUD/USD declined to 0.6245 on Tuesday, hovering within a tight 0.6230-0.6300 corridor. Technical cues are mixed: the Moving Average Convergence Divergence (MACD) histogram displays rising green bars, hinting at underlying bullish pressure.
Yet the Relative Strength Index (RSI) stands at 49 in negative territory, down sharply — signaling an ongoing lack of conviction. This mismatch underscores market indecision with traders awaiting pivotal data releases (the Fed’s policy decision and Australia’s CPI) for clearer direction before adopting more aggressive positions.
US-China Trade War FAQs
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.
An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.
The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.
The US Dollar regained balance and rebounded sharply, helped by the modest rebound in US yields and another tariffs story, all ahead of the key FOMC event on Wednesday.
Here is what you need to know on Wednesday, January 29:
The US Dollar Index (DXY) rose to two-day highs just above the 108.00 yardstick following the resumption of a strong buying interest in the Greenback. The FOMC meeting will be the salient event, seconded by weekly Mortgage Applications, Wholesale Inventories, and the advanced Goods Trade Balance prints.
EUR/USD tumbled to two-day lows and threatened to breach the 1.0400 support on the back of the strong bid bias in the Greenback. Germany’s Consumer Confidence tracked by GfK will be released, followed by the ECB’s M3 Money Supply, Loans to Companies and Loans to Households figures.
GBP/USD followed its risk-peers and deflated to weekly lows near the 1.2400 mark following the strong bounce in the US Dollar. The BoE’s A. Bailey is due to speak in an otherwise empty UK docket.
USD/JPY reversed three daily advances in a row, briefly flirting with the key resistance at the 156.00 yardstick. The publication of the BoJ Minutes is next in the Japanese calendar along with the Consumer Confidence gauge.
AUD/USD added to Monday’s deep pullback and clinched multi-day lows near 0.6230. Quarterly Inflation Rate and the RBA’s Monthly CPI Indicator are expected to be key in light of the RBA meeting in February.
WTI managed to advance modestly on the back of crude oil supply disruption in Libya, bouncing off recent lows and regaining the $73.00 mark and beyond per barrel.
Gold prices met some support in the better tone in global equities following Monday’s DeepSeek-led pronounced sell-off, advancing past the $2,760 mark per ounce troy. Silver followed its cousin’s steps, reversing Monday’s decline and bouncing off the sub-$30.00 mark per ounce to clock decent gains.
The Canadian Dollar stuck to familiar levels on Tuesday.
The Bank of Canada and the Federal Reserve are both due this week.
The Loonie’s rate differential is set to widen further, limiting bullish odds.
The Canadian Dollar (CAD) stuck to familiar levels on Tuesday, treading water as Loonie traders buckle down for the wait to this week’s double-header of key central bank showings. The Bank of Canada (BoC) is broadly expected to cut interest rates yet again on Wednesday, while the Federal Reserve (Fed) is set to stand pat on interest rates for most of the first half of the year.
The BoC’s upcoming rate cut will see the Canadian Dollar’s rate differential against the Greenback widen even further, putting downside pressure on the Loonie. With USD/CAD already testing multi-year highs, further downside pressure on the Loonie will only worsen things.
Daily digest market movers: Tariff threats rule the headlines as traders await Fed and BoC
BoC forecast to drop interest rates another 25 bps on Wednesday.
Fed set to stand pat on rates as central bankers weigh near-term outcomes.
US President Donald Tump reiterated his willingness to use sweeping tariffs to try and force production from other countries into the US.
Possible inflation pressure from tariffs could counter-intuitively make it harder for the Fed to cut rates, despite President Trump declaring his intent to “ask” the Fed to lower rates.
Canadian Dollar price forecast
USD/CAD continues to churn sideways, spiraling around the 1.4400 handle. With price action constrained in the midrange of a lateral channel, technical indicators are drifting back to their medians.
Bids are constrained between 1.4500 and 1.4300,j and a quick break to either direction could kick off a firm new leg of a trend.
USD/CAD daily chart
Canadian Dollar FAQs
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.
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.
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.
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.
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.
Traders eagerly await Mexican economic indicators, including the December Unemployment Rate and preliminary Q4 GDP.
The Mexican Peso (MXN) recovered some ground after Monday’s session, when it depreciated over 2% due to United States (US) President Donald Trump's trade threats to Colombia over its reluctance to accept Washington’s conditions on receiving planes carrying illegal immigrants. The USD/MXN trades at 20.54, down 0.49%.
Risk appetite improved during the day following Monday’s sell-off, due in part to Chinese company DeepSeek’s advance on AI and Trump’s trade rhetoric. Although the frenzy on AI has tempered, Trump doubled down on his trade policies, saying that he would apply tariffs to chips, pharmaceuticals, aluminum, steel and copper.
Mexico’s economic docket is absent on Tuesday, unlike the US. Durable Goods Orders for December disappointed investors, but excluding transportation rose, a sign that business spending would likely improve in 2025 Q1.
On the consumer side, the Conference Board (CB) revealed that Americans are less optimistic about the economy. The report revealed that labor market conditions fell for the first time in four months as people grew pessimistic about future employment prospects.
This week, Mexico’s economic docket will feature the Unemployment Rate for December, along with the release of preliminary Q4 2024 Gross Domestic Product (GDP) figures.
Banco de Mexico (Banxico) presented its Monetary Program for 2025, in which the Central Bank hinted that the Governing Board is eyeing cuts to Mexico’s main reference rate of a greater magnitude than previously seen in 2024.
Economists polled by Reuters project Mexico’s GDP to dip -0.2% QoQ from an expansion of 1.1%. On an annual basis, GDP is foreseen to edge lower from 1.6% to 1.2%.
Citi revealed its Expectations Survey, in which Mexican private economists revised GDP figures for 2025 downward to 1%. Regarding inflation, economists foresee the Consumer Price Index (CPI) at 3.91%, while the core CPI is projected at 3.68%. Both figures are within Banxico’s 3% plus or minus 1%.
The USD/MXN exchange rate would likely end in 2025 at around 20.95.
Banxico is expected to lower rates by 25 basis points (bps) from 10.00% to 9.75%, though some analysts expect a 50-bps cut at the February 6 meeting.
US Durable Goods Orders plummeted to -2.2 % MoM in December, missing the 0.8% increase expected by economists and worse than November’s -2% contraction.
The Conference Board revealed that US Consumer Confidence dipped to 104.1, below the 105.6 foreseen by analysts. The report showed that all five components of the index deteriorated.
Money market futures have priced in 54 bps of Fed rate cuts in 2025, according to CME FedWatch Tool data.
USD/MXN technical outlook: Mexican Peso climbs as USD/MXN extends its losses
The USD/MXN is retraining at the time of writing, although it hit a five-day peak of 20.77 as buyers eyed the year-to-date (YTD) high of 20.90. Momentum is slightly tilted to the downside, but the major trend is up, as shown by the Relative Strength Index (RSI).
However, bears are lurking as they pushed the exotic pair lower, but if they are hopeful of reaching lower prices, they need to clear the psychological 20.50 figure. In that outcome, the next support would be the 50-day Simple Moving Average at 20.38, followed by the 100-day SMA at 20.06. Once those levels are taken, the 20.00 figure is next.
Conversely, if USD/MXN climbs past the YTD peak of 20.90, the next resistance would be 21.00 ahead of the March 8, 2022, peak at 21.46. A breach of the latter will expose 22.00.
Mexican Peso FAQs
The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is broadly determined by the performance of the Mexican economy, the country’s central bank’s policy, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans who live abroad, particularly in the United States. Geopolitical trends can also move MXN: for example, the process of nearshoring – or the decision by some firms to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency as the country is considered a key manufacturing hub in the American continent. Another catalyst for MXN is Oil prices as Mexico is a key exporter of the commodity.
The main objective of Mexico’s central bank, also known as Banxico, is to maintain inflation at low and stable levels (at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%). To this end, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will attempt to tame it by raising interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the overall economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN.
Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation. However, if economic data is weak, MXN is likely to depreciate.
As an emerging-market currency, the Mexican Peso (MXN) tends to strive during risk-on periods, or when investors perceive that broader market risks are low and thus are eager to engage with investments that carry a higher risk. Conversely, MXN tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
The Dollar Index gains traction, hitting a fresh weekly high above 108.00 as market sentiment deteriorates.
US Durable Goods Orders disappointed, declining by 2.2% in December, missing expectations for a 0.8% increase.
Treasury Secretary Scott Bessent proposed gradual tariffs, but Trump pushed for higher, uniform rates, spooking investors.
Consumer Confidence in January fell to 104.1 from December's 109.5, reflecting growing concerns over the economic outlook.
The US Dollar Index (DXY), which measures the value of the US Dollar against a basket of currencies, extended its gains on Tuesday, consolidating above the psychological 108.00 level. Market sentiment soured after renewed concerns over tariffs and weak US economic data, including lower-than-expected Durable Goods Orders and declining Consumer Confidence. Despite these headwinds, the DXY managed to hold above its recent lows, signaling some resilience.
Daily digest market movers: US Dollar gains despite weak economic data
Treasury Secretary Scott Bessent proposed incremental tariffs on all US imports, starting at 2.5%, triggering risk aversion in markets.
President Trump countered Bessent’s suggestion, demanding significantly higher tariffs, further unsettling global financial markets.
The Conference Board's Consumer Confidence Index fell to 104.1 in January from 109.5 in December, indicating weaker sentiment.
Durable Goods Orders decreased by 2.2% in December, led by a 7.4% drop in transportation equipment, marking another economic setback.
Excluding transportation, new orders rose modestly by 0.3%, offering limited optimism amidst broader declines.
Concerns over overvalued AI shares contributed to a cautious market mood, limiting risk appetite and favoring the US Dollar.
Investors now flick their eyes to Wednesday’s Federal Reserve decision, where a hold is already priced in.
The Dollar Index showed resilience by reclaiming levels above 108.00, bolstered by renewed safe-haven demand. Technical indicators, however, paint a mixed picture. While the RSI remains below 50, hinting at weak momentum, the MACD shows growing flat bars, signaling sustained bearish pressure.
On the bright side, an upward correction could extend if the downward movement becomes overstretched. Immediate resistance lies at 108.50, while a failure to maintain 108.00 could see the DXY index revisiting support near 107.50.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact 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 when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
18:04
United States 7-Year Note Auction dipped from previous 4.532% to 4.457%
The Fed’s latest rate call looms ahead in the midweek.
Tariff threats from US President Trump hang over the markets.
The Dow Jones Industrial Average (DJIA) rose around 250 points on Tuesday, climbing one-half of one percent and chalking in a fresh eight-week high as investors shrug off fresh volatility in the face of renewed trade war threats from United States (US) President Donald Trump. The Federal Reserve’s (Fed) latest rate call is on the cards for this week. While traders are always on the lookout for signs of future rate cuts from the Fed, market attention has been split between a fresh round of tariffs being threatened by President Trump and the tech sector getting dominated by new Chinese entrants to the space.
US Durable Goods Orders contracted further in December, falling 2.2% versus the expected rebound of 0.8%. However, the figure remains well within recent norms. Durable Goods Orders Excluding Automotive purchases rose 0.3%, falling just shy of forecasts but still recovering from the previous month’s -0.2% contraction. It’s no surprise the pace of vehicle purchasing is slowing: US consumers are saddled with nearly $1.7 trillion in automotive debt, representing nearly a tenth of all consumer debt, including mortgages, with car payments outpacing student loans or credit cards.
US President Donald Trump hit the ground running late Monday, revitalizing his sweeping tariff threats and renewing his promises to impose stiff import fees on a wide range of foreign goods and entire industry sectors. The latest iteration of President Trump’s plans to tax US consumers until foreign businesses move their factories include ambiguous levies on steel, copper, aluminum, various and “other” semiconductors, as well as foreign microprocessors in general.
Convincing all of these sectors to move production to the US is a tall bid as the US is generally cost-prohibitive to construct factories in, and US labor tends to command a level of wages that are multiples above the typical wages found in other countries where industrial goods are produced in large quantities. Import fees are unlikely to have much effect except to drive inflation and suppress consumer spending.
The Fed is slated to deliver its latest rate call on Wednesday. No moves on the fed funds rate is expected this week, but traders will be tuning in for any developments in the warming drama between Fed Chair Jerome Powell and President Trump. The Fed enjoys a high level of autonomy that puts control of interest rates out of reach of the White House, a fact that President Trump has lamented about in the past. Donald Trump’s latest statements that he will “demand” lower interest rates are sure to weigh on Chair Powell’s press conference this week.
Dow Jones news
Despite some thin losses spread around the bottom half of the Dow Jones. Key industrial leaders are gaining ground, outpacing the losers and bolstering the overall equity index. Boeing (BA) rose 6.5% to $186 per share, followed by Salesforce (CRM) which climbed 5.5% to $366 per share.
Dow Jones price forecast
The Dow Jones Industrial Average is well on its way to etching in a third straight positive week, a welcome reprieve for bulls after struggling to recover their footing through a six-week backslide that kicked off at the Dow’s record highs above 45,000 last November. The DJIA is set to break through previous peaks and set new all-time highs.
Dow Jones daily chart
Dow Jones FAQs
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.
Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.
There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.
The EUR/USD pair experienced a notable decline on Tuesday, slipping by 0.57% to settle at 1.0430. Despite holding within a relatively tight range in recent sessions, the pair’s inability to sustain upward traction signals waning bullish momentum and raises the likelihood of further downside in the near term.
Technical indicators underscore the bearish shift. The Relative Strength Index (RSI) has dropped sharply to 56, remaining in positive territory but signaling a potential reversal as it trends downward. Similarly, the Moving Average Convergence Divergence (MACD) histogram shows decreasing green bars, reflecting a slowdown in buying pressure and indicating a weakening upward trend. Together, these indicators suggest growing vulnerability for the pair.
From a technical perspective, the immediate support level to watch lies around 1.0400, with further downside potentially exposing the 1.0375 region (20 -day Simple Moving Average). On the upside, resistance at 1.0470 would need to be overcome to reestablish bullish traction. However, unless key resistance levels are breached, the near-term outlook remains tilted to the downside.
GBP/USD tumbles as Trump’s proposed tariffs on other industries raise fears of a trade war.
US Dollar Index climbs 0.4% to 107.86, pressuring GBP/USD amid increased market risk aversion.
US sees a significant drop in Durable Goods Orders and Consumer Confidence; inflation expectations rise.
The Pound Sterling extended its losses against the Greenback on Tuesday as US President Donald Trump threatened to impose tariffs on computer chips and other industries. Risk aversion extended for the second straight day, and the GBP/USD retreated from weekly highs of 1.2523, trading at 1.2432, down 0.50%
GBP/USD falls to 1.2432, down 0.50%, amid rising U.S. protectionist measures
On Monday, the Greenback recovered some ground, and most G8 FX currencies tumbled as Trump crossed the wires. He said he would impose duties on chips, pharmaceuticals, steel, aluminum, and copper if not produced in the United States (US). Therefore, the trade war is on, and traders keep the US Dollar bid.
The US Dollar Index (DXY), which tracks the buck’s value against a basket of six peers, rises 0.4% up at 107.86, a headwind for the GBP/USD. A further extension above DXY’s January 24 peak of 108.19 would exert further pressure on Sterling.
Data-wise, US Durable Goods Orders plummeted --2.2 % MoM in December, missing the 0.6% increase expected by economists and worse than November’s -2% contraction.
Lately, the US Consumer Confidence revealed by the Conference Board slumped to 104.1, below the 105.6 foreseen by analysts. The report showed that all five components of the index deteriorated. Labor market conditions dropped for the first time since September, as Americans grew pessimistic about future employment prospects.
Of note is that the survey showed that inflation expectations rose from 5.1% to 5.3%.
In the meantime, traders eye the Federal Open Market Committee (FOMC) decision on January 29. The Federal Reserve is expected to keep rates on hold as it buys time to assess the impact of Trump 2.0's presidency and as prices remain stickier than expected.
GBP/USD Price Forecast: Technical outlook
The GBP/USD is downward biased, as buyers failed to push prices above the 50-day Simple Moving Average (SMA) of 1.2521. A daily close below the January 27 low of 1.2425 could pave the way for testing 1.2400. Once surpassed, the next stop would be the January 22 high at 1.2375.
Conversely, if GBP/USD rises above 1.2500, a test of the 50-day SMA is on the cards. Further upside is seen at 1.2575, the January 7 high.
British Pound PRICE Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the Japanese Yen.
USD
EUR
GBP
JPY
CAD
AUD
NZD
CHF
USD
0.51%
0.43%
0.65%
0.08%
0.66%
0.56%
0.31%
EUR
-0.51%
-0.08%
0.13%
-0.43%
0.15%
0.05%
-0.18%
GBP
-0.43%
0.08%
0.25%
-0.35%
0.20%
0.13%
-0.12%
JPY
-0.65%
-0.13%
-0.25%
-0.59%
-0.01%
-0.13%
-0.36%
CAD
-0.08%
0.43%
0.35%
0.59%
0.58%
0.48%
0.23%
AUD
-0.66%
-0.15%
-0.20%
0.00%
-0.58%
-0.10%
-0.34%
NZD
-0.56%
-0.05%
-0.13%
0.13%
-0.48%
0.10%
-0.24%
CHF
-0.31%
0.18%
0.12%
0.36%
-0.23%
0.34%
0.24%
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).
US CB Consumer Confidence Index declined in January.
The US Dollar Index consolidates daily gains slightly below 108.00.
Consumer sentiment in the US deteriorated in January, with the Conference Board's (CB) Consumer Confidence Index declining to 104.1 from 109.5 in December.
In this period, the Present Situation Index fell by 9.7 points to 134.3 and the Expectations Index dropped to 83.9.
Assessing the survey's findings, "views of current labor market conditions fell for the first time since September, while assessments of business conditions weakened for the second month in a row," said Dana M. Peterson, Chief Economist at The Conference Board.
"Meanwhile, consumers were also less optimistic about future business conditions and, to a lesser extent, income. The return of pessimism about future employment prospects seen in December was confirmed in January," Peterson added.
Market reaction
The US Dollar Index largely ignored this report and was last seen rising 0.42% on the day at 107.87.
A rally in Silver markets will catalyze large-scale CTA buying activity, TDS’ Senior Commodity Strategist Daniel Ghali notes.
Upside convexity in Silver markets remains severely underpriced
“Continued algo selling activity isn't out of the question just yet, but considering the unique implications of fast-draining LBMA inventories, the XAU/XAG ratio at multi-year highs and an imminently strong outlook for gold flows, discretionary fund positioning essentially flat, and SHFE aggregate open interest at multiyear lows, the set-up in Silver markets is akin to a powder keg waiting for a spark to ignite.”
“Explosive upside convexity in Silver markets remains severely underpriced, and the evidence continues to suggest the market is sleepwalking into a silversqueeze. Comex inventories have now risen by nearly 30 million ounces since the start of the year, which in all likelihood has eroded a significant portion of the ~55 million ounce buffer between the LBMA's free float and its long-term average daily trading volume.”
15:00
United States Richmond Fed Manufacturing Index registered at -4 above expectations (-8) in January
Gold markets were swept into the quant fund leveraging last session, but CTAs are now set to buy Gold in every reasonable scenario for price action over the coming sessions, TDS’ Senior Commodity Strategist Daniel Ghali notes.
CTA buying activity to support prices in the imminent term
“The unique set-up in Gold over the last weeks has underscored the strong start to the year, with (temporarily) acute Asian currency depreciation pressures initially catalyzing 'mystery buying' activity, whereas conversely, a weakening dollar over the last ~week has attracted new length from Western macro funds.”
“In our view, the elevated aggregate open interest in comex Gold overstates the extent to which positioning is bloated after accounting for risk parity fund leverage, with our advanced positioning analytics still pointing to more subdued macro fund positioning than the extreme levels held into US elections.”
“Expected CTA buying activity will help support prices in the imminent term, and we still see some scope for macro fund buying to persist thereafter.”
The Fed is likely to keep the target range for the federal funds rate unchanged at 4.25-4.50% this week, Rabobank’s Senior US Strategist Philip Marey notes.
Fed to keep the target range for the federal funds rate unchanged
“We expect Powell to stress that the FOMC is data-dependent and cautious about further cuts, while dodging questions about the impact of Trump’s policies on the Fed’s rate path.”
“The FOMC and the Fed staff are struggling to incorporate the policies of the new administration in their forecasts, but once Trump’s policies have been fully incorporated in the projections, we expect the rationale for a second rate cut this year to fade.”
“While the Fed and the markets still expect two rate cuts this year, we think that the likely inflationary impact of tariffs and increased border security will cause a pause in the cutting cycle after one final hike in the coming months.”
AUD/USD falls sharply as the US Dollar surges on multiple tailwinds.
Market sentiment is quite cautious amid a sell-off in global technology stocks on DeepSeek concerns.
Investors await the Fed’s policy meeting and the Australian CPI data, which will be released on Wednesday.
The AUD/USD pair plunges below 0.6250 on Tuesday. The Aussie pair weakens as the US Dollar (USD) performs strongly in a highly risk-off market environment. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, jumps to near 108.00.
Market sentiment is quite risk-averse as global technology stocks have faced a massive sell-off on Chinese DeepSeek’s success in building an affordable Artificial Intelligence (AI) model, unlike top chatbots, such as OpenAI and Meta, which rely on high energy and sophisticated chips. This has resulted in an increase in the US Dollar’s safe-haven demand.
The US Dollar is also performing strongly on the back of growing uncertainty over United States (US) President Donald Trump’s tariff agenda and the Federal Reserve’s (Fed) monetary policy announcement on Wednesday.
US Treasury Secretary Scott Bessent has proposed 2.5% tariff universally, as starters, which will increase at the same pace every month until they reach to 20%, as guided by Trump. Market participants expect that Bessent’s gradual tariff hike approach would allow Trump to negotiate in a better position.
Meanwhile, the Fed is widely anticipated to keep interest rates steady in the range of 4.25%-4.50%. Investors will keenly focus on Fed’s guidance on the monetary policy outlook for the entire year.
On the Aussie front, investors will pay close attention to the Australia Consumer Price Index (CPI) data for December and the fourth quarter of 2024. Compared to the similar quarter of the previous year, the CPI rose by 2.5%, slower than 2.8% in the previous quarter. Quarter-on-quarter CPI is estimated to have grown by 0.3%, faster than 0.2% in the third quarter of 2024.
The inflation data will significantly influence market expectations about when the Reserve Bank of Australia (RBA) will start reducing interest rates. Meanwhile, traders are pricing in a 25-basis points (bps) interest rate reduction in the February’s policy meeting.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
14:00
United States S&P/Case-Shiller Home Price Indices (YoY) came in at 4.3%, above forecasts (4.1%) in November
14:00
United States Housing Price Index (MoM) came in at 0.3%, above forecasts (0.2%) in November
13:57
United States Redbook Index (YoY) increased to 4.9% in January 24 from previous 4.5%
Durable Goods Orders in the US fell 2.2% in December.
US Dollar Index stays in positive territory near 108.00.
Durable Goods Orders in the US declined by 2.2%, or $6.3 billion, in December to $276.1 billion, the US Census Bureau reported on Tuesday. This reading followed a 2% decrease reported in November and came in worse than the market expectation for an increase of 0.8%.
"Excluding transportation, new orders increased 0.3%," the press release read. "Excluding defense, new orders decreased 2.4%. Transportation equipment, also down four of the last five months, drove the decrease, $6.9 billion, or 7.4%, to $86.1 billion."
Market reaction
The US Dollar Index showed no immediate reaction to this report and was last seen rising 0.5% on the day at 107.93.
USD/CHF recovers strongly from 0.8965 as investors expect the Fed-SNB policy divergence to widen further.
The Fed is expected to keep interest rates steady in the policy announcement on Wednesday.
The safe-haven demand of the US Dollar increases in a risk-aversion environment.
The USD/CHF pair rebounds strongly, slightly above the key hurdle of 0.9050 in Tuesday’s North American trading hours after a two-week-long correction to near 0.8965. The Swiss Franc pair strengthens as the US Dollar (USD) resumes its upside journey in a jittery market environment.
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, soars to near 108.00. Investors rushed to the US Dollar as global technology stocks melted down on the assumption that Chinese DeepSeek’s low-cost Artificial Intelligence (AI) model would reduce the technology gap between China and the United States (US).
Meanwhile, investors have underpinned the US Dollar against the Swiss Franc (CHF) amid expectations that the Federal Reserve (Fed) will announce a pause in the current policy-easing cycle in the policy announcement on Wednesday. On the contrary, the Swiss National Bank (SNB) could push its borrowing rates into the negative territory to avoid growing risks of inflation undershooting the central bank’s range of 0%-2%. This would widen the policy divergence between the Fed and the SNB.
In the Fed’s monetary policy announcement, investors will look for cues about how long the central bank will keep interest rates steady.
USD/CHF is on track to revisit its 15-month high, around 0.9200. The outlook of the Swiss Franc pair remains firm as the 20-week Exponential Moving Average (EMA) near 0.8900 is sloping higher.
The 14-week Relative Strength Index (RSI) oscillates in the bullish range of 60.00-80.00, suggesting a strong upside momentum.
For a fresh upside toward the round-level resistance of 0.9300 and the 16 March 2023 high of 0.9342, the asset needs to break decisively above the October 2023 high of 0.9244.
On the flip side, a downside move below the psychological support of 0.9000 would drag the asset towards the November 22 high of 0.8958, followed by the December 16 low of 0.8900.
USD/CHF weekly chart
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact 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 when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
13:30
United States Durable Goods Orders ex Defense fell from previous -0.3% to -2.4% in December
The Pound Sterling (GBP) is trading lower against the USD, broadly in line with its peers, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
GBP drop is liable to extend to the low/mid 1.23s
“UK bond yields are fractionally higher this morning but Gilts are outperforming modestly. Lower global bond yields are easing concerns about the viability of the Labour government’s fiscal plans—to some extent. The government is not entirely in the clear but the relief may help the GBP outperform the EUR in the near term.”
“Cable has slipped back from the low 1.25 zone after failing to secure a clean break above the figure over the past couple of sessions. Intraday support at 1.2430 is just about holding the pound up for now but should losses extend through 1.2420 (minor bull channel support), the GBP drop is liable to extend to the low/mid 1.23s.”
13:30
United States Durable Goods Orders registered at -2.2%, below expectations (0.8%) in December
13:30
United States Durable Goods Orders ex Transportation came in at 0.3%, below expectations (0.4%) in December
EUR/USD slumped right out of the gate in response to renewed tariff risks, leaving spot trading in a tight range in the low 1.04 area through much of Asian and European trade, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
EUR slips back, positioning ahead of ECB
“EUR/USD may remain relatively subdued in the next few days. A 25bps rate cut from the ECB Thursday is fully priced in at this point. Sluggish growth momentum across the major Eurozone economies and the risk of tariffs suggests the ECB will keep the door open to easier policy in the months ahead.”
“Stalled gains yesterday and spot losses so far today combine to tilt the recently more positive technical signals for the EUR back to negative. Loss of support at 1.0455/60 (now resistance) suggests that near-term risks are edging towards a retest of the 1.0380/00 zone.”
It’s swings and roundabouts for the Canadian Dollar (CAD) at present as markets weigh the risk of tariffs and react to each and every headline that drops on the matter, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
CAD is trading softer on the day
“The CAD has slipped on the session but is actually the most resilient of the G10 currencies against the USD. Spot is deviating a bit more significantly from our fair value estimate (1.4238) again but more pivoting around 1.44 seems likely for now as investors await the Bank of Canada and Fed policy meeting decisions tomorrow.”
“A 1/4 point cut from the Bank is widely expected and factored in while the Fed is expected to sit on its hands. Both central banks may signal that rate settings will remain on hold for now as policymakers monitor developments. That will sustain US/Canada spreads at onerous levels for the CAD for some, preventing a significant recovery regardless of the tariff situation.”
“The CAD is a little weaker today but the CAD bullish technical developments noted previously—the USD-bearish weekly close through late Friday, the break under trend support (now resistance at 1.4445) and the broadening top developing on the daily chart—remain intact. Support is 1.4350/55. Look for more range trading for now.”
The Bloomberg survey indicates that all but two forecasters are expecting a 25-bps rate cut from the Riksbank at the January 29 policy meeting, Rabobank’s FX analyst Jane Foley notes.
EUR/SEK to trade at 11.40 in 3 months
“The Riksbank has slashed rates by 150 bps since last May and indicated at its December meeting that ‘if the (economic) outlook remains unchanged, the policy rate may be cut once again during the first half of 2025’. Despite this guidance, there is some speculation in the market that the Riksbank could announce two more rate cuts this year, with the second in March.”
“Consequently, while a policy change this week is unlikely to take the market by surprise, the bigger reaction is likely to come from the guidance provided by policy makers. Although dovish guidance from the Riksbank would likely weigh on the SEK vs. the EUR in the near-term, the proximity of the end of Sweden’s rate cutting cycle and optimism that the economy is pulling away from recessionary conditions should provide support in the coming months.”
“We would be looking to buy the SEK on dips vs. the EUR and we maintain a 3-month forecast of EUR/SEK 11.40.”
After yesterday’s stock market swings, it’s back to tariffs for FX today. The US Dollar (USD) has strengthened broadly overnight as President Trump renewed his threat of hefty tariffs and specifically mentioned auto tariffs for Canada and Mexico. The FT reported that Treasury Sec. Bessent favored universal tariffs starting at 2.5%, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
USD recovers as President Trump renews tariff threats
“The USD is trading broadly firmer on the session, with the snap higher in the DXY from yesterday’s soft performance (and recovery back above the upper 107 zone on the index) suggesting the firmer tone may persist for now. Investors continue to carry significant long USD positions, however, which suggests the potential for significant gains is limited, absent renewed incentives.”
“The AUD and NZD are the weakest of the major currencies on the session, weighed down by CNY losses. The ZAR and—despite the tariff threat—MXN are the session’s outperformers, however, with improved risk appetite perhaps offsetting some of the tariff negatives for the peso. The shake out in tech stocks boosted demand for havens yesterday, with the bid in Treasurys pulling US 10Y yields back to the 4.50% point. That may be something of a pivot point for FX in the near-term—still lower US yields will undercut the USD a little more while a rebound in yields should backstop the USD at least.”
“With the Fed just around the corner, markets may settle somewhat in the short run. Yields may rebound a little later this week if the Fed holds policy, as is widely expected, and suggests it is moving to the sidelines for the next few months to assess developments. US data releases this morning include Durable Goods, housing data, Consumer Confidence and the Richmond Fed Manufacturing Index. The consensus call for Durables is a 0.6% M/M rise. Aircraft may be a drag, however.”
12:01
Brazil Mid-month Inflation down to 0.11% in January from previous 0.34%
The US Dollar bounces higher after the universal tariff plan threat picks up again.
US President Trump uses the DeepSeek turmoil as proof of the need for higher tariffs.
The US Dollar Index (DXY) roars back and hits a fresh weekly high at 108.01.
The US Dollar Index (DXY), which tracks the performance of the US Dollar against six different major currencies, edges higher in early Tuesday, trading slightly below 108.00 at the time of writing. The Nvidia rout from Monday, where Nvidia (NVDA) lost over $600 billion in market capitalization at one point, played into US President Donald Trump’s hand regarding his plan to impose a universal tariff. Markets even got more shaken up when t Trump advocated for a gradually increasing universal tariff plan, bigger than 2.5%.
On the economic data front, all eyes are on the US Federal Reserve (Fed) and the European Central Bank (ECB), which will announce their first monetary policy decisions this year on Wednesday and Thursday, respectively. Ahead of those monetary policy meetings, preliminary reading for the US December Durable Goods is due later in the day. This will be a good litmus test to see how the US consumer is behaving at the moment ahead of any inflation readings.
Daily digest market movers: US Consumer in focus
Asian markets will quiet down this week and next. With the Lunar New Year starting this Tuesday, Chinese traders will return to the markets on February 5.
At 13:30 GMT, December US Durable Goods Orders data is due:
Headline Durable Goods Orders are expected to increase by 0.8% from -1.2% in November.
Durable Goods Orders without Transportation are seen rising 0.4% compared to -0.2% in the previous month.
At 15:00 GMT, the US Conference Board (CB) Consumer Confidence data for January will be released, expected to head to 105.7 from 104.7. Apart from that, the Richmond Fed Manufacturing Index for January should tick up marginally to -8 from -10.
Equities are recovering from their steep correction seen Monday in the Nvidia (NVDA) rout spillover. Broadly, most European indices are recovering around 0.50%, and US equity futures are positive, with the Nasdaq leading the recovery.
The CME FedWatch tool projects a 51.2% chance that interest rates will remain unchanged at current levels in the May meeting, with the remaining 48.8% chance of a rate cut that month. Expectations are that the Federal Reserve (Fed) will remain data-dependent with uncertainties that could influence inflation during US President Donald Trump’s term.
The US 10-year yield is trading around 4.569% and starts its recovery towards the more-than-one-year high seen earlier this month at 4.807%.
US Dollar Index Technical Analysis: Not without risk
Although the US Dollar Index (DXY) might recover on Tuesday, this does not mean that all downside risk is avoided. Despite its surge back to 108.00, a rejection could occur again, causing the US Dollar Index to fall back to 107.59 or lower. The Relative Strength Index (RSI), which is still below 50, supports that risk possibility as it has more room to move lower before hitting oversold conditions.
The road to recovery is still not done and needs more upside. First, the psychological level of 108.00 must be recovered on a daily close. From there, 109.29 (July 14, 2022, high and rising trendline) is next to pare back last week’s losses. Further up, the next upside level to hit before advancing further remains at 110.79 (September 7, 2022, high).
On the downside, the 55-day Simple Moving Average (SMA) at 107.59 and the October 3, 2023, high at 107.35 acts as a double safety feature to support the DXY price. For now, that looks to be holding, though the Relative Strength Index (RSI) still has some room for the downside. Hence, rather look for 106.52 or even 105.89 as better levels for US Dollar bulls to engage and trigger a reversal.
US Dollar Index: Daily Chart
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact 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 when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
Silver price trades with caution near $30.00 as the US Dollar surges amid a jittery market mood.
A sell-off in technology stocks across the globe has improved the US Dollar’s appeal.
US bond yields gain as investors expect the Fed to keep interest rates steady.
Silver price (XAG/USD) recovers some of its intraday losses and strives to hold the key level of $30.00 in Tuesday’s European session. The white metal trades with caution amid a dismal market sentiment. The marker sentiment is deeply risk-averse as global technology, power, and data center stocks have faced an intense sell-off as market experts believe that Chinese Deepseek’s low-cost Artificial Intelligence (AI) model could challenge the dominance of top chatbots like OpenAI and Meta.
Technically, the appeal of precious metals increases in a highly risky market environment. However, a significant surge in the US Dollar (USD) and bond yields has restrictive the upside in the Silver price. The safe-haven demand for the US Dollar has increased significantly amid a sharp sell-off in technology stocks. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, jumps to near 108.00.
Meanwhile, 10-year US Treasury yields jump to near 4.56% ahead of the Federal Reserve’s (Fed) monetary policy announcement on Wednesday. The Fed is certain to announce a temporary pause in the policy-easing cycle and leave interest rates unchanged in the range of 4.25%-4.50%, according to the CME FedWatch tool.
Investors will pay close attention to Fed Chair Jerome Powell’s press conference to know for how long the Fed will keep borrowing rates steady. Market participants would be keen to know the impact of potential tariffs by President Donald Trump on the monetary policy stance and the economy.
Silver technical analysis
Silver price struggles near the 50-day Exponential Moving Average (EMA) around $30.40. The white metal continues to face pressure near the upward-sloping trendline around $30.90, which is plotted from the 29 February 2024 low of $22.30 on a daily timeframe.
The broader outlook of the Silver price remains firm above the 200-day Exponential Moving Average (EMA), which trades around $29.50.
The 14-day Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, suggesting a sideways trend.
Silver daily chart
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
11:01
Ireland Retail Sales (YoY) up to 0.8% in December from previous -1%
11:01
Ireland Retail Sales (MoM): 1.1% (December) vs 0.5%
EUR/HUF uptrend stalled near 416 and it has evolved within a sideways consolidation, Societe Générale’s FX analysts note.
Next potential supports are at 402 and 399
“The pair is now at the lower part of this range near 407/406 which is an important support zone. A rebound can’t be ruled out, but it will be interesting to see if a cross above the hurdle at 416 materializes. Inability to overcome this could denote risk of deeper pullback.”
“If EUR/HUF breaches 407/406, the phase of decline could extend. Next potential supports could be located at March 2023 high of 402 and 200-DMA at 399.”
Gold declined yesterday as the global rout in technology stocks, sparked by the Chinese AI startup DeepSeek's breakout success, ING’s commodity analysts Warren Patterson and Ewa Manthey note.
Gold is up more than 4% so far this year
“In precious metals, Gold also declined yesterday as the global rout in technology stocks, sparked by the Chinese AI startup DeepSeek's breakout success, prompted traders to cover margins.”
“Still, Gold is up more than 4% so far this year and we believe trade frictions and geopolitical concerns will push it to another record high this year.”
The National Bank of Hungary is scheduled to meet today, but this should be a copy-and-paste of previous meetings. FX has seen significant relief in the last two weeks, but inflation did surprise to the upside in December. Markets expect rates to remain unchanged at 6.50% today with the same tone as last time, ING’s FX analysts Frantisek Taborsky notes.
EUR/HUF to trade at 420 at the end of the quarter or later
“In markets, we will be watching EUR/HUF and the spillover to the fixed-income market today. The currency pair has dropped below 410 over the last two days, the lowest this year, allowing for some rally in fixed income as well. If the NBH repeats its previously cautious tone, which is our baseline view, this should be confirmation for EUR/HUF to stabilise and potentially test lower levels. This we believe is a condition for HUF assets to rally as well.”
“Even though the very front-end curves will not see much dovishness anytime soon, we believe the belly and long-end rates and bond curves are mispriced and should be lower. The medium-term picture for HUF, however, is not positive for us. The central bank will return to a dovish tone at some point this year and EUR/USD will be lower, again pushing EUR/HUF higher. Thus, we expect EUR/HUF at 420 at the end of the quarter or later, depending on the global story.”
USD/SGD bounced as tariff concerns resurfaced. USD/SGD was last seen at 1.3515, OCBC’s FX analysts Frances Cheung and Christopher Wong note.
Rebound risks likely
“This underscores our earlier caution that tariff concerns remain, and this could still keep risk appetite restrained, thereby implying that USD dips may still find support. Bearish momentum remains but shows tentative signs of fading while RSI shows signs of turning higher from near oversold conditions. Rebound risks likely.”
“Resistance at 1.3520/40 levels (50 DMA, 23.6% fibo retracement of Sep low to Jan high), 1.3630 (21 DMA). Support at 1.3480, 1.3440 levels.”
EUR/GBP falls to near 0.8380 as investors turn cautious ahead of the ECB’s policy meeting on Thursday.
Both the ECB and the BoE are expected to cut interest rates by 25 bps in their first policy meetings of the year.
Investors expect that price pressures in the Eurozone are much under control.
The EUR/GBP pair drops to near two-week low of 0.8380 in Tuesday’s European session. The cross weakens as the Euro (EUR) faces selling pressure, with investors focusing on the European Central Bank’s (ECB) monetary policy announcement on Thursday.
The ECB is almost certain to reduce its Deposit Facility rate by 25 basis points (bps) to 2.75%, with the Main Refinancing Operations Rate sliding to 2.9%. This would be the fourth interest rate cut by the ECB in a row. Dovish ECB bets are based on assumption that inflationary pressures in the Eurozone are sustainably on track to return to the central bank’s target of 2%. Also, investors are worried that potential tariffs by United States (US) President Donald Trump could falter the Eurozone economic outlook.
Market participants are confident that ECB President Chritine Lagarde will deliver a dovish interest rate guidance in the press conference after the policy decision. A string of ECB officials has been confident that policy rates will decline to the neutral rate of 2% by the year-end. The neutral rate is one that neither weighs nor stimulate economic growth.
Analysts at Citi expects the ECB to reduce interest rates by 25 bps at every meeting "until at least the summer".
Meanwhile, investors have underpinned the Pound Sterling (GBP) against the Euro amid expectations that the Bank of England’s (BoE) policy-easing cycle will continue to be gradual. Traders expect the BoE to cut interest rates two or three times this year but are confident that it will cut its borrowing rates by 25 bps in the policy meeting next week.
Economic Indicator
ECB Rate On Deposit Facility
One of the European Central Bank's three key interest rates, the rate on the deposit facility, is the rate at which banks earn interest when they deposit funds with the ECB. It is announced by the European Central Bank at each of its eight scheduled annual meetings.
British Prime Minister (PM) Keir Starmer said on Tuesday, “I am beginning to see the UK’s economy turning around.”
Additional comments
Artificial intelligence (AI) will be a game-changer.
The government hears 'loud and clear' the message to cut regulation.
Market reaction
GBP/USD maintains its offered tone while losing 0.42% on the day to trade near 1.2445, as of writing.
British Pound PRICE Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the weakest against the US Dollar.
USD
EUR
GBP
JPY
CAD
AUD
NZD
CHF
USD
0.52%
0.34%
0.56%
0.17%
0.58%
0.51%
0.45%
EUR
-0.52%
-0.18%
0.03%
-0.35%
0.06%
-0.01%
-0.07%
GBP
-0.34%
0.18%
0.23%
-0.17%
0.20%
0.16%
0.10%
JPY
-0.56%
-0.03%
-0.23%
-0.39%
0.02%
-0.06%
-0.11%
CAD
-0.17%
0.35%
0.17%
0.39%
0.41%
0.34%
0.28%
AUD
-0.58%
-0.06%
-0.20%
-0.02%
-0.41%
-0.07%
-0.13%
NZD
-0.51%
0.00%
-0.16%
0.06%
-0.34%
0.07%
-0.07%
CHF
-0.45%
0.07%
-0.10%
0.11%
-0.28%
0.13%
0.07%
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).
USD/JPY has been on a rollercoaster ride since the start of the week. The initial reaction to the tech-led equity selloff was a perfect recipe for a Japanese Yen (JPY_ rally: risk-off, declining USD rates. The Bank of Japan rate hike on Friday and a still unbalanced positioning were perhaps providing an extra incentive to JPY bulls, ING’s FX analysts Francesco Pesole notes.
USD/JPY to retest of 160.0 in the near term
“The exploration below 154.0 did not last long though, and the broader dollar rebound – which accelerated as universal tariffs retook centre stage – has taken USD/JPY back to the 155.50-156.0 area. This is again a testament to the perceived correlation between US protectionism and a more hawkish Fed, which has large repercussions on the rate-sensitive JPY.”
“Still, there are some positive takeaways for the yen from yesterday’s price action. As detailed in the USD section above, the dollar is not attractive as a safe haven in an equity selloff. As US sentiment may sour further from the combined impact of AI stocks revaluation, higher for longer Fed rates and risks related to US protectionism, there should be more opportunities for the yen to outperform, especially in the crosses.”
“We also see risks to the upside for JPY rates as we think markets underestimate the BoJ rate hiking cycle by some 25-30bp. If another rise in US yields keeps encouraging USD/JPY buyers below 155.0, EUR/JPY is probably looking at some downside potential, with a retesting of 160.0 in the near term a tangible possibility.”
US Dollar (USD) rebounded after tariff news resurfaced. Trump said he would soon impose tariffs on foreign pharmaceuticals, semiconductors and metals (objective was to return production of these essential goods to US). Elsewhere, FT reported that Treasury secretary Scott Bessent favours universal tariffs on US imports, starting at 2.5% and it can move higher by the same amount each month. DXY was last seen at 107.90 levels.
Bearish momentum on daily chart slowly fades
“Trump indicated he wants tariffs ‘much bigger’ than 2.5%. Not forgetting, 1 Feb is a potential day the 25% tariff on Canada, Mexico and 10% tariff on China goods come into effect. Tariff developments remain fluid and uncertain in terms of timing, magnitude and scope of products. As such, we should continue to see more 2-way trades dominate especially after the clean-out of some USD long positions.”
“Potentially thinner market liquidity this week due to CNY market closure may even exacerbate FX moves. Bearish momentum on daily chart shows tentative signs of fading while RSI rose from near oversold conditions. Rebound risk not ruled out. Resistance at 108.70 (21 DMA) and 109.50 levels. Support at 107.60/80 levels (50 DMA, 23.6% fibo retracement of Oct low to Jan high), 106.40 (38.2% fibo).”
“Later this week on Thursday morning (3am SGT), FOMC meeting comes into focus. This may be a non-event with expectations for hold after 100bp cumulative cut was seen over the last 3 meetings. There will not be any dot plot projection at this meeting, so focus is on Powell’s press conference. It is likely that he keeps it brief and reiterate policymaking being data dependent. For now, markets are projecting the next 25bp cut to come in June and about 2 cuts for the year. We are looking for 3 cuts.”
EUR/USD falls sharply to near 1.0420 as the safe-haven appeal of the US Dollar has strengthened in a risk-off environment.
The Fed is expected to leave interest rates unchanged, while the ECB is set to cut them by 25 bps, both this week.
US Treasury Bessent proposes a 2.5% tariff hike universally, which will increase at the same pace every month.
EUR/USD tumbles to near 1.0420 in Tuesday’s European session and is currently trading around 1.0442 at the time of writing. The major currency pair weakens as the US Dollar (USD) strengthens amid a global sell-off in technology, power, and data center stocks, which has increased its safe-haven appeal. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, surges to near 108.00.
Investors are dumping technology stocks as Chinese DeepSeek’s low-cost Artificial Intelligence (AI) model has challenged the dominance of current AI players and their related entities across the globe.
Meanwhile, deepening uncertainty over US President Trump's universal tariff plan and the Federal Reserve’s (Fed) monetary policy announcement on Wednesday has also strengthened the US Dollar. Soon after being selected as US Treasury Secretary, Scott Bessent proposed the plan of imposing a universal 2.5% tariff plan, which will increase graduallyeach month until reaching Trump’s guidance of 20%.
Market experts believe that the gradual introduction of tariffs will give more time for the US to negotiate harder and close better deals with their trading partners.
On the monetary policy front, the Fed is almost certain to leave interest rates unchanged in the range of 4.25%-4.50%. Therefore, investors will mainly focus on Fed Chair Jerome Powell’s press conference after the policy decision for fresh interest rate guidance. Analysts at Macquarie expect that Powell is unlikely to offer much in this regard other than emphasizing the “data dependence of future decisions” while highlighting “uncertainty about the neutral rate”.
Daily digest market movers: EUR/USD slides as Fed-ECB monetary decisions loom large
EUR/USD weakens amid strength in the US Dollar. The Euro (EUR) trades cautiously against its major peers as investors await the European Central Bank’s (ECB) interest rate decision, which will be announced on Thursday. Investors expect the ECB to cut its Deposit Facility rate by 25 basis points (bps) to 2.75% amid a sluggish Eurozone economic outlook and confidence that inflationary pressures will sustainably return to the central bank’s target of 2%.
Given that traders have fully priced in a 25 bps interest rate reduction from the ECB, investors will pay close attention to President Christine Lagarde’s press conference to know the impact of Trump’s tariffs, if imposed, on the economic and monetary policy outlook.
Christine Lagarde warned last week at the World Economic Forum (WEF) in Davos that Europe must “anticipate what will happen” and be “prepared in order to respond,” as Trump’s tariffs would be “selective” and “focused.”
Analysts at Citi expect the ECB to reduce interest rates by 25 bps at every meeting "until at least the summer".
Technical Analysis: EUR/USD faces pressure near 50-day EMA
EUR/USD struggles around the 50-day Exponential Moving Average (EMA), which trades around 1.0456 since the last two trading days on Tuesday. The major currency pair corrects to near 1.0420 after failing to extend its upside move above the key resistance of 1.0530. The near-term outlook remains firm as the pair holds the 20-day EMA, which trades around 1.0390.
On the downside, the downward-sloping trendline from the 30 September 2024 high of 1.1209 will act as major support for the Euro bulls.
The 14-day Relative Strength Index (RSI) struggles to climb above the 60.00 hurdle, suggesting that the trend would be sideways.
Looking down, the January 20 low of 1.0266 will be the key support zone for the pair. Conversely, the December 6 high of 1.0630 will be the key barrier for the Euro bulls.
Euro FAQs
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro 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 then its currency will gain in value 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.
This was meant to be a week for FX to reconnect with central bank events after a Trump-dominated start to the year. So far, it’s proven to be quite the opposite. The announcement by Chinese startup DeepSeek of a more affordable AI model to rival US tech giants has shaken highly valued US tech equities and sent global stocks tumbling, ING’s FX analysts Francesco Pesole notes.
Equity futures point to some potential stabilization
“What appeared clear is that the dollar did not act as efficiently as a safe haven in an equity selloff, as markets focused on the potential wealth effect on US consumers and increased dovish bets on the Fed. So, while the usual risk-sensitive currencies like AUD, NZD, NOK and CAD came under pressure from the souring sentiment, it’s the canonical low-yielders JPY and CHF that acted as preferred safe haven channels rather than the USD.”
“However, the USD snapped back higher across the board late yesterday as Trump revamped the relatively dormant theme of universal tariffs. The FT first reported that new Treasury Secretary Scott Bessent is pushing for a gradual rise in universal tariffs starting from 2.5%, and potentially up to 20%. Trump later said that he wants ‘much bigger’ tariffs than 2.5% and is considering targeted duties on products like steel, copper and semiconductors.”
“Equity futures point to some potential stabilization today, although the risk of further valuation-led repricing in US tech stocks remains material. Even if the dollar is not the preferred haven in those equity selloffs, tariffs are a bigger and longer-term concern for the broader FX sphere, and the perceived inflationary effect of protectionism already seems to be offsetting the equity-led dovish repricing in Fed expectations. Unless the Fed offers hints that it’s keeping a close eye on equity volatility tomorrow, there is too little on the macro side to suggest a dovish tilt and the dollar can find additional support.”
Industrial metals traded under pressure at the start of the new week, with Copper dropping from a two-month high, amid concerns over China’s economic growth following weak factory activity and profit data, despite Beijing’s recent efforts to boost the economy, ING’s commodity analysts Warren Patterson and Ewa Manthey note.
Tariff threats are unlikely to help sentiment
“We have seen plenty of support measures from Beijing over the past few months, but, so far, they have failed to have a meaningful impact on industrial metals demand.”
“China’s official manufacturing PMI index fell to 49.1, the lowest since August, while the non-manufacturing gauge for construction and services dropped to 50.2. An uncertain path for China’s economic recovery remains one of the key downside risks to our industrial metals outlook for 2025.”
“Tariff threats are unlikely to help sentiment with reports that President Trump is set to impose tariffs on steel, Aluminum and Copper imports. There is very little detail on exactly what will be covered. According to the US Geological Survey (USGS), the US has a net import reliance of 13%, 44% and 46% for iron & steel, Aluminum and Copper, respectively.”
Gold faced some early selling pressure on Tuesday after Monday’s market rout.
The Nvidia correction supports President Trump’s call for a global tariff implementation.
Gold’s chances to print a fresh all-time high diminish.
Gold’s price (XAU/USD) faces pressure for the second day in a row, trading at around $2,735 at the time of writing on Tuesday, following an over 1% dive the previous day after the Chinese AI startup DeepSeek shook up markets. The result is not tiny, with over $550 billion in market capitalization going up in smoke for Nvidia alone. Seeing the tech-sensitivity, cryptocurrencies such as Bitcoin also took it on the chin, with Bitcoin (BTC) losing over 6.5% at one point among one of the spillover victims in the financial markets asset classes.
This plays into the hands of United States (US) President Donald Trump, who again demanded global tariffs. The belief is that doing so will better defend US tech companies and shield them from China’s dumping strategy. The rule of thumb remains that tariffs are inflationary, which means higher yields, which is a headwind for Bullion.
Later this week, the Federal Reserve (Fed) and the European Central Bank (ECB) will decide on policy interest rates on Wednesday and Thursday, respectively.
Daily digest market movers: Inflationary concerns
Asian markets will quiet down this week and next week. With the Lunar New Year starting this Tuesday, Chinese traders will return to the markets on February 5.
The Financial Times reported that Treasury Secretary Scott Bessent is pushing for universal tariffs on US imports to start at 2.5% and rise gradually, citing unnamed sources. President Trump subsequently said that he wants across-the-board levies that are “much bigger” than that, Bloomberg reported.
The CME FedWatch tool projects no change in the policy rate for Wednesday's Federal Reserve interest rate decision. Going forward, the probability of a 25 basis point rate cut in the May rate decision is 40.0%, compared to 51.5% for no change.
Barrick Gold (ABX CN) and Mali will begin new negotiations on Tuesday. Barrick Gold and Mali will attempt to resolve a dispute over the alleged non-payment of taxes and the seizure of Barrick’s gold stocks by authorities in the country, Reuters reports.
Technical Analysis: Where to go from here
Gold’s price rally takes a step back and might need to look for further support on the downside. Markets were blindsided by President Trump, who had already come in quite hard over the weekend with tariff threats for Colombia and now puts universal tariffs back on the table. Inflationary concerns triggered by these tariffs could mean higher yields, possibly no rate cuts in 2025 and thus headwinds for Gold.
The first line of support remains at $2,721, a sort of double top in November and December broken on January 21. Just below that, $2,709 (October 23, 2024, low) is in focus as a second nearby support. In case both abovementioned levels snap, look for a dive back to $2,680 with a full-swing sell-off.
Although the window of opportunity is starting to close, Gold could still hit the all-time high of $2,790, which is around 2% away from current levels. Once above that, a fresh all-time high will present itself. Meanwhile, some analysts and strategists have penciled in calls for $3,000, but $2,800 looks to be a good starting point as the next resistance on the upside.
XAU/USD: Daily Chart
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Silver prices (XAG/USD) fell on Tuesday, according to FXStreet data. Silver trades at $30.11 per troy ounce, down 0.21% from the $30.17 it cost on Monday.
Silver prices have increased by 4.19% since the beginning of the year.
Unit measure
Silver Price Today in USD
Troy Ounce
30.11
1 Gram
0.97
The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 91.15 on Tuesday, up from 90.88 on Monday.
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
(An automation tool was used in creating this post.)
GBP/JPY could test the crucial support zone around the 14-day EMA at 193.21, followed by the ascending channel's lower boundary.
The 14-day RSI stays below the 50 level, indicating that bearish momentum is in play.
The pair may navigate the region around the upper boundary of the ascending channel at the 195.90 level.
GBP/JPY recovers its recent losses registered in the previous session, trading around 193.80 during the European hours on Tuesday. The daily chart analysis shows the currency cross remains close to the lower boundary of its ascending channel pattern, indicating a potential weakening of the bullish bias.
Additionally, the 14-day Relative Strength Index (RSI), a key momentum indicator, remains slightly below the 50 level, signaling that bearish momentum is currently in play. Further movement is expected to provide a clearer directional trend.
However, the GBP/JPY cross grapples to stay above the 14- and nine-day Exponential Moving Averages (EMAs), suggesting that short-term price momentum remains strong. Should the currency cross continue to climb along these EMAs, it would reinforce the bullish bias.
Regarding support levels, the GBP/JPY cross could test the crucial zone around the 14-day EMA at 193.21, followed by the nine-day EMA at 193.09, which aligns with the ascending channel's lower boundary. A break below this crucial zone could strengthen the bearish bias, potentially driving the currency cross toward the eight-week low of 189.34, recorded on January 17.
On the upside, the GBP/JPY cross could retest its primary resistance at the upper boundary of the ascending channel at the 195.90 level. A break above this channel would reinforce the bullish bias and support the currency cross in approaching its January high of 198.26, reached on January 7.
GBP/JPY: Daily Chart
British Pound PRICE Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the Japanese Yen.
USD
EUR
GBP
JPY
CAD
AUD
NZD
CHF
USD
0.52%
0.35%
0.73%
0.13%
0.59%
0.53%
0.50%
EUR
-0.52%
-0.17%
0.21%
-0.39%
0.06%
0.00%
-0.02%
GBP
-0.35%
0.17%
0.41%
-0.22%
0.20%
0.16%
0.14%
JPY
-0.73%
-0.21%
-0.41%
-0.63%
-0.18%
-0.25%
-0.27%
CAD
-0.13%
0.39%
0.22%
0.63%
0.46%
0.39%
0.37%
AUD
-0.59%
-0.06%
-0.20%
0.18%
-0.46%
-0.06%
-0.08%
NZD
-0.53%
-0.00%
-0.16%
0.25%
-0.39%
0.06%
-0.03%
CHF
-0.50%
0.02%
-0.14%
0.27%
-0.37%
0.08%
0.03%
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).
USD/CAD attracts some buyers amid a solid USD bounce from over a one-month low.
Trump’s tariff threats and rebounding US bond yields help revive the USD demand.
A modest recovery in Oil prices underpins the Loonie and caps gains for the major.
The USD/CAD pair regains positive traction on Tuesday and climbs to over a one-week high, around the 1.4415 region, during the first half of the European session. Spot prices, however, remain confined in a familiar range held over the past month or so as traders opt to wait on the sidelines ahead of this week's key central bank event risks.
The Bank of Canada (BoC) is scheduled to announce its policy decision on Wednesday and is widely expected to cut interest rates by 25 basis points. This marks a big divergence in comparison to the broader market consensus that the Federal Reserve (Fed) will leave interest rates unchanged at the end of a two-day meeting the same day, which, in turn, is seen as a key factor acting as a tailwind for the USD/CAD pair.
Apart from this, a solid US Dollar (USD) recovery from the lowest level since December 18 touched on Monday offers additional support to the currency pair. Investors remain worried that US President Donald Trump's protectionist policies would reignite inflationary pressures. This triggers a fresh leg up in the US Treasury bond yields and revives the USD demand, which, in turn, favors the USD/CAD bulls.
That said, a modest recovery in Crude Oil prices, from a nearly three-week trough set on Monday, helps limit losses for the commodity-linked Loonie and caps the USD/CAD pair. Traders now look forward to the US economic docket – featuring the release of Durable Goods Orders, the Conference Board's Consumer Confidence Index and the Richmond Manufacturing Index – for some impetus later during the US session.
Canadian Dollar FAQs
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.
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.
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.
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.
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.
European natural gas prices also saw plenty of weakness yesterday with TTF settling 3.7% lower on the day, taking prices back below EUR48/MWh, ING's commodity analysts Warren Patterson and Ewa Manthey note.
Potential transit flows through Ukraine to add pressure
"Talk of potential transit flows through Ukraine (of Azeri gas) will likely be adding pressure. In addition, storage draws have slowed which is likely offering some comfort to the market. EU gas storage is a little under 56% full at the moment, down from 72% at the same stage last year and below the five-year average of 63%."
Oil prices came under pressure yesterday with the market and the broader complex unable to escape the sell-off seen in equity markets, ING's FX analyst Francesco Pesole notes.
Middle East market continues to show relative strength
"Tariff headlines will also not be helping sentiment with reports that President Trump will place tariffs on steel, aluminum and copper imports. In addition, the Financial Times reports that Treasury Secretary Scott Bessent is pushing for a universal import tariff of 2.5%, which will be raised gradually."
"Despite the recent weakness in the oil market, the Middle East market continues to show relative strength with its unusual premium to Brent widening to more than US$2/bbl. While the Middle Eastern market has been strengthening since late last year, it is since US sanctions against Russia that we have seen a much more meaningful move, with buyers of Russian oil looking for alternatives."
"Although oddly, despite sanctions on a large part of the Russian shadow fleet, tanker rates have been weakening more recently."
Euro (EUR) fell on headlines regarding universal tariffs. FT reported that Treasury secretary Scott Bessent favours universal tariffs on US imports, starting at 2.5% while Trump said he wants tariffs ‘much bigger’ than 2.5%. This puts tariff agenda back on the table and should restraint EUR bulls for now. Pair was last at 1.0428 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.
Some pullback is not ruled out this week
"Bullish momentum on daily chart intact but shows signs of fading while RSI shows tentative signs of falling from near overbought conditions. Some pullback is not ruled out this week. Support at 1.0420/30 levels (23.6% fibo, 50 DMA), 1.0350 (21 DMA) and 1.03 levels. Resistance at 1.0520, 1.0570 levels (38.2% fibo retracement of Sep high to Jan low)."
"On ECB meeting (Thursday), our house view looks for a cut, consistent with market expectation for a 25bp cut. Recent ECB-speaks remain dovish and continued to point to a measured pace of rate cut with no hint of larger magnitude of rate cut. Stournaras said the cuts should be in the order of 25bp each time so that by end-2025, rates is close to 2%, from the 3% that we are today."
"Klass said that he is comfortable with market bets for rate cuts at the next 2 meetings but not convinced yet that ECB needs to go into stimulative mode. Villeroy said it is plausible for rates to be around 2% in summer. Lagarde said that disinflation process continues, and policymakers do not see themselves as behind the curve. ECB will maintain its measured approach to ease monetary policy."
WTI could face challenges due to a bleak demand outlook following weak manufacturing data from China.
US weather forecasts anticipate warmer-than-usual temperatures this week, likely lowering the demand for heating fuels.
Potential Trump tariffs on steel, aluminum, and copper could have ripple effects on global commodity demand.
West Texas Intermediate (WTI) Oil price rebounds from the four-week low of $72.19 per barrel, recorded on January 28, currently trading around $73.50 during European hours on Tuesday. Despite this uptick, crude Oil prices remain constrained due to a bleak demand outlook following weak economic data from China.
China, the world's largest crude Oil importer, reported an unexpected contraction in January's manufacturing activity. The National Bureau of Statistics (NBS) Manufacturing PMI dropped to 49.1 in January, down from 50.1 in December, missing market expectations. This has raised concerns about global crude demand growth.
As per Reuters, IG analyst Yeap Jun Rong stated "The general tone of caution in the risk environment, coupled with weaker Chinese PMI numbers that cast further doubt on China's Oil demand outlook, may serve as a drag on Oil prices." Additionally, recent United States (US) sanctions on Russian Oil trade and the Shandong Port Group's ban on US-sanctioned tankers are expected to impact China's crude Oil demand.
US weather forecasts predict warmer-than-normal temperatures this week, reducing the demand for heating fuels. StoneX Oil analyst Alex Hodes mentioned on Monday, "Temperatures in both regions (US and Europe) are increasing, allowing for heating fuel demand to slide off some."
Traders are also keeping an eye on US President Donald Trump's broad set of tariffs, which includes potential tariffs on steel, aluminum, and copper. These tariffs could have significant ripple effects on global commodity demand.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
The shake-up in equity markets and resurging tariff risk are going to be much more relevant for EUR/USD compared to the widely anticipated 25bp cut and quite likely reiteration of a dovish-leaning guidance, ING's FX analyst Francesco Pesole notes.
Risks shift back to the downside for EUR/USD
"The tariff threat may be perceived more seriously given the Treasury’s active planning, and that materially shrinks the upside potential for the euro. Indeed, outside of a positioning-fuelled USD correction on the back of declining fears of global tariffs, the euro continues to lack any clear domestic bullish driver, as we expect a dovish ECB to confirm this week."
"Our high-frequency fair value model now shows EUR/USD undervaluation (i.e. tariff-related risk premium) having rewidened from 1% to 1.8% since yesterday morning. That undervaluation peaked at 3.0% in early January, meaning an additional 1%+ drop in EUR/USD regardless of any rates, equity or commodity could be warranted if markets proceed to price in a greater tariff risk."
"We think the short-term balance of risks has shifted back to the downside for EUR/USD following tariff-related news overnight and a return below 1.040 is warranted at this stage."
08:01
Spain Unemployment Survey registered at 10.61%, below expectations (11.1%) in 4Q
NZD/USD receives downward pressure from risk-off mood amid fresh tariff threats from US President Donald Trump.
Trump plans to impose tariffs on US imports of computer chips, pharmaceuticals, steel, aluminum, and copper.
Traders expect the RBNZ to deliver a 50 basis point rate cut in February.
The NZD/USD pair continues its downward trend for the second day, trading around 0.5660 during early European hours on Tuesday. This decline is attributed to fresh tariff threats from US President Donald Trump.
On Monday evening, President Trump announced plans to impose tariffs on imports of computer chips, pharmaceuticals, steel, aluminum, and copper, aiming to shift production to the United States and boost domestic manufacturing. Additionally, Trump's advisers consider imposing 25% tariffs on Mexico and Canada by February 1.
Meanwhile, the US Dollar Index (DXY), which measures the US Dollar (USD) against a basket of six major currencies, hovers near 108.00. Market participants are likely to monitor key US economic releases later in the day, including Durable Goods Orders, the Conference Board’s Consumer Confidence Index, and the Richmond Fed Manufacturing Index.
The Kiwi Dollar struggles due to dovish expectations surrounding the Reserve Bank of New Zealand’s (RBNZ) policy stance. Swaps markets are now pricing in nearly a 90% chance of another 50 bps reduction on February 19, adding to the two cuts already delivered earlier in the cycle. The central bank is expected to deliver a total of 100 bps of rate cuts for the remainder of 2025.
In a parliamentary speech on Tuesday, New Zealand Prime Minister Christopher Luxon emphasized his government's focus on growth to lift incomes, strengthen local businesses, and create opportunities in 2025. He noted promising signs of success in 2024, such as low inflation, falling interest rates, rising wages, and increased business and consumer confidence.
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
The Pound Sterling falls sharply against the US Dollar as the latter strengthens amid a sell-off in technology stocks globally.
Investors expect the Fed to call a pause in the current policy-easing cycle.
Morgan Stanley has revised the UK GDP growth rate for 2025 lower to 0.9%.
The Pound Sterling (GBP) declines below 1.2450 against the US Dollar (USD) in Tuesday’s European session after failing to break above the psychological resistance of 1.2500. The GBP/USD falls sharply as the safe-haven appeal of the US Dollar has increased amid a dismal market mood.
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, jumps to near 108.00 after a sharp sell-off in power, data center, and companies offering top chatbot stocks across the globe have strengthened its appeal as a safe-haven. Global technology stocks nosedive amid worries that Chinese DeepSeek’s Artificial Intelligence (AI) model could disrupt the global market, given its at-par performance against US chatbots like OpenAI and Meta without relying on higher energy demand and sophisticated semiconductor chips.
Apart from that, deepening fears of tariffs by United States (US) President Donald Trump and uncertainty over the Federal Reserve’s (Fed) monetary policy announcement on Wednesday are acting as tailwinds for the US Dollar.
US Treasury Secretary Scott Bessent has proposed imposing a 2.5% tariff universally and has also guided to increase by the same amount every month, Financial Times (FT) reported. Market participants expect that a gradual approach to tariff hikes would be favorable for the US and other nations in negotiating a deal.
Meanwhile, the Fed is almost certain to announce a pause in the current policy-easing spell and keep interest rates unchanged in the range of 4.25%-4.50% on Wednesday. However, the Fed's monetary policy guidance is expected to be slightly hawkish due to the stubborn inflation outlook and stable labor demand.
Daily digest market movers: Pound Sterling trades with caution as UK stagflation fears loom large
The Pound Sterling exhibits a mixed performance against its major peers on Tuesday. The British currency is expected to trade cautiously as investors worry that the United Kingdom (UK) economy could face risks of stagflation amid weakening labor demand and a stubborn inflation outlook.
The hiring momentum in the UK private sector has been hit hard since Chancellor of the Exchequer Rachel Reeves raised employers’ contribution to National Insurance (NI) in the Autumn Budget. The preliminary S&P Global Purchasing Managers Index (PMI) report for January showed that employment levels have decreased for the fourth month running, which businesses often linked to rising cost pressures. The agency added that many firms suggested that the forthcoming hike in “employers’ NI” contribution had resulted in “cutbacks to recruitment plans”, while others cited the impact of a post-Budget slump in business confidence.
Though the UK Consumer Price Index (CPI) for December came in softer than expectations and November’s reading, it is expected to remain broadly sticky as private firms pass on the impact of higher wage growth, energy prices, and prices paid for imported raw materials to consumers. The inflation rate was the steepest for just over one-and-a-half years in both the manufacturing and services sectors, S&P Global reported.
Weak employment and higher inflation are expected to lead to stagflation in the UK economy. This will pose a bigger risk for the Bank of England (BoE), which is scheduled to announce its first monetary policy decision of 2025 on February 6. Traders are pricing in a 25 basis point (bps) interest rate reduction, pushing borrowing rates to 4.5% amid the weak economic outlook.
Investment banking firm Morgan Stanley has revised its forecast for the UK’s Gross Domestic Product (GDP) growth lower to 0.9% for the year from 1.3%, citing signs of a slowdown in labor demand and faltered economic prospects.
Technical Analysis: Pound Sterling faces offers near 50-day EMA
The Pound Sterling faces selling pressure against the US Dollar on Tuesday after failing to extend its upside above the 50-day Exponential Moving Average (EMA), which trades around 1.2500. However, the near-term outlook of the GBP/USD pair remains firm as it holds the 20-day Exponential Moving Average (EMA), which trades around 1.2390.
The 14-day Relative Strength Index (RSI) moves higher above 50.00 from the 20.00-40.00 range, suggesting that the bearish momentum has ended, at least for now.
Looking down, the January 13 low of 1.2100 and the October 2023 low of 1.2050 will act as key support zones for the pair. On the upside, the December 30 high of 1.2607 will act as key resistance.
Pound Sterling FAQs
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).
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.
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.
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.
07:45
France Consumer Confidence registered at 92 above expectations (90) in January
Here is what you need to know on Tuesday, January 28:
Following Monday's choppy action, the US Dollar gathers strength against its rivals early Tuesday as markets assess US President Donald Trump's latest comments on tariffs. Later in the day, December Durable Goods Orders and the Conference Board's Consumer Confidence Index data for January will be featured in the US economic calendar.
US Treasury Secretary Scott Bessent said late Monday that he is pushing for universal tariffs on imports to start at 2.5% and rise gradually, per the Financial Times. While speaking with reporters on Air Force One early Tuesday, President Trump responded to these remarks and said that he wants tariffs “much bigger than 2.5%,” adding that he hasn't yet decided on the level. Following this comment, the US Dollar Index gained traction and was last seen rising toward 108.00, gaining more than 0.4% on the day.
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.
USD
EUR
GBP
JPY
CAD
AUD
NZD
CHF
USD
0.47%
0.39%
0.73%
0.16%
0.55%
0.49%
0.42%
EUR
-0.47%
-0.08%
0.26%
-0.30%
0.08%
0.03%
-0.05%
GBP
-0.39%
0.08%
0.35%
-0.23%
0.13%
0.09%
0.03%
JPY
-0.73%
-0.26%
-0.35%
-0.58%
-0.20%
-0.27%
-0.33%
CAD
-0.16%
0.30%
0.23%
0.58%
0.39%
0.32%
0.25%
AUD
-0.55%
-0.08%
-0.13%
0.20%
-0.39%
-0.06%
-0.12%
NZD
-0.49%
-0.03%
-0.09%
0.27%
-0.32%
0.06%
-0.07%
CHF
-0.42%
0.05%
-0.03%
0.33%
-0.25%
0.12%
0.07%
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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
EUR/USD touched its highest level since mid-December above 1.0530 on Monday but erased a large portion of its daily gains to close marginally higher. The pair stays under bearish pressure and trades below 1.0450 in the European morning.
After closing the third consecutive trading day in positive territory on Monday, GBP/USD loses its traction and drops below 1.2450 to begin the European session on Tuesday.
USD/JPY declined nearly 1% on Monday but erased nearly all of these losses on Tuesday. The pair was last seen trading decisively higher on the day above 155.70. In the early trading hours of the Asian session on Wednesday, the Bank of Japan will polish its Policy Meeting Minutes.
AUD/USD stays on the back foot in the European morning and trades near 0.6250. Fourth-quarter Consumer Price Index (CPI) data from Australia will be watched closely by market participants early Wednesday.
Gold turned south following the previous week's rally and lost more than 1% on Monday. XAU/USD holds its ground early Wednesday but trades below $2,750.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
EUR/JPY gains traction to near 162.55 in Tuesday’s early European session
Expectations of further BoJ hikes and safe-haven flows could boost the JPY.
Bets for a move of aggressive policy easing by the ECB might weigh on the shared currency.
The EUR/JPY cross trades in positive territory around 162.55 during the early European session on Tuesday. However, the potential upside of the cross might be limited amid concerns about US President Donald Trump's trade tariffs and rising speculation about further the Bank of Japan (BoJ) rate hike.
The BoJ raised interest rates on Friday by a quarter point to 0.5%, their highest since 2008, as widely expected. BOJ Governor Kazuo Ueda said the central bank will continue hiking if the outlook is realized, adding that there is scope to push up borrowing costs further before they reach levels deemed neutral to the economy. This, in turn, could provide some support to the Japanese Yen (JPY) against the shared currency. Markets were pricing in one more 25 basis points (bps) rate hike by the end of this year.
Meanwhile, the uncertainties with proposed tariffs from US President Donald Trump could trigger the fear of trade wars and elevate market volatility. This might lift a safe-haven currency like the JPY and create a headwind for EUR/JPY.
On the Euro front, the rising expectations for further rate cuts by the European Central Bank (ECB) on Thursday might undermine the Euro. The ECB is expected to cut its benchmark deposit rate by a further quarter point to 2.75% at its January meeting, its fourth reduction in a row. Analysts at Citi anticipate the ECB to reduce interest rates by a quarter of a percentage point at every meeting until at least the summer, citing weak growth and cooling inflation in the Eurozone.
Euro FAQs
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro 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 then its currency will gain in value 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.
In a parliamentary speech on Tuesday, New Zealand (NZ) Prime Minister (PM) Christopher Luxon said that his government will bring a relentless focus on unleashing growth to lift incomes, strengthen local businesses, and create opportunity in 2025.”
He further noted that “promising signs of success were seen in 2024, such as inflation dropping and remaining low, interest rates starting to fall, wages continuing to rise faster than inflation, and business and consumer confidence rising.”
Market reaction
PM Luxon’s comments failed to lift the sentiment around New Zealand (NZD) as the NZD/USD pair remains heavy near 0.5660, down 0.54% on the day.
New Zealand Dollar PRICE Today
The table below shows the percentage change of New Zealand Dollar (NZD) against listed major currencies today. New Zealand Dollar was the weakest against the US Dollar.
USD
EUR
GBP
JPY
CAD
AUD
NZD
CHF
USD
0.46%
0.33%
0.64%
0.17%
0.61%
0.53%
0.38%
EUR
-0.46%
-0.13%
0.16%
-0.29%
0.14%
0.06%
-0.09%
GBP
-0.33%
0.13%
0.31%
-0.16%
0.24%
0.19%
0.03%
JPY
-0.64%
-0.16%
-0.31%
-0.48%
-0.04%
-0.13%
-0.29%
CAD
-0.17%
0.29%
0.16%
0.48%
0.44%
0.36%
0.19%
AUD
-0.61%
-0.14%
-0.24%
0.04%
-0.44%
-0.08%
-0.24%
NZD
-0.53%
-0.06%
-0.19%
0.13%
-0.36%
0.08%
-0.17%
CHF
-0.38%
0.09%
-0.03%
0.29%
-0.19%
0.24%
0.17%
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 New Zealand Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent NZD (base)/USD (quote).
AUD/JPY could face struggles amid differing policy stances between central banks.
The AUD struggles amid rising odds of the RBA starting to cut interest rates in February.
BoJ reiterated its intention to continue raising rates if the economic outlook outlined in the January meeting materializes as anticipated.
AUD/JPY edges higher after registering more than 1% losses in the previous session, trading around 97.30 during the Asian hours on Tuesday. The upside of the AUD/JPY cross could be restrained amid increased likelihood of the Reserve Bank of Australia (RBA) starting cutting interest rates as soon as next month.
This dovish sentiment surrounding the RBA’s policy outlook is fueled by weaker core inflation data, which has fallen to its lowest level since Q4 2021, nearing the central bank's target range of 2% to 3%. All eyes are now on Australia's upcoming quarterly inflation report, set for release on Wednesday, as it could offer additional clues about the future direction of interest rates.
The Australian Dollar also failed to gain support from China’s recent stimulus measures to promote its development of index investment products, its latest effort to revive the ailing equity market. The China Securities Regulatory Commission (CSRC) has approved a second round of long-term stock investment pilot programs valued at 52 billion Yuan ($7.25 billion). As close trade partners, China's economic performance significantly impacts the Australian economy.
The AUD/JPY cross could lose value as the Japanese Yen (JPY) strengthens, following increasing expectations that the Bank of Japan (BoJ) will continue raising interest rates. Last week, the BoJ reaffirmed its commitment to further rate hikes and adjustments to its monetary policy stance if the outlook presented at the January meeting unfolds as expected.
The BoJ also announced a JPY 200 billion purchase of commercial paper and confirmed it would provide US Dollar (USD) funding against pooled collateral. Meanwhile, Japan’s Economy Minister, Ryosei Akazawa, commented on Tuesday that he would “closely monitor the impact of the rate hike on the economy.”
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
EUR/USD retreats further from over a one-month peak amid resurgent USD demand.
Trump’s tariff threats and rebounding US bond yields provide a goodish lift to the buck.
Bets for a move aggressive policy easing by the ECB contribute to the intraday decline.
The EUR/USD pair extends the overnight modest pullback from the 1.0530-1.0535 region, or its highest level since December 17 and attracts heavy follow-through selling during the Asian session on Tuesday. Spot prices currently trade around the 1.0430 area, down over 0.50% for the day and seem vulnerable to weaken further amid a strong pickup in the US Dollar (USD) demand.
Investors remain concerned that US President Donald Trump's trade tariffs would reignite inflationary concerns, triggering a modest recovery in the US Treasury bond yields. This, in turn, assists the USD Index (DXY), which tracks the Greenback against a basket of currencies, to stage a solid bounce from over a one-month low touched on Monday and exerts downward pressure on the EUR/USD pair.
Meanwhile, Trump earlier this month had threatened to impose tariffs on Mexico, Canada, China and the European Union (EU). This, along with rising bets for a supersized rate cut by the European Central Bank (ECB) on Thursday, undermines the shared currency and contributes to the EUR/USD pair's decline. Bears, however, might refrain from placing aggressive bets ahead of the key central bank event risks.
The US Federal Reserve (Fed) is scheduled to announce its policy decision at the end of a two-day meeting on Wednesday, which will be followed by the ECB meeting on Thursday. The latest monetary policy updates should provide a fresh directional impetus to the EUR/USD pair. In the meantime, traders on Tuesday will take cues from the US macro data to grab short-term opportunities later during the US session.
The US economic docket features the release of Durable Goods Orders, the Conference Board’s Consumer Confidence Index and the Richmond Manufacturing Index. Nevertheless, the aforementioned fundamental backdrop makes it prudent to wait for strong follow-through selling before confirming that the EUR/USD pair’s recent recovery from over a two-year trough has run its course.
Economic Indicator
ECB Rate On Deposit Facility
One of the European Central Bank's three key interest rates, the rate on the deposit facility, is the rate at which banks earn interest when they deposit funds with the ECB. It is announced by the European Central Bank at each of its eight scheduled annual meetings.
The US Dollar Index climbs to around 107.95 in Tuesday’s Asian session, up 0.56% on the day.
Trump said new tariffs will target semiconductors, pharmaceuticals and steel.
The Fed is likely to hold interest rates steady at its January meeting on Wednesday.
The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, drifts higher to near 107.95, snapping the three-day losing streak during the Asian trading hours on Tuesday. The fresh tariff threats from US President Donald Trump provide some support to the USD broadly.
Trump said late Monday that he plans to impose tariffs on imported computer chips, pharmaceuticals and steel in an effort to bring production to the United States, boosting the Greenback. This action came after Trump rattled markets by imposing tariffs on Colombia over the weekend before halting the action when the South American nation had agreed to accept military aircraft carrying deported migrants.
Additionally, Trump proposed 25% tariffs on imports from Canada and Mexico, and he threatened to impose taxes on the EU and China on February 1 as well. Investors will closely watch the developments surrounding tariff policies between the US and trading partners. ”Tariffs will remain front and center for the time being, ...especially as we close in on the February 1st deadline for the first round of tariffs," noted Kieran Williams, head of Asia FX at InTouch Capital Markets.
Data released by the Commerce Department's Census Bureau on Monday showed that US New Home Sales rose 3.6% to a seasonally adjusted annual rate of 698,000 units in December from 674,000 units in November. This reading came in above the market consensus of 670,000 units. Later on Tuesday, the US Durable Goods Orders, Conference Board’s Consumer Confidence, and the Richmond Fed Manufacturing Index will be released.
The US Federal Reserve (Fed) interest rate decision will be in the spotlight on Wednesday, with policymakers likely to keep the benchmark interest rate in the current 4.25%-to-4.50% range. Analysts expected the US central bank to reduce rates again at its March and June meetings, but with any further cuts in doubt as policies on immigration and tariffs could fuel inflation.
Market players will closely monitor the Press Conference for guidance about the Fed's rate outlook. A hawkish stance of the Fed could lift the USD, while a dovish approach could drag the USD lower against its rivals.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact 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 when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
Gold price struggles to capitalize on the overnight bounce from a multi-day trough.
Rebounding US bond yields revive the USD demand and weigh on the XAU/USD pair.
Trump’s trade tariffs and Fed rate cut bets could lend support to the precious metal.
Gold price (XAU/USD) attracts some sellers following an Asian session uptick to the $2,745 area and turns lower for the second straight day on Tuesday amid a goodish pickup in the US Dollar (USD) demand. US President Donald Trump's trade tariff threats revive inflationary concerns and trigger a modest recovery in the US Treasury bond yields. This, in turn, assists the USD in staging a solid bounce from its lowest level since December 18 touched on Monday and undermines the USD-denominated bullion.
However, bets that the Federal Reserve (Fed) would lower borrowing costs twice by the end of this year, bolstered by Trump's remarks that he will demand interest rates drop immediately, might cap the US bond yields and the USD. Moreover, worries about the potential economic fallout from Trump's trade policies could act as a tailwind for the safe-haven Gold price. This, in turn, warrants some caution before positioning for any further losses as the focus shifts to a two-day FOMC meeting starting this Tuesday.
Gold price is undermined by resurgent USD demand; downside potential seems limited
US President Donald Trump ordered his Administration to introduce emergency 25% tariffs on Colombian imports, though the duties were put on hold after the latter agreed to unrestricted acceptance of all illegal migrants returned from the US.
Trump said this Tuesday that he would impose tariffs on producers of pharmaceuticals and computer chips soon. I will also place tariffs on aluminum and copper, and will look at steel and other industries for tariffs, Trump added.
This revived fears that Trump's protectionist stance would reignite inflation and assist the yield on the benchmark 10-year US government bond to move away from over a one-month low, underpinning the US Dollar and weighing on the Gold price.
Trump said last week that he would demand a cut in interest rates. Moreover, the markets are pricing in two 25 basis point interest rate cuts by the Federal Reserve by the end of this year, which might cap the US bond yields and the Greenback.
Traders now look to Tuesday's US economic docket – featuring Durable Goods Orders, the Conference Board's Consumer Confidence Index and the Richmond Manufacturing Index – for some impetus during the North American session.
The focus will then shift to the crucial FOMC monetary policy decision on Wednesday, which will play a key role in influencing the USD price dynamics and help determine the next leg of a directional move for the non-yielding yellow metal.
Gold price technical setup warrants some caution before placing aggressive bearish bets
On Monday, the XAU/USD showed some resilience below the 23.6% Fibonacci retracement level of the December-January positive move. Moreover, oscillators on the daily chart are holding comfortably in positive territory. This, along with the recent breakout through the $2,720-2,725 horizontal barrier, suggests that the path of least resistance for the Gold price is to the upside. Hence, it will be prudent to wait for strong follow-through selling below the overnight swing low, around the $2,730 area, and the $2,725-2,750 resistance-turned-support before positioning for deeper losses. The commodity might then slide to the $2,707-2,705 area, or the 38.2% Fibo. level, before dropping to the 50% Fibo. level, around the $2,684 region.
On the flip side, the immediate hurdle is pegged near the $2,755-2,757 zone. This is followed by the overnight swing high, around the $2,772-2,773 region and the $2,786 area, or the highest level since October 2024 touched last Friday and the all-time peak, near the $2,790 zone. Some follow-through buying, leading to a strength beyond the $2,800 mark, will be seen as a fresh trigger for bullish traders and pave the way for an extension of a well-established uptrend witnessed over the past month or so.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
GBP/USD depreciates as the BoE is widely anticipated to deliver a 25 basis point rate cut in February.
The US Dollar rises as President Trump plans to impose tariffs on imports of multiple products.
Trump stated that he wants “bigger tariffs” than “2.5% universal tariffs on US imports,” proposed by Treasury Secretary Scott Bessent.
The GBP/USD pair halts its three-day winning streak as the British Pound (GBP) faces headwinds due to growing market expectations of a near-certain rate cut by the Bank of England (BoE) to 4.5% at its upcoming meeting. During Tuesday's Asian session, the pair trades around 1.2440.
Soft economic data from the United Kingdom (UK)—including weaker inflation, retail sales, labor market figures, and sluggish GDP growth in December—has strengthened the case for a 25 basis point rate cut by the BoE in February.
Meanwhile, the US Dollar Index (DXY), which measures the US Dollar (USD) against a basket of six major currencies, hovers near 108.00. Market participants are likely to monitor key US economic releases later in the day, including Durable Goods Orders, the Conference Board’s Consumer Confidence Index, and the Richmond Fed Manufacturing Index.
The US Dollar has gained traction following President Donald Trump’s tariff announcements on Monday evening. Trump proposed tariffs on imports of computer chips, pharmaceuticals, steel, aluminum, and copper to encourage domestic manufacturing.
Treasury Secretary Scott Bessent also proposed introducing universal tariffs on US imports, starting at 2.5%. However, Trump stated he favors “much bigger” tariffs than the initial proposal.
Uncertainty surrounding the economic implications of Trump’s trade and immigration policies has prompted the Federal Reserve (Fed) to adopt a cautious approach ahead of its policy decision on Wednesday, which could lend additional support to the Greenback.
Pound Sterling FAQs
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).
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.
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.
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.
Gold prices remained broadly unchanged in India on Tuesday, according to data compiled by FXStreet.
The price for Gold stood at 7,624.73 Indian Rupees (INR) per gram, broadly stable compared with the INR 7,627.13 it cost on Monday.
The price for Gold was broadly steady at INR 88,933.38 per tola from INR 88,961.30 per tola a day earlier.
Unit measure
Gold Price in INR
1 Gram
7,624.73
10 Grams
76,246.22
Tola
88,933.38
Troy Ounce
237,155.90
FXStreet calculates Gold prices in India by adapting international prices (USD/INR) to the local currency and measurement units. Prices are updated daily based on the market rates taken at the time of publication. Prices are just for reference and local rates could diverge slightly.
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
(An automation tool was used in creating this post.)
USD/CAD maintains its position below the psychological level of 1.4400.
The bullish bias persists, as the 14-day RSI remains above the 50 mark.
Immediate support appears at the nine-day EMA of 1.4374.
The USD/CAD pair extends its gains for the second consecutive session, trading near 1.4400 during Tuesday’s Asian session. On the daily chart, the pair remains within an ascending channel, highlighting a prevailing bullish trend.
The 14-day Relative Strength Index (RSI) hovers just above the 50 level, signaling sustained positive momentum. A consistent RSI above 50 would further support the bullish sentiment.
Moreover, the USD/CAD pair trades slightly above the nine- and 14-day Exponential Moving Averages (EMAs), reinforcing the bullish trend and indicating strong short-term price action. This alignment reflects solid buying interest and suggests the potential for further upside movement.
On the upside, the USD/CAD pair tests the psychological level of 1.4400 and remains positioned to challenge 1.4518—its highest level since March 2020, achieved on January 21. Further resistance is anticipated near the upper boundary of the ascending channel, around 1.4830.
The immediate support lies at the nine-day EMA at 1.4375, followed closely by the 14-day EMA at 1.4373. This level aligns with the lower boundary of the ascending channel, near the 1.4350 mark, providing a strong support zone.
USD/CAD: Daily Chart
Canadian Dollar PRICE Today
The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the weakest against the US Dollar.
USD
EUR
GBP
JPY
CAD
AUD
NZD
CHF
USD
0.52%
0.37%
0.67%
0.17%
0.57%
0.52%
0.37%
EUR
-0.52%
-0.16%
0.13%
-0.35%
0.05%
-0.00%
-0.15%
GBP
-0.37%
0.16%
0.33%
-0.19%
0.15%
0.14%
0.00%
JPY
-0.67%
-0.13%
-0.33%
-0.52%
-0.12%
-0.19%
-0.32%
CAD
-0.17%
0.35%
0.19%
0.52%
0.40%
0.34%
0.20%
AUD
-0.57%
-0.05%
-0.15%
0.12%
-0.40%
-0.06%
-0.19%
NZD
-0.52%
0.00%
-0.14%
0.19%
-0.34%
0.06%
-0.15%
CHF
-0.37%
0.15%
-0.00%
0.32%
-0.20%
0.19%
0.15%
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 Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CAD (base)/USD (quote).
The Indian Rupee remains under selling pressure on Tuesday.
The INR declines tracking weaker Chinese Yuan, sustained foreign fund outflows and strong USD demand.
The Fed rate decision and India’s Federal Fiscal Deficit will be the highlights for this week.
The Indian Rupee (INR) drifts lower on Tuesday as a decline in the Chinese Yuan amid concerns over US President Donald Trump's trade tariffs put pressure on the Asian peers. Additionally, likely equity outflows and a muted trend in domestic equities contribute to the INR’s downside. However, the downside of the Indian Rupee might be limited as the Reserve Bank of India (RBI) will likely intervene in the foreign exchange market to prevent the local currency from significantly depreciating.
The US Federal Reserve (Fed) monetary policy meeting will take center stage on Wednesday. The Fed is widely expected to make no changes to the policy rate at its January meeting, but traders will take more cues from the Press Conference for guidance for policy action in March. On the Indian docket, the Federal Fiscal Deficit will be released on Friday, which might introduce measures to stimulate economic growth.
Indian Rupee remains vulnerable amid a weak macroeconomic environment
"Trump's threat through tariffs and sanctions will concern global trade, and keep emerging market currencies, and thereby the rupee under pressure," said Jigar Trivedi, a senior analyst at Reliance Securities.
The RBI announced on Monday a host of measures to inject liquidity into the banking system, including bond purchases and dollar/rupee swaps. The Indian central bank's efforts are expected to inject 1.5 trillion rupees ($17.39 billion) into the banking system.
US President Donald Trump late Monday announced plans to levy tariffs on imports of computer chips, pharmaceuticals, steel, aluminum, and copper.
US Treasury Secretary Scott Bessent is pushing for new universal tariffs on US imports to start at 2.5% and rise gradually, per the Financial Times. However, Trump said he wants tariffs much larger than 2.5%.
US New Home Sales rose 3.6% to a seasonally adjusted annual rate of 698,000 units in December from 674,000 units in November, according to the Commerce Department's Census Bureau on Monday. This reading came in better than the estimation of 670,000 units.
USD/INR keeps the bullish vibe in the longer term
The Indian Rupee trades a weaker note on the day. The strong uptrend of the USD/INR pair prevails as the price has broken above the descending triangle pattern while holding above the key 100-day Exponential Moving Average (EMA) on the daily chart. The 14-day Relative Strength Index (RSI) stands above the midline near 63.20, suggesting that further upside looks favorable.
The all-time high of 86.69 appears to be a tough nut to crack for bulls. A bullish breakout above this level could pave the way to the 87.00 psychological mark.
If more bearish candlesticks show up, we could see a drop to 86.14, the low of January 24. A breach of the mentioned level could expose 85.85, the low of January 10. The additional downside filter to watch is 85.65, the low of January 7.
Indian Rupee FAQs
The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar – most trade is conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.
The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the ‘carry trade’ in which investors borrow in countries with lower interest rates so as to place their money in countries’ offering relatively higher interest rates and profit from the difference.
Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.
Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.
USD/CHF appreciates as Trump announced plans to impose tariffs on imports of multiple products.
Trump stated that he "wants tariffs 'much bigger' than 2.5%," the rate proposed by Treasury Secretary Scott Bessent.
SNB’s Schlegel said that while the central bank does not support negative interest rates, it cannot completely rule them out.
USD/CHF recovers its recent losses from the previous two sessions, trading around 0.9050 during the Asian hours on Tuesday. The upside of the pair could be attributed to the improved US Dollar (USD) following tariff threats made by US President Donald Trump.
Trump announced plans on Monday evening to impose tariffs on imports of computer chips, pharmaceuticals, steel, aluminum, and copper. The goal is to shift production to the United States (US) and bolster domestic manufacturing.
Additionally, Scott Bessent, the Treasury Secretary under Trump, stated that he aims to introduce new universal tariffs on US imports, starting at 2.5%. These tariffs could rise to as much as 20%, reflecting Trump’s aggressive stance on trade policies, consistent with his campaign rhetoric last year.
However, President Trump told reporters aboard Air Force One early Tuesday that he “wants tariffs ‘much bigger’ than 2.5%,” as proposed by Treasury Secretary Scott Bessent. However, Trump noted that he has not yet decided on the specific tariff levels.
The US Dollar gained strength amid uncertainty regarding the impact of Trump's trade and immigration policies. This backdrop may encourage the Federal Reserve (Fed) to maintain a cautious stance at Wednesday’s policy decision.
The USD/CHF pair’s upside potential is bolstered by the weaker Swiss Franc (CHF) amid ultra-dovish monetary policy guidance from the Swiss National Bank (SNB). Swiss National Bank (SNB) Chairman Martin Schlegel, in an interview on Monday, stated that while the Bank does not support negative interest rates, it cannot entirely dismiss the possibility. Schlegel made these remarks during a conversation with broadcaster SRF.
In recent weeks, Schlegel has repeatedly highlighted the potential for negative rates, especially as Swiss inflation dropped to 0.6% in December, sparking concerns about deflation.
Swiss Franc FAQs
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.
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.
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.
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.
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.
Silver trades with a negative bias above a nearly two-week low touched on Monday.
The technical setup favors bearish trades and supports prospects for deeper losses.
A sustained move beyond the 100-day SMA is needed to negate the negative bias.
Silver (XAG/USD) struggles to capitalize on the previous day's bounce from the $29.70 area, or a nearly two-week low and ticks lower during the Asian session on Tuesday. The white metal currently trades just above the $30.00 psychological mark, down 0.20% for the day and seems vulnerable to slide further.
Last week's failure near the 100-day Simple Moving Average (SMA) and a subsequent breakdown below a short-term ascending trend-channel favor bearish traders. Meanwhile, oscillators on the daily chart – though have been losing traction – are yet to confirm a negative outlook. This, in turn, makes it prudent to wait for some follow-through selling below the overnight swing low, around the $29.70 zone before positioning for deeper losses.
The XAG/USD might then weaken further below mid-$29.00s and test the next relevant support near the $29.10-$29.00 area. The downward trajectory could extend further towards the $28.75-$28.70 region, or a multi-month low touched in December, before the white metal slides further towards the $28.00 round-figure mark.
On the flip side, the ascending channel breakpoint, around the $30.30 area, now seems to act as an immediate hurdle ahead of the $30.50-$30.60 region. Any further move up might continue to face stiff resistance and remain capped near the $31.00 mark, or the 100-day SMA. The latter should act as a key pivotal point, which if cleared decisively might shift the near-term bias in favor of bullish traders and pave the way for a further appreciating move.
Silver daily chart
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
The Japanese Yen retreated further from a multi-week high touched against the USD on Monday.
Trump’s tariff threats, rebounding US bond yields and modest USD strength support USD/JPY.
The divergent BoJ-Fed expectations might keep a lid on any further upside for the currency pair.
The Japanese Yen (JPY) attracts heavy selling during the Asian session on Tuesday and moves away from a six-week high touched against its American counterpart the previous day. Investors remain concerned about the potential economic fallout from US President Donald Trump's trade policies, which, in turn, is seen undermining the JPY. Apart from this, a goodish rebound in the US Treasury bond yields turns out to be another factor driving flows away from the lower-yielding JPY.
This, along with a solid US Dollar (USD) recovery from its lowest level since December 18 touched on Monday lifts the USD/JPY pair back closer to the mid-155.00s. Any meaningful JPY depreciation, however, seems elusive in the wake of bets that the Bank of Japan (BoJ) will hike interest rates further. In contrast, the Federal Reserve (Fed) is expected to cut interest rates twice this year, which, in turn, could act as a headwind for the US bond yields, the USD and the currency pair.
Japanese Yen weakens after Trump’s tariff threats; hawkish BoJ expectations could limit losses
US President Donald Trump said he would soon impose tariffs on producers of pharmaceuticals and computer chips in the near future. I will also place tariffs on aluminum and copper, and look at steel and other industries for tariffs.
This comes after Trump ordered his administration to impose emergency 25% tariffs on Colombian imports, though the duties were put on hold after the latter agreed to unrestricted acceptance of all illegal migrants returned from the US.
The Financial Times reported on Monday that Scott Bessent, who was confirmed as the US Treasury Secretary, is pushing for tariffs on all imports to start at 2.5% and to increase it gradually by the same amount every month.
The yield on the benchmark 10-year US government bond moves away from over a one-month low touched the previous day, which helps revive demand for the US Dollar and undermines the lower-yielding Japanese Yen.
The Bank of Japan reiterated last week, after raising rates to the highest since 2008, that it will continue to raise the policy rate and adjust the degree of monetary accommodation if the outlook presented at the January meeting is realized.
Moreover, the leaders of Japan's top business lobby and labor unions have agreed on the need to maintain the momentum for pay hikes again this year, which should allow the BoJ to tighten its policy further and help limit JPY losses.
The BoJ announced that it would provide ¥200 billion through the outright purchase of commercial paper. Separately, Japan's Economy Minister Ryosei Akazawa said that he will closely monitor the impact of the rate hike on the economy.
Traders now look to Tuesday's US economic docket – featuring Durable Goods Orders, the Conference Board's Consumer Confidence Index and the Richmond Manufacturing Index – for some impetus later during the US session.
The focus, however, will remain glued to the outcome of a two-day FOMC monetary policy meeting, starting this Tuesday, which will influence the USD price dynamics and provide a fresh directional impetus to the USD/JPY pair.
USD/JPY might attract sellers near the 156.00 mark, ascending channel breakdown in play
From a technical perspective, the overnight sustained breakdown below a multi-month-old ascending trend-channel support was seen as a key trigger for bearish traders. Moreover, oscillators on the daily chart have just started gaining negative traction. This, in turn, suggests that the path of least resistance for the USD/JPY pair is to the downside. Hence, any subsequent move up could be seen as a selling opportunity near the trend-channel support breakpoint, now turned resistance, around the 156.00 mark, which should cap spot prices near the 156.60-156.70 supply zone.
On the flip side, the 155.00 psychological mark now seems to protect the immediate downside ahead of the 154.55-154.50 horizontal zone, the 154.00 round figure and the overnight swing low, around the 153.70 region. Some follow-through selling will reaffirm the near-term negative outlook and drag the USD/JPY pair further towards the 153.30 intermediate support en route to the 153.00 mark.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
The Australian Dollar loses ground following tariff threats made by US President Donald Trump.
The AUD faced challenges amid increased risk aversion due to news of growing momentum among Trump’s advisers to implement tariffs.
Trump announced plans to impose tariffs on imports of computer chips, pharmaceuticals, steel, aluminum, and copper to encourage domestic production.
The Australian Dollar (AUD) continues to decline for the second consecutive day against the US Dollar (USD) on Tuesday. The AUD/USD pair's weakness can be linked to tariff threats made by US President Donald Trump.
The risk-sensitive AUD also faced challenges amid increased risk aversion due to news on growing momentum among US President Donald Trump’s advisers to place 25% tariffs on Mexico and Canada as soon as February 1.
President Trump announced plans on Monday evening to impose tariffs on imports of computer chips, pharmaceuticals, steel, aluminum, and copper. The goal is to shift production to the United States (US) and bolster domestic manufacturing.
Trump also commented on the popular social media app TikTok, stating, “We will have a lot of people bidding on TikTok.” He emphasized his stance on limiting China’s involvement, saying, “Don’t want China involved in TikTok.”
Australian Dollar declines due to increased risk aversion regarding Trump’s policies
The US Dollar Index (DXY), which tracks the value of the US Dollar against six major currencies, rises to near 107.80 at the time of writing. Traders will likely watch the US Durable Goods Orders, the Conference Board’s Consumer Confidence, and the Richmond Fed Manufacturing Index later on Tuesday.
Scott Bessent, the Treasury Secretary under Trump, stated that he aims to introduce new universal tariffs on US imports, starting at 2.5%. These tariffs could rise to as much as 20%, reflecting Trump’s aggressive stance on trade policies, consistent with his campaign rhetoric last year.
The USD gained strength amid uncertainty regarding the impact of US President Donald Trump's trade and immigration policies. This backdrop may encourage the Federal Reserve (Fed) to maintain a cautious stance on cutting interest rates this year.
According to S&P Global data released on Friday, the US Composite PMI fell to 52.4 in January from 55.4 in December. The Manufacturing PMI rose to 50.1 in January, surpassing the previous reading of 49.4 and exceeding the forecast of 49.6. However, the Services PMI dropped to 52.8 in January from 56.8 in December, falling short of the expected 56.5.
However, Trump said on Thursday that he wants the Fed to cut interest rates immediately. "With oil prices going down, I'll demand that interest rates drop immediately, and likewise they should be dropping all over the world," said Trump at the World Economic Forum in Davos, Switzerland.
The US Dollar faced challenges as Trump's remarks came before the Federal Reserve's (Fed) monetary policy meeting scheduled for January 28 and 29, with expectations the US central bank will hold rates steady.
Traders expect the Fed to keep its benchmark overnight rate steady in the 4.25%-4.50% range at its January meeting. Moreover, Trump’s policies could drive inflationary pressures, potentially limiting the Fed to one more rate cut.
China's NBS Manufacturing PMI fell to 49.1 in January, down from 50.1 in December, missing the market expectation of 50.1. Similarly, the NBS Non-Manufacturing PMI declined to 50.2 in January compared to December's 52.2 reading. As close trade partners, China's economic performance significantly impacts the Australian economy.
The Australian Dollar also failed to gain support from China’s fresh stimulus measures to promote its development of index investment products, its latest effort to revive the ailing equity market. The China Securities Regulatory Commission (CSRC) has approved a second round of long-term stock investment pilot programs valued at 52 billion Yuan ($7.25 billion).
China’s Industrial Profits declined by 3.3% year-over-year to CNY 7,431.05 billion in 2024, easing from the 4.7% drop recorded in the first 11 months of the year. This marks the third consecutive year of contraction, following a 2.3% decline in 2023. The continued downturn reflects ongoing economic challenges, including weak demand, rising deflationary pressures, and a prolonged slump in the property sector.
Technical Analysis: Australian Dollar tests 14-day EMA near 0.6250
The AUD/USD pair trades near 0.6260 on Tuesday, confined within an ascending channel on the daily chart, hinting at a potential bullish bias. The 14-day Relative Strength Index (RSI) is positioned on the 50 mark, suggesting a neutral market sentiment.
The AUD/USD pair tests immediate support at the 14-day Exponential Moving Average (EMA) of 0.6256. Additional support lies near the channel's lower boundary around 0.6250.
Regarding resistance, the AUD/USD pair could test the nine-day EMA at 0.6266, followed by the key psychological level of 0.6300. A break above the latter could reinforce the bullish bias and lead the pair to target the channel's upper boundary around 0.6360.
AUD/USD: Daily Chart
Australian Dollar PRICE Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the US Dollar.
USD
EUR
GBP
JPY
CAD
AUD
NZD
CHF
USD
0.51%
0.34%
0.62%
0.12%
0.45%
0.47%
0.37%
EUR
-0.51%
-0.18%
0.10%
-0.39%
-0.07%
-0.05%
-0.15%
GBP
-0.34%
0.18%
0.31%
-0.21%
0.08%
0.12%
0.03%
JPY
-0.62%
-0.10%
-0.31%
-0.52%
-0.20%
-0.20%
-0.28%
CAD
-0.12%
0.39%
0.21%
0.52%
0.33%
0.34%
0.24%
AUD
-0.45%
0.07%
-0.08%
0.20%
-0.33%
0.01%
-0.08%
NZD
-0.47%
0.05%
-0.12%
0.20%
-0.34%
-0.01%
-0.10%
CHF
-0.37%
0.15%
-0.03%
0.28%
-0.24%
0.08%
0.10%
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).
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
Citing an internal memo sent by the Office of Management and Budget to agencies Monday, the Washington Post (WaPo) reported early Tuesday that “the White House budget office is ordering a pause to all grants and loans disbursed by the federal government.”
Additional takeaways
“Trillions of dollars could be on hold.”
“Matthew J. Vaeth, the acting director of the White House Office of Management and Budget, instructs federal agencies to “temporarily pause all activities related to obligations or disbursement of all Federal financial assistance.”
“Each agency called to perform a “comprehensive analysis” to ensure its grant and loan programs are consistent with President Donald Trump’s executive orders, which aimed to ban federal diversity, equity and inclusion initiatives, and limit clean energy spending, among other measures.”
Speaking with reporters on Air Force One, US President Donald Trump said early Tuesday that he “wants tariffs “much bigger” than 2.5%” as Treasury Secretary Scott Bessent proposed.
Trump said that he hasn't decided on the level yet.
Market reaction
The US Dollar (USD) is picking up fresh bids on these comments, with the US Dollar Index (DXY) rising 0.51% on the day to 107.88 at the time of writing.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
Japan's Economy Minister Ryosei Akazawa said on Tuesday that he ”will closely monitor the impact of the rate hike on the economy.”
Separately, the Bank of Japan (BoJ) announced that it would provide JPY200 billion through the outright purchase of commercial paper.
The Japanese central bank added that it would supply the US Dollar (USD) funds against pooled collateral.
Market reaction
USD/JPY is off the high but stays firm near 155.30 following these headlines, still up 0.50% on the day.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
WTI price edges lower to around $73.00 in Tuesday’s early Asian session.
Trump tariff threats and concerns over energy demand drag the WTI price lower.
The Fed rate decision will be the highlight later on Wednesday.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $73.00 on Tuesday. The WTI price remains on the defensive amid the uncertainty surrounding US President Donald Trump’s tariff plans and weak economic data from China.
Trump rattled markets by imposing tariffs on Colombia over the weekend before halting the action when the country agreed to his terms. He has also threatened actions against China, Canada, Mexico, and the European Union. In addition, Trump said that he would push Saudi Arabia and OPEC to lower oil prices. Uncertainty over how Trump's proposed tariffs and energy policies could undermine the WTI price in the near term.
“Crude prices were volatile and came under pressure as the market reacted to the latest developments in U.S. trade policy. Although the tariffs the Trump administration threatened to apply on Colombia were short-lived, similar trade actions could cause ripples across global markets,” noted Analyst David Eng.
Furthermore, Chinese startup DeepSeek surpassed ChatGPT as the most popular free app on Apple's App Store in the United States. This low-cost artificial intelligence (AI) model prompted concerns over energy demand to power data centers.
The US Federal Reserve (Fed) interest rate decision on Wednesday will be in the spotlight. The US central bank is expected to keep interest rates on hold at its January meeting amid broad uncertainty. Oil traders will closely monitor the Press Conference for guidance about the Fed's outlook. A hawkish stance of the Fed could weigh on economic growth and WTI demand expectations. On the other hand, dovish approach could provide some support to the black gold.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
NZD/USD weakens to near 0.5670 in Tuesday’s early Asian session, down 0.38% on the day.
Trump said that he will place tariffs on imports of computer chips, pharmaceuticals, steel, aluminum, and copper.
The downbeat Chinese PMI data and RBNZ dovish bets continue to undermine the Kiwi.
The NZD/USD pair attracts some sellers to around 0.5670 during the early Asian session on Tuesday. The US Dollar (USD) gains traction due to US President Donald Trump's tariff threats. Later on Tuesday, the US Durable Goods Orders, the Conference Board’s Consumer Confidence, and the Richmond Fed Manufacturing Index will be released.
Late Monday, Trump said that he will impose tariffs on imports of computer chips, pharmaceuticals, steel, aluminum, and copper. The purpose is to bring production to the United States, boosting domestic manufacturing. Additionally, Scott Bessent, Trump’s Treasury secretary, said that he wanted to push new universal tariffs on US imports to start at 2.5%. The levies could be pushed up to as high as 20%, in line with Trump’s maximalist position on the campaign trail last year. The Greenback strengthens following this headline and creates a headwind for the pair.
The US Federal Reserve (Fed) interest rate decision will take center stage on Wednesday. The US central bank will likely pause cutting rates after reducing them by a total of 100 basis points (bps) since July 2024. Traders will closely watch the press conference as it might offer some hints about the US interest rate path.
“While inflation concerns have significantly abated, they still remain. As a result, it is quite possible that there will be fewer rate cuts over the course of next year than anticipated only a few months ago,” said Michele Raneri, vice president and head of U.S. research and consulting at TransUnion.
The disappointed Chinese economic data and dovish expectation of the Reserve Bank of New Zealand (RBNZ) could weigh on the New Zealand Dollar (NZD). Swaps markets are now pricing in nearly 90% chance of another 50 bps reduction on February 19, adding to the two delivered earlier in the cycle. The New Zealand central bank is anticipated to deliver a total of 100 bps of rate cuts for the remainder of 2025.
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
00:30
Australia National Australia Bank's Business Conditions: 6 (December) vs 2
00:30
Australia National Australia Bank's Business Confidence increased to -2 in December from previous -3
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