CFD Markets News and Forecasts — 29-01-2025

• EUR/USD eased slightly lower on Wednesday after testing the low side.
• The Fed held rates steady, as markets broadly expected.
• With the Fed’s latest rate call out of the way, markets await key US data to see if they were right.

EUR/USD drifted into the low side on Wednesday, dipping below 1.0400 before getting pushed back into touch range of the day’s opening bids. The Federal Reserve (Fed) delivered little of note in its latest rate call, sparking a slight uptick in volatility but little meaningful momentum as Fiber traders await actual changes in interest rates, or at least some signal that they might be coming.

US fourth-quarter Gross Domestic Product (GDP) growth will be reported on Thursday. Median market forecasts anticipate a decrease in annualized GDP growth, with a projection of 2.6% compared to the previous 3.1%. Inflationary pressures remain a concern, and the Q4 GDP Price Index is expected to rise to 2.5% from 1.9%. 

December’s Core Personal Consumption Expenditures Price Index (PCEPI) will print on Friday. The monthly PCEPI figure for December is forecast to increase to 0.2% month-over-month from the previous month’s 0.1%, and the annual figure is expected to remain steady at 2.8% year-over-year, still frustratingly above the Fed’s 2% annual target and challenging hopes for an acceleration in the pace of interest rate changes.

The Federal Reserve (Fed) maintained rates on Wednesday, as futures markets had largely anticipated, and Fed Chair Jerome Powell emphasized the Fed's data-dependent approach to rate adjustments. Chair Powell noted that the Federal Open Market Committee (FOMC) is closely monitoring the policies enacted by US President Donald Trump. Still, he denied that the newly elected President has had direct contact with the Fed. 

As an independent federal institution, the White House has limited influence over the policy guidance set by the Federal Reserve. Chair Powell reiterated that while inflation is progressing towards the target median levels, the current economic landscape, along with concerns over the substantial trade policies being pursued by President Trump, indicates that the Fed is not in a hurry to change the restrictiveness of policy rates. Rate markets have reduced their expectations for Fed rate cuts in 2025. According to the CME's FedWatch Tool, futures markets are pricing in no changes to the federal funds rate until June at the earliest.

EUR/USD price forecast

EUR/USD is getting hung up in technical congestion at the 50-day Exponential Moving Average (EMA) near 1.0450, but both bulls and bears appear to have run out of gas. Fiber remains capped below the 1.0500 handle, and downside pressure is unable to build momentum below 1.0400.

EUR/USD daily chart

• GBP/USD ended Wednesday close to flat, but tested the low side.
• With the Fed’s widely-anticipated rate hold out of the way, markets turn to data prints.
• US Q4 GDP and PCEPI inflation metrics are due on Thursday and Friday, respectively.

GBP/USD spun in a tight circle on Wednesday, briefly dipping into the 1.2400 handle after the Federal Reserve (Fed) kept interest rates on hold. Rate futures markets broadly forecast the lack of movement on interest rates, with the Fed citing no particular reason to rush into further rate cuts. The back half of the trading week will be key US data releases to see if the Fed made the right call.

US fourth-quarter Gross Domestic Product (GDP) growth will be printing on Thursday. Median market forecasts are expecting a step down in annualized GDP growth, expecting a print of 2.6% versus the previous 3.1%. Inflation pressures still remains a concern, and the Q4 GDP Price Index is expected to tick upwards to 2.5% from 1.9%.

Friday’s Core Personal Consumption Expenditures Price Index (PCEPI) will be landing on markets on Friday. The monthly PCEPI figure for December is forecast to tick higher to 0.2% MoM from the previous month’s 01.%, and the annualized figure is expected to stand pat at 2.8% YoY, still frustratingly above the Fed’s 2% annual target and vexing hopes for an uptick in the pace of interest rates.

The Federal Reserve (Fed) held rates steady on Wednesday, as rate futures markets had broadly predicted, and Fed Chair Jerome Powell reiterated the Fed's data-dependent approach to making rate adjustments. Fed Chair Powell noted that the Federal Open Market Committee (FOMC) is closely watching what kind of policies are enacted by US President Donald Trump, but denied that the newly-minted US President has been in contact with the Fed directly. 

As an independent federal institution, the White House holds little sway over policy guidance set by the Federal Reserve.Fed Chair Powell noted that the Federal Open Market Committee (FOMC) is closely watching what kind of policies are enacted by US President Donald Trump, but denied that the newly-minted US President has been in contact with the Fed directly. As an independent federal institution, the White House holds little sway over policy guidance set by the Federal Reserve.

Fed Chair Powell also noted that while inflation is still grinding its way toward median target levels, the current economic landscape, plus some concerns over massive trade policies being pursued by US President Trump, means the Fed is in no particular rush to adjust the restrictiveness of policy rates. Rate markets have trimmed their bets of Fed rate cuts in 2025. According to the CME's FedWatch Tool, rate futures markets are pricing in no moves on the fed funds rate until June at the earliest.

GBP/USD price forecast

GBP/USD continues to grind through chart paper in the most frustrating position possible, drifting just south of the 50-day Exponential Moving Average (EMA) near 1.2500 but unable to sink decisively below 1.2400. A bullish technical correction appears to have run out of gas, but a meaningful downturn remains off of the cards for now.

GBP/USD daily chart

• USD/CAD edges higher to around 1.4420 in Thursday’s late American session. 
• The Fed decided to leave its overnight borrowing rate unchanged in a range between 4.25%-4.50% on Wednesday.
• The BoC reduced the policy rate by 25 bps to 3.0%, announced end of quantitative tightening.

The USD/CAD pair gains ground to around 1.4420 during the late American session on Thursday. The US Dollar (USD) strengthens broadly after the US Federal Reserve (Fed) left interest rates steady as widely expected but gave scant clues about further reductions in borrowing costs this year.

The US central bank held its overnight borrowing rate in a range between 4.25%-4.50% at its January meeting on Wednesday, as widely anticipated. The Fed's decision came after three consecutive cuts since September 2024 worth a full percentage point. This was the first Fed meeting after US President Donald Trump took office. 

Fed Chair Jerome Powell said during the press conference that the central bank would need to see “real progress on inflation or some weakness in the labor market before we consider making adjustments.” The cautious stance of the Fed provides some support to the US Dollar against the Canadian Dollar (CAD). 

On the Loonie front, the Bank of Canada (BoC) cut its key policy rate by 25 basis points (bps) to 3.0% on Wednesday. The Canadian central bank also announced its plan to complete the normalization of its balance sheet and end quantitative tightening. The BoC added that a tariff war triggered by the United States could cause major economic damage.

“The potential for a trade conflict triggered by new U.S. tariffs on Canadian exports is a major uncertainty. This could be very disruptive to the Canadian economy and is clouding the economic outlook,” said BoC governor Tiff Macklem on Wednesday. The concerns about trade conflict that would hurt economic activity in Canada might continue to undermine the CAD and create a tailwind for the pair in the near term. 

• Gold prices show modest reaction to Fed's rate hold, hinting at future rate hike pauses.
• Fed Chair Powell adopts patient stance on policy, influenced by changing fiscal and trade environments.
• Investors focus on Powell's insights for future Fed actions, anticipating upcoming economic data.

Gold prices edged lower as the US Federal Reserve (Fed) delivered a hawkish hold. The Fed removed inflation language, an indication of a pivot towards maintaining rates unchanged. The XAU/USD trades volatile within the $2,750 - $2,740 range as Fed Chair Jerome Powell crossed the wires.

Powell’s first question was about having been contacted by US President Donald Trump. He answered he had not spoken with Trump and firmly stated that he wouldn’t comment on Trump’s policies or politics.

In addition, Powell said that monetary policy is “less restrictive than it had been,” adding that the Fed is not in a rush to adjust rates. He added that the Federal Open Market Committee (FOMC) is in wait-and-see mode, eyeing fiscal and trade policies implemented by the new US administration.

Powell clarified the Fed doesn’t have a pre-set course on setting interest rates, and when asked about the March meeting, he said they’re not in a rush.

Given the backdrop, XAU/USD seesawed, yet it remains near $2,750 modestly lower. After the Fed’s decision, traders are eyeing the release of Gross Domestic Product (GDP) figures, jobs data, and the Fed’s preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index.

Daily digest market movers: Gold price losses ground after Powell’s press conference

• Earlier, the Federal Reserve unanimously decided to hold rates unchanged at the 4.25% - 4.50% range and dropped inflation language, which traders perceived as indicating that the Fed would keep rates higher for longer.
• The statement added that the economy is expanding solidly, the unemployment rate has stabilized, and labor market conditions remain solid. Additionally, it added that it remained focused on both sides of the dual mandate.
• The Fed's decision was unanimous.
• The US 10-year Treasury yield rises one basis point up to 4.549% and caps Gold’s advance.
• The US Dollar Index (DXY), which tracks the buck’s value against a basket of six currencies, climbs 0.12%, up at 108.04, a headwind for Bullion.
• Given the backdrop, Gold prices extended their losses, yet they were quite moderate as traders await Fed Chair Jerome Powell's press conference.
• The CME FedWatch Tool shows that investors expect 50 basis points of easing through 2025, with the first-rate cut seen in June.

XAU/USD technical outlook: Gold’s uptrend intact, as XAU/SD hovers near $2,750

Gold price uptrend remains intact even though the yellow metal dips slightly following the Fed’s decision. XAU/USD hit a daily low of $2,744, trimming some of its earlier losses, and it seems poised to form a ‘bullish harami’ candle pattern, which suggests that higher prices are expected.

In that outcome, XAU/USD next resistance would be the January 24 high at $2,785. A breach of the latter will expose the record high at $2,790, followed by $2,800.

Conversely, if Gold extends its losses and drops below $2,750, the next support would be the $2,730, the January 27 swing low. A breach of the latter will expose $2,700.

The US Dollar traded in a positive fashion after the Fed left its interest rates unchanged, as widely anticipated, and Chief Powell delivered a neutral message at his press conference.

Here is what you need to know on Thursday, January 30:

The US Dollar Index (DXY) kept the weekly bid bias in place helped by rising yields and Powell’s tone. Another revision of Q4 GDP Growth Rate is due seconded by the weekly Initial Jobless Claims, and Pending Home Sales.

EUR/USD dropped to the sub-1.0400 region, or four-day lows, in response to further strength in the Greenback and prudence ahead of the ECB event on Thursday. The ECB meeting and press conference by President C. Lagarde will take centre stage, followed by preliminary Q4 GDP Growth Rate prints in Germany and the broader Euroland, as well as EMU’s Unemployment Rate, Consumer Confidence and Economic Sentiment.

GBP/USD rebounded from lows in the sub-1.2400 region, eventually ending the day around Tuesday’s closing levels. The BoE’s M4 Money Supply and Consumer Credit figures are expected along with Mortgage Approvals and Mortgage Lending.

USD/JPY remained choppy, trading just above the 155.00 hurdle and fading part of Tuesday’s advance. The usual weekly Foreign Bond Investment figures will be released followed by the speech by the BoJ’s Himino.

AUD/USD retreated for the third consecutive day, this time putting the 0.6200 support to the test. Export and Import Prices in Australia are due along with the speech by the RBA’s Jones.

WTI resumed its bearish leg and broke below the $73.00 mark per barrel to flirt with fresh four-week lows.

Gold prices faced renewed downside pressure, briefly revisiting the $2,750 zone per ounce troy following USD dynamics and the FOMC gathering. Silver prices added to Tuesday’s advance and flirted with multi-day peaks near the $31.00 mark per ounce.

• Fed keeps fed funds rate steady, cites resilient labor market and balanced economic risks.
• US Treasury yields and Dollar Index gain modestly due to Fed's slightly hawkish inflation stance.
• Market participants await Fed Chair Powell's press conference for further directional guidance.

The USD/JPY remained unfazed during the North American session after the US Federal Reserve (Fed) maintained the fed funds rate at the 4.25%—4.50% range while shifting slightly hawkish after acknowledging there's no inflation improvement. At the time of writing, the pair trades at around 155.31, down 0.12%.

USD/JPY drops, even though Fed's remove inflation language

The Federal Reserve's monetary policy statement highlighted a resilient labor market while maintaining that risks to its dual mandate goals "are roughly in balance." Policymakers noted solid economic expansion and reiterated their commitment to monitoring risks while continuing balance sheet reduction at the existing pace. The decision was unanimous.  

Following the announcement, U.S. Treasury yields climbed, with the 10-year note rising four and a half basis points to 4.581%. The U.S. Dollar Index (DXY) gained 0.17%, reaching a session high of 108.10.

Meanwhile, USD/JPY traders will eye Fed Chair Jerome Powell's press conference at around 18:30 GMT.

USD/JPY Reaction to Fed's Decision

The USD/JPY ticked higher towards the 100-hour Simple Moving Average (SMA) at 155.44. If surpassed, it could pave the way to test the 200-hour SMA at 155.71. Further upside is seen, as 156.00 would emerge as the next resistance. 

Conversely, if USD/JPY drops inside the Ichimoku Cloud (Kumo) below 155.20, a test of 155.00 is on the cards. On further weakness, the pair could challenge the January 25 daily low of 154.09.

• Federal Reserve's hawkish hold omits specific inflation terms, hinting at rate pause, affecting gold markets.
• U.S. Treasury yields rise, 10-year note at 4.581%; dollar strengthens to 108.29 on DXY, up 0.22%.
• Gold traders incur moderate losses, awaiting further details from Fed Chair Powell's press conference.

Gold prices slumped as the US Federal Reserve (Fed) delivered a hawkish hold. The Fed removed inflation language, an indication of a pivot towards maintaining rates unchanged. The XAU/USD trades volatile within the $2,750 - $2,740 range.

XAU/USD fluctuates after the Fed's decision to hold rates

On its monetary policy statement, the Fed acknowledged the labor market remains solid, though emphasized that risks to achieving the dual mandate goals "are roughly in balance." They added that economic activity continued to expand solidly, and officials would remain attentive to risks on both sides of its dual mandate, and the balance sheet reduction would continue at its previous pace.

The Fed's decision was unanimous.

After the data US Treasury yields are rising, particularly the US 10-year Treasury note yield, up four basis points to 4.581%. The Greenback rose as high as 108.29 as depicted by the US Dollar Index (DXY), which gains 0.22% at the time of writing.

Given the backdrop, Gold prices extended their losses, yet they were quite moderate, as traders await Fed Chair Jerome Powell's press conference.

Gold's reaction to Fed´s Decision

XAU/USD extended its losses toward the 200-hour Simple Moving AVerage (SMA) at $2,743. Still buyers are leaning onto that level, which if surpassed, would pave the way to test the January 27 low of $2,730, followed by the $2,700 mark. On the other hand, if bulls push prices above the day's high of $2,766, it could open the door to test record highs.

• Federal Reserve leaves rates unchanged at 4.25%-4.50% as expected.
• Fed statement removes prior language on inflation progress, signaling a cautious approach.
• AUD/USD drops to 0.6220 as the US Dollar strengthens post-Fed decision.

The AUD/USD pair extended its decline on Wednesday, falling to 0.6220 following the Federal Reserve’s policy decision. 

As widely anticipated, the Fed left interest rates unchanged at 4.25%-4.50%, but the statement carried a hawkish tone. Notably, policymakers removed prior language indicating that inflation had made progress toward the 2% target, signaling a more cautious outlook on future rate cuts. The US Dollar strengthened immediately after the announcement, pressuring the Aussie lower. All eyes are now on Jerome Powell's presser.

Technical overview

The AUD/USD remains under selling pressure, with the pair struggling to regain momentum. The Relative Strength Index (RSI) hovers in negative territory, reflecting bearish sentiment. Meanwhile, the MACD histogram prints rising green bars, suggesting some divergence. Key support lies at 0.6200, with a break below exposing 0.6170. On the upside, resistance is seen at 0.6230 (20-day Simple Moving Average).

AUD/USD daily chart

• GBP/USD rattled, but more impact is still in the pipe.
• Fed held rates steady as rate futures broadly anticipated.
• More details will be due from Fed Chair Powell's press conference.

GBP/USD knocked into some fresh volatility, testing down in intraday chart action and testing below 1.2435 in response to the Federal Reserve's (Fed) recent decision to maintain the interest rate at 4.25%-4.50%. Markets largely expected this hold, and attention will now turn to Fed Chair Jerome Powell's press conference, scheduled for thirty minutes after the Federal Open Market Committee's (FOMC) rate announcement.

Breaking: Federal Reserve left its interest rates unchanged, as anticipated

US President Donald Trump is likely to take to social media during Fed Chair Powell's press conference. He has previously indicated his intention to "demand" rate cuts from the Fed, a stance that challenges the Fed's independence as established by Congress.

More to come...

GBP/USD five-minute chart

• EUR/USD sees some volatility, but more impact is still in the pipe.
• Fed held rates steady as rate futures broadly anticipated.
• More details will be due from Fed Chair Powell's press conference.

EUR/USD dumped a scant 20 pips on reaction to the Federal Reserve's (Fed) latest rate call, which came in at standing steady at 4.25%-4.50%. Markets broadly anticipated a hold from the Fed, and investor focus will shift to Fed Chair Jerome Powell's upcoming press conference, due thirty minutes after the Federal Open Market Committee's (FOMC) rate call.

Breaking: Federal Reserve left its interest rates unchanged, as anticipated

US President Donald Trump is expected to hit his social media feeds during Fed Chair Powell's press conference. President Trump has already forecast his intent to "demand" rate cuts from the Fed, a move that runs aground of the Fed's Congressionally-appointed independence from the White House specifically.

More to come...

EUR/USD, five-minute chart

• The US Dollar Index climbs near 108.20 ahead of the Federal Reserve’s policy announcement.
• The Fed is expected to hold rates steady at 4.25%-4.50%, with Powell’s guidance in focus.
• Investors assess how Trump’s economic policies, including proposed 25% tariffs on Canada and Mexico, could shape monetary policy.
• Weak consumer confidence and durable goods orders add uncertainty to the Fed's outlook.

The US Dollar Index (DXY), which measures the value of the US Dollar against a basket of currencies, extends its recovery above 108.00 as investors await the Federal Reserve’s (Fed) monetary policy decision. Markets expect the central bank to leave rates unchanged, but Chair Jerome Powell’s remarks could be key in shaping rate expectations. With United States (US) President Donald Trump’s proposed tariffs on Canada and Mexico adding further uncertainty, traders are keen to gauge the Fed’s stance on inflation and growth.

Daily digest market movers: US Dollar steadies ahead of key Fed meeting

• The Federal Reserve is widely anticipated to maintain its current interest rate at 4.25%-4.50%.
• Powell’s presser in focus: Investors will watch for signals on whether the Fed could leave a March rate cut on the table.
• As for now, the CME FedWatch Tool indicates a 33% chance of a rate reduction in March, up from previous estimates.
• Datawise, the Atlanta Fed’s GDPNow model raised Q4 growth estimates to 3.2% SAAR from 3.0%.
• The first official reading of Q4 GDP is due tomorrow, with consensus at 2.6% vs. 3.1% in Q3.
• Inflation remains a concern: Above-trend growth and persistent price pressures could deter the Fed from cutting rates soon.

DXY technical outlook: Resilience above 108.00, but caution remains

The Dollar Index remains on solid footing above 108.00, showing signs of stabilization ahead of the Fed’s policy announcement. However, momentum indicators reflect mixed signals. The Relative Strength Index (RSI) remains below 50, suggesting limited bullish strength, while the MACD’s red bars indicate ongoing selling pressure. If the DXY maintains its current position, further gains toward 108.50 are possible. A break below 107.50 would open the door for additional losses.

• The Dow Jones is trading flat through Wednesday as markets await Powell.
• The Fed is widely expected to stand pat on interest rates for this meeting.
• Despite the forecast of no rate moves, markets will be watching the FOMC closely.

The Dow Jones Industrial Average (DJIA) is treading water on Wednesday, awaiting Federal Reserve (Fed) Chair Jerome Powell and the Federal Open Market Committee’s (FOMC) latest rate call, which is already widely expected to be no moves on rate cuts. A hefty earnings season is further constraining traders’ desire to make any heavy moves, with Apple (AAPL), Microsoft (MSFT), Facebook (FB), and Tesla (TSLA) slated to publish their latest earnings reports during the midweek.

The FOMC’s latest rate call is due at 1400 EST, or 1900 GMT, with Fed Chair Powell’s press conference slated to start half an hour later. The Fed’s steady rate call is a foregone conclusion, but the thing drawing market attention will be how Fed Chair Powell addresses the friction between United States (US) President Donald Trump and the Federal Reserve. President Trump has set the White House on a collision course with the US central bank, as Donald Trump’s history as a borrower has led him to believe that arbitrarily lower interest rates are the panacea to federal funding woes that his administration is facing. 

President Trump stated his intention to “demand” lower interest rates from Powell and the Fed. However, the US president is typically ill-suited to make that particular demand when the rule of law and the Fed’s Congressionally appointed independence are factors. Investors tend to prefer the rule of law, and any particularly egregious moves by the split-term President to try to upend that will likely make waves among markets.

Dow Jones news

Most of the Dow Jones is holding in tepid territory ahead of the Fed’s latest rate call. The equity index is roughly split down the middle between losers and winners, though Nvidia (NVDA) is continuing its latest trend of falling to the bottom. Nvidia is down another 4.6% on Wednesday, falling below $123 per share as the chip-punching silicon merchant continues to take a pummeling as China’s open-source AI megamodel, DeepSeek, threatens US venture-capital-fueled AI infrastructure dominance.

Dow Jones price forecast

The Dow Jones Industrial Average is drying out just south of record highs above 45,000, with intraday price action testing the waters near 44,800. A topside break will see the Dow Jones chalking in fresh all-time peak bids, while a bearish turnaround will mark the major equity index’s first ‘lower high’ pattern since mid-2024.

Dow Jones daily chart

• Mexican Peso stable in cautious markets, awaiting US Federal Reserve decision.
• Mexico's labor market gains contrast with US tariff concerns, placing subtle pressure on Peso
• Banxico’s Deputy Governor hints at further easing despite potential US trade challenges.

The Mexican Peso (MXN) remains subdued against the US Dollar (USD) during the North American session as investors wait for the United States (US) Federal Reserve (Fed) monetary policy decision. Consequently, price action is constrained, as seen by USD/MXN trading at 20.55, up by a minimal 0.06% and virtually unchanged.

Data from Mexico revealed that the December Unemployment Rate dipped, indicating the labor market's strength. Recently, Banco de Mexico (Banxico) Deputy Governor Omar Mejia Castelazo said on Banorte’s podcast that Banxico has enough margin to carry out a “process of calibration” at upcoming monetary policy meetings. He hinted that the central bank will likely continue to ease policy.

When asked about challenges from Trump’s trade policies in the US, Mejia added that Mexico had “solid macro-economic fundamentals.”

Despite this, the Mexican currency has been pressured during the week, depreciating over 1.89% on Monday against the Greenback due to  President Trump’s trade policy threats to Colombia. At the same time, the White House reiterated that 25% tariffs to Mexico would be applied on February 1, according to Karoline Leavitt, the Press Secretary.

Regarding this, David A. Meier, an economist at Julius Baer, ​​said: “Our view is that these threats are intended to put pressure on Mexico and Canada on drug and immigration issues, as well as to reopen the USMCA negotiations before 2026.”

Meier warned of the potential economic consequences if the threats materialize. He added that Mexican exports would reduce and remittances would take a hit, which opens the door for further depreciation of the Mexican Peso.

In addition, Mexico’s economic docket will feature the release of preliminary Q4 2024 Gross Domestic Product (GDP) figures.

Daily digest market movers: Mexican Peso hovers near 20.50 after jobs report

• The Institutio Nacional de Estadistica Geografia e Informatica (INEGI) revealed that Mexico's Unemployment Rate in December was 2.4%, down from 2.6% in November. Seasonally adjusted figures were 2.6%.
• According to Reuters, Mexico President Claudia Sheinbaum said she “doesn't believe the United States will impose tariffs on Feb. 1.”
• A Reuters poll revealed that private economists estimate Mexico’s GDP to contract -0.2% QoQ from an expansion of 1.1% in Q4. 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%. In headline figures, inflation is foreseen at 3.91%, and core prices are 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.
• Money market futures have priced in 50 bps of Fed rate cuts in 2025, according to CME FedWatch Tool data.

USD/MXN technical outlook: Mexican Peso surges as USD/MXN drops to 20.50

The USD/MXN consolidates near the 20.50 figure for the second straight day, with traders reluctant to push prices above the year-to-date (YTD) high of 20.90. Since November, the exotic pair has remained within the 20.20 – 20.90 range, capped on the downside by the 50 and 100-day Simple Moving Averages (SMAs), each at 20.38 and 20.07.

For a bullish continuation, buyers must clear the YTD peak and the 21.00 figure, which could open the door to test the March 8, 2022, daily high of 21.46, followed by the 22.00 psychological level.

On the other hand, if sellers push prices below the 100-day SMA, the next support would be 20.00, followed by the October 18, 2024 swing low of 19.64.

• The Canadian Dollar lost 0.25% against the Greenback on Wednesday.
• The Bank of Canada cut interest rates by another 25 bps, to 3%.
• The BoC also announced the end of its quantitative tightening program.

The Canadian Dollar shed one-quarter of one percent against the Greenback on Wednesday, falling back after the Bank of Canada (BoC) slashed another 25 bps from interest rates, bringing the BoC’s main reference rate down to 3.0%. The Canadian interest rate peaked at 5% in July of 2023, and the BoC’s latest rate cut follows two back-to-back jumbo cuts of 50 bps in October and December of last year.

The Bank of Canada also announced the end of its quantitative tightening program, and is expected to restart asset purchases in early March. However, BoC Governor Tiff Macklem pulled back from the brink, saying that the BoC isn’t expecting to full-on restart quantitative easing programs immediately. The looming threat of widespread trade tariffs from US President Donald Trump is definitely weighing on the BoC, and rate swap markets are pricing in nearly-even odds that the Canadian central bank will deliver another 25 bps rate cut in March.

Daily digest market movers: Canadian Dollar sheds weight after BoC rate cut

• Despite getting knocked back post-BoC rate cut, the Canadian Dollar is still treading water within its recent range, keeping USD/CAD hobbled near the 1.4400 handle.
• With the CAD’s interest rate differential against the US Dollar set to widen further heading into Q2, Loonie bulls have limited room to run.
• Tariffs are the looming threat to the BoC’s policy stance in 2025.
• BoC policymakers have brushed off the Loonie sitting at multi-year lows against the USD for the time being, but continued declines may spark policy adjustments moving forward.
• The BoC also snuck in a slight upside revision to inflation forecasts, now see annualized inflation metrics to hold slightly above the 2.0% target through 2026.
• BoC Governor Macklem: Tariffs threat weighed on the bank's decision

Canadian Dollar price forecast

The Canadian Dollar has shed some weight against the US Dollar for three consecutive trading days, falling back around four-tenths of one percent through the first half of the trading week and bolstering USD/CAD back above the 1.4400 handle. The pair has been in a rough sideways grind for over six weeks after the Loonie fell to multi-year lows against the Greenback and USD/CAD tapped 1.4500 for the first time since the pandemic.

USD/CAD price action remains hobbled in a choppy flat channel between 1.4300 and 1.4500, with bids continuing to swirl around 1.4400 in back-and-forth chart momentum. The pair is overall poised for a topside break into chart paper above 1.4500, but a pullback below the 50-day Exponential Moving Average (EMA) rising into 1.4270 could see an extended bearish slide.

USD/CAD daily chart

• Australian inflation missed expectations, reinforcing RBA rate cut speculation.
• US-China trade tensions keep pressure on the Aussie.
• Markets await the Fed’s decision for further direction.

The AUD/USD dropped by 0.57% to 0.6225 on Wednesday, struggling near weekly lows below 0.6250. Softer-than-expected inflation data from Australia strengthened expectations of a February rate cut by the Reserve Bank of Australia (RBA), putting additional pressure on the Aussie. Weak economic signals from China and escalating US-Sino trade tensions further dampened sentiment, while investors awaited the Federal Reserve’s policy decision later in the day.

Market sentiment remains cautious as investors await the Federal Reserve's (Fed) highly anticipated monetary policy decision. While the central bank is widely expected to keep interest rates steady, market participants are keen to gauge its stance on future rate cuts. Any hawkish tilt from the Fed, emphasizing persistent inflation risks or delaying policy easing, could drive further strength in the US Dollar, pressuring the AUD/USD lower.

At the same time, Australia’s inflation figures came in below expectations, adding to speculation that the RBA will ease monetary policy in its upcoming meeting. The latest data showed that quarterly inflation rose by just 0.2%, missing the projected 0.3%. On an annual basis, inflation slowed to 2.4%, down from 2.8% in the previous quarter and below the expected 2.5%. While December’s Monthly CPI increased by 2.5%, as forecasted, it remained within the RBA’s 2%-3% target range.
Adding to the Aussie’s challenges, concerns over potential US tariffs on Chinese goods continue to mount. White House Press Secretary Karoline Leavitt reiterated that President Donald Trump is still considering imposing 10% tariffs on China, with a decision expected in February. 

Technical overview

The AUD/USD remains under pressure, trading within a tight range as it struggles to recover. The Relative Strength Index (RSI) stands at 43, sharply declining in negative territory, indicating sustained bearish momentum. Meanwhile, the MACD histogram prints green bars but declinig, signaling some bullish presence.
Despite recent losses, technical indicators suggest mixed signals. The MACD hints at potential upside, while the RSI remains bearish. If the pair fails to reclaim the 20-day Simple Moving Average (SMA) at 0.6230, selling pressure could intensify. Immediate support is seen at 0.6200, with a break lower exposing 0.6170. Resistance remains at 0.6250, followed by 0.6300.

AUD/USD daily chart

• Bank of Canada cuts key rate to 3%, matching expectations, briefly boosting USD/CAD.
• BoC Governor Macklem cites trade conflict risks and cuts growth forecasts, hinting at economic challenges.
• BoC concludes Quantitative Tightening, adjusts inflation expectations, and hints at further easing in March.

The USD/CAD hit a six-day high of 1.4470 after the Bank of Canada (BoC) cut rates by 25 basis points from 3.25% to 3%, as economists widely expected. However, as market participants digest the BoC’s monetary policy statement, the pair has retraced toward 1.4430, yet it remains up 0.29%.

USD/CAD ascends to 1.4470 following BoC's decision to lower interest rates amidst cautious economic outlook

In addition, the BoC cut growth forecasts and warned Canadians, “A long-lasting and broad-based trade conflict would badly hurt economic activity in Canada,” Governor Tiff Macklem said in prepared opening remarks to a press conference.

The BoC updated its forecasts. Inflation is seen at 2.3% in 2025, and the economy is expected to grow 1.8% YoY in Q4 2024. Furthermore, announced the end of Quatitatitve Tightening (QT), and added that inflation would be around the 2% target over the next two years.

Canadian swaps market sees a 47% chance of further easing by the BoC in March.

Up next, the BoC Governor Tiff Macklem would cross newswires ahead of the Federal Reserve’s monetary policy decision.

USD/CAD Price Chart – Hourly

The USD/CAD reached a daily high, clearing the R2 pivot and peaking shy of the R3 daily pivot point. It then erased those gains and hit the R1 pivot level before stabilizing at around the current exchange rate. Momentum indicates that the BoC’s frenzy was tempered, though Macklem's presser could rock the boat.

Key resistance levels lie at 1.4471, 1.4500 and the January 20 peak at 1.4518. On further weakness, the USD/CAD could test the daily pivot point at 1.4394, followed by S1 at 1.4369.

• Sterling under pressure with scant domestic data; focus on upcoming Fed rate decision.
• Market sentiment favors Fed holding rates steady, with potential cuts later in the year.
• Investors await Fed Chair Powell's press conference for clues on future monetary policy.

The Pound Sterling extended its losses on Wednesday as the Greenback remains firm ahead of the US Federal Reserve’s monetary policy decision. An absent economic docket in the UK, except for Bank of England (BoE) Governor Andrew Bailey's TSC hearing, could move the markets ahead of the Fed. The GBP/USD trades at 1.2406, down 0.27%.

GBP/USD dips to 1.2406, losing 0.27% with investors on edge ahead of key Fed monetary policy

Risk appetite improved, but investors remain cautious ahead of the Fed. The odds that the US Central Bank may keep rates unchanged are 98%, though money markets estimate that Powell and Co. would cut rates twice, each 25 basis points (bps), the first in June and the second towards the end of the year.

Market players will be watching Fed Chair Jerome Powell's press conference. According to Brown Brothers Harriman (BBH), they expect Powell to emphasize again that the FOMC can be more cautious as the Fed considers further adjustments to its policy rate.

US economic data revealed on Tuesday showed that Core Durable Goods Orders improved slightly. Following its release, the Atlanta GDP Now model hinted that growth for the last quarter of 2024 might hit 3.2%, up from 3% before yesterday’s data.

In the meantime, financial markets recovered following Monday’s sell-off after DeepSeek revealed its latest AI model, which was cheaper than OpenAI’s or US models and required fewer computer resources.

Throughout the day, GBP/USD traders are waiting for the Fed’s decision and the Chair Powell press conference at 18:30 GMT.

GBP/USD Price Forecast: Technical outlook

From a daily chart perspective, the GBP/USD might extend its losses beneath 1.2400, after diving to a new three-day low of 1.2392. On further weakness, the pair could visit January 22 peak at 1.2375, ahead of 1.2350. Momentum turned bearish as seen by the Relative Strength Index (RSI).

In the short-term, the one hour chart indicates that the spot price fell below the 50 and 100 Simple Moving Averages (SMAs), finding acceptance below the latter which is at 1.2431. A drop below 1.2400 will expose the 200-SMA at 1.2353. Conversely, further upside is seen, once buyers lift GBP/USD above 1.2431 and 1.2446, with the latter being the 50-SMA.

• USD/JPY trades subduedly around 155.40 ahead of the Fed’s monetary policy announcement.
• The Fed is widely anticipated to leave interest rates steady in the range of 4.25%-4.50%.
• Investors have underpinned Yen against the US Dollar as BoJ's hawkish bets swell.

The USD/JPY pair edges lower to near 155.40 in Wednesday’s North American session. The asset trades cautiously even though the US Dollar (USD) performs strongly ahead of the Federal Reserve’s (Fed) monetary policy decision at 19:00 GMT.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, refreshes three-day high near 108.30. The USD Index gains as traders are confident that the Fed will announce a pause in the policy-expansionary spell and keep interest rates steady in the range of 4.25%-4.50%. In the last three policy meetings, the Fed reduced its key borrowing rates by 100 basis points (bps).

As the Fed is certain to maintain the status quo, investors will pay close attention to Fed Chair Jerome Powell’s press conference to gauge the next move in the US Dollar. Powell can be asked how long the Fed will keep interest rates at their current levels. Investors will also be keen to know the impact of United States (US) President Donald Trump’s economic agenda on the monetary policy outlook.

Analysts at Macquarie expect Powell to offer little in this regard other than emphasizing the “data dependence of future decisions” and highlighting “uncertainty about the neutral rate.”

Market participants view Trump’s policies, such as immigration controls, higher tariffs, and lower taxes, as inflationary and pro-growth for the economy. This scenario forces Fed officials to adopt a hawkish stance on interest rates.

Though the US Dollar performs strongly, investors have underpinned the Japanese Yen (JPY) against the Greenback amid growing expectations that the Bank of Japan (BoJ) will raise interest rates again this year.

BoJ hawkish bets swell after minutes of the December meeting showed that officials emphasized the need to adjust the monetary policy cautiously in hopes that Japan's spring wage negotiations will result in strong hikes again this year.

• The US Dollar Index advances to near 108.20 ahead of the Fed’s monetary policy decision in which the central bank is expected to keep interest rates steady.
• Investors will be keen to know the impact of Trump’s economic agenda on the interest rate outlook from Fed Powell.
• US Donald Trump is poised to impose 25% tariffs on Canada and Mexico.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, rises to near Friday’s high of 108.20 in Wednesday’s North American session. The US Dollar (USD) performs strongly against its major peers ahead of the Federal Reserve’s (Fed) monetary policy decision, which will be announced at 19:00 GMT.

According to the CME FedWatch tool, trades are confident that the Fed will certainly announce a pause to the current policy-easing cycle by leaving interest rates unchanged in the range of 4.25%-4.50%. Therefore, the impact of the Fed’s policy decision on the US Dollar won’t last long.

However, the Fed’s guidance on the monetary policy outlook will be more critical for currency markets for which investors will pay close attention to Chair Jerome Powell’s press conference. Powell is expected to face questions like how long the Fed will keep interest rates steady and the impact of United States (US) President Donald Trump’s economic agenda on the monetary policy stance.

Market participants are worried that Trump’s economic policies, such as immigration controls, higher tariffs and lower taxes will be pro-growth and inflationary for the economy, which could force the Fed to leave interest rates at their current levels for longer.

Meanwhile, Donald Trump is poised to raise tariffs on Canada and Mexico by 25% from February 1. White House Press Secretary Karoline Leavitt reported on Tuesday that 25% tariffs on Canada and Mexico from February 1 are “still on the books”. Leavitt added that the President is “very much still considering 10% tariffs on China” from Saturday.

The Pound Sterling (GBP) is edging marginally lower, in line with its European peers, Scotiabank's Chief FX Strategist Shaun Osborne notes.

Chancellor talks up growth policies

"There was little reaction to comments from Chancellor Reeves outlining measures aimed at boosting UK growth—trade talks, looser planning and development rules— perhaps because there was little new in the comments and these measures will take time to have an impact. The chancellor threw her support behind the expansion of Heathrow airport to signal that the government is serious about removing obstacles to development."

"Spot losses are holding in the low 1.24 zone but weakness below the base of a minor bull channel on the short-term chart suggests downside risks remain for the pound. A move below 1.24 targets losses to the low/mid 1.23s in the short run."

The Euro (EUR) is moderately lower again as the USD firms broadly, Scotiabank's Chief FX Strategist Shaun Osborne notes.

EUR/USD drifts back to 1.04

"There are some positives around the fringes of the EUR’s outlook, however. Spain notched up another solid year of growth, rising 3.5% in the Q4 year—better than many. Meanwhile, this week’s volatility in global stocks may give investors a timely nudge that Eurozone stocks are outperforming US markets so far this year."

"The Stoxx 50 index is up 7% YTD. Relatively better returns in Europe may provide a little support for EUR sentiment if the trend extends."

"Soft price action yesterday—spot losses completed the third leg of an 'evening star' candle pattern on the daily chart—adds to the weaker technical tone of the EUR. Spot losses are losing a little momentum in the low 1.04 area at present, with the 40-day MA (1.0403) providing some anchoring for the market. Loss of support around the figure targets a drop to 1.0350. Resistance is 1.0535."

Broader US Dollar (USD) strength explains the modest drop in the Canadian Dollar (CAD) on the session so far. The BoC policy decision today is expected to result in a 25bps rate cut which is already largely factored in. Swaps have been effectively discounting a January ease for some time, with the strength of some recent data releases (jobs, retail) only marginally affecting pricing, Scotiabank's Chief FX Strategist Shaun Osborne notes.

USD/CAD holds established range

"OIS pricing reflects 95% chance of a 1/4-point cut today, taking the target rate to 3.00%. The policy decision and MPR are released at 9.45ET, with Governor Macklem and Senior DG Rogers speaking to reporters at 10.30ET. The Bank will provide more detail on its analysis of the impact of tariffs on the domestic economy today and, given the uncertainty around the outlook, it may signal that the pace of easing will slow in the coming months."

"Significant tariffs applied broadly to Canadian exports would prompt a severe slowing in domestic growth. US tariffs and retaliation on US goods coming into Canada would slow growth and boost inflation, tilting risks towards rate hikes. On the tariff front, today’s meeting between Foreign Affairs Minister Joly and US Secretary of State Rubio may give some sense of the near-term tariff risks facing Canada."

"The USD is nudging higher again but remains well within the broader range that has prevailed since mid-December. USD/CAD support in the low/mid 1.43 zone remains firm (40-day MA rising to 1.4339 today) but, absent new, bullish impulses, USD gains should remain contained to the 1.4475 zone. Key support is 1.4255/60. Key resistance is 1.4515/20."

The US Dollar (USD) is advancing again ahead of the Fed policy decision this afternoon, Scotiabank's Chief FX Strategist Shaun Osborne notes.

USD firms ahead of FOMC

"Gains are relatively limited versus the core majors and the JPY and MXN are just about managing to resist the rise. Finance Minister Kato spoke with US Treasury Secretary Bessent earlier and said they will continue to discuss FX closely. The AUD is underperforming after Q4 CPI data came in a little lower than forecast, lifting expectations that the RBA will—finally —join the global central bank easing trend in February. Limited movement overnight may reflect thinner trading in Asia in particular due to the start of the Lunar New Year celebrations."

"The FOMC is expected to leave policy on hold today. Policymakers have signaled that the pace of easing may slow amid resilient growth trends and the lack of additional progress on inflation since the middle of last year. Uncertainty about the impact of President Trump’s policy initiatives will add to the desire to hold off on additional easing for now. Policymakers may be concerned that tariffs could reignite inflation pressures a little more easily amid still stubborn price pressures."

"Fed Chair Powell will likely try and steer a relatively neutral–sounding course on the near-term outlook for policy at least but a steady Fed contrasts with the outlook for lower rates in many other jurisdictions and provides the motivation for a somewhat firmer USD. Meanwhile, the White House reiterated February 1 tariff threats for Canada and Mexico at yesterday’s press briefing. Given that one of President Trump’s first moves was to order a thorough review of US trade and economic policies which is due April 1, some time shortly after the latter date may be a more realistic point for tariff action to emerge."

• Gold stabilizes on Wednesday after a near 1% recovery the previous day. 
• All eyes are on the Federal Reserve interest rate decision later in the day. 
• Gold is better positioned to eke out a fresh all-time high still. 

Gold’s price (XAU/USD) trades roughly flat and stabilizes around $2,760 at the time of writing on Wednesday after a whipsaw start to the week. No big moves are expected, as several traders sit on their hands until the Federal Reserve (Fed) interest rate decision later in the day. Lower US rates are often seen as beneficial for Gold to trade higher. 

Market expectations show the Fed will likely keep interest rates unchanged in the range of 4.25%-4.50%, so traders will rather focus on Fed Chairman Jerome Powell’s comments on the central bank’s policy outlook. And here, traders might be in for a huge disappointment. Powell is not expected to comment on President Donald Trump's criticism of the Fed or why or how Trump calls for lower rates. Instead, Powell is expected to repeat that the central bank remains independent and data-dependent and will focus on its dual mandate: inflation and the jobs market. 

Daily digest market movers: Ready for a fresh all-time high

• According to Bloomberg, the market expectation is for Fed Chairman Jerome Powell to deliver a dovish pause. This should see US yields tilt lower, which opens the opportunity for Gold to surge higher and print a possible fresh all-time high. 
• Australian hedge funds are clamouring for Gold exposure during the second term of US President Donald Trump. They are betting that his administration will fail to arrest the US economy’s spiralling debt and that Gold will act as an antidote to the bond market’s carnage, Financial Review reports.
• At 19:00 GMT, the Fed will deliver its monetary policy decision, followed by a press conference from Fed Chairman Jerome Powell at 19:30 GMT.

Technical Analysis: Softening stance sets up Gold for all-time high

Gold’s price has positioned itself at a perfect point for reaching a fresh all-time high should the Fed be rather dovish on Wednesday. The decline earlier this week has nearly recovered, and Gold is trading roughly flat for now. Expect volatility to pick up, with a possible fresh all-time high on the back of comments from Fed Chairman Jerome Powell, who is expected to deliver a dovish rate pause.

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 1% 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

• AUD/USD declines to near 0.6220 as soft Australian CPI data has boosted RBA dovish bets.
• Year-on-year Australian CPI rose at a slower pace of 2.4% in the last quarter of 2024.
• The Fed is certain to announce a pause in the current policy-easing spell.

The AUD/USD pair falls sharply to near 0.6220 in Wednesday’s European session. The Aussie pair faces sharp selling pressure as the Australian Dollar (AUD) weakens across the board after the release of the softer-than-projected Australian Q4 Consumer Price Index (CPI) data, which fuelled bets supporting the Reserve Bank of Australia (RBA) to start reducing interest rates from the policy meeting in February.

Australian Bureau of Statistics reported that inflationary pressures rose at a steady pace of 0.2% in the last quarter of 2024 on a sequential basis, slower than estimates of 0.3%. Compared to the same quarter of the previous year, inflation rose at a slower pace of 2.4% than expectations of 2.5% and 2.8% growth in the third quarter of 2024. However, the Monthly CPI grew at a faster pace of 2.5% in December, as expected, compared to a 2.3% increase in November, but is broadly inside the RBA’s range of 2%-3%.

Soft Australian inflation data have boosted market expectations that the RBA will pivot to policy easing at its next policy meeting.

Meanwhile, deepening fears that United States (US) President Donald Trump will impose 10% tariffs on China has also kept the Aussie Dollar on the backfoot, being Australia a leading trading partner of China. On Tuesday, White House Press Secretary Karoline Leavitt reported that the President is “very much still considering 10% tariffs on China” from February 1.

On the US Dollar (USD) front, investors await the Federal Reserve’s (Fed) monetary policy decision, which will be announced at 19:00 GMT. The Fed is widely anticipated to keep interest rates steady in the range of 4.25%-4.50%.

• The Federal Reserve is widely expected to leave monetary policy settings unchanged following the January meeting.
• Fed Chairman Powell’s presser could provide important clues about the rate outlook.
• The US Dollar could come under bearish pressure if the Fed leaves a rate cut in March on the table.  

The United States (US) Federal Reserve (Fed) will announce monetary policy decisions following the first policy meeting of the year on Wednesday. Market participants widely anticipate that the US central bank will leave monetary policy settings unchanged after cutting the interest rate by 25 basis points (bps) to 4.25%-4.5% in December.

The CME FedWatch Tool shows that investors virtually see no chance of a rate cut in January, while pricing in a 33% probability of a 25 bps reduction in March. Hence, the statement language and comments from Fed Chairman Jerome Powell could drive the US Dollar’s (USD) valuation, rather than the interest rate announcement. 

“The FOMC is widely expected to maintain its policy stance unchanged at 4.25%-4.50% next week, with Chair Powell expected to communicate what's likely to be a cautious process for policymaking in the near horizon, while still espousing an easing bias,” said TD Securities analysts previewing the Fed event. “In our view, decisions by Fed officials, while still highly data-dependent, are increasingly turning more Trump-dependent,” added.

When will the Fed announce its interest rate decision and how could it affect EUR/USD?

The US Federal Reserve is scheduled to announce its interest rate decision and publish the monetary policy statement on Wednesday at 19:00 GMT. This will be followed by Fed Chairman Jerome Powell's press conference starting at 19:30 GMT. 

The revised Summary of Economic Projections (SEP), also known as the dot plot, published after the December policy meeting showed that policymakers are projecting two 25 bps rate cuts in 2025. In the press conference, Chairman Powell explained strong economic growth, low unemployment and expectations for higher inflation were primary reasons for projecting a slower policy-easing path.

The most likely scenario for the Fed is to reiterate its data-dependent approach to policy and for officials to wait for US President Donald Trump’s trade and other economic policies to take shape. “We expect significant policy changes, we need to see what they are and the effects to get a clearer picture,” Powell said at the presser in December. 

In case Powell adopts an optimistic tone about the inflation outlook after Trump refrained from imposing day-one tariffs and voiced his willingness to work with China on trade issues, markets could see that as a sign pointing to a rate cut in March and weigh on the USD with the immediate reaction. On the other hand, investors could adopt a cautious stance if Powell talks about the potential undesired effects of proposed 25% tariffs on imports from Canada and Mexico, two of the biggest US exporters, on inflation. In this scenario, the USD could gather strength against its rivals.

Eren Sengezer, European Session Lead Analyst at FXStreet, provides a short-term technical outlook for EUR/USD:

“EUR/USD remains technically bullish on the daily chart, with the Relative Strength Index (RSI) indicator rising above 60 for the first time since late September. Additionally, the pair holds comfortably above the 50-day and the 20-day Simple Moving Averages (SMA).”
“On the upside, the Fibonacci 38.2% retracement level of the October-January downtrend aligns as the first resistance level at 1.0580 ahead of 1.0670-1.0700 (Fibonacci 50% retracement, 100-day SMA). In case the pair drops below 1.0440 (50-day SMA, Fibonacci 23.6% retracement) and starts using this level as resistance, technical sellers could take action and open the door for an extended slide toward 1.0350 (20-day SMA) and 1.0200 (end-point of the downtrend).

• EUR/JPY slides to near 161.60 as the Euro faces selling pressure ahead of the ECB policy meeting on Thursday.
• The ECB is almost certain to cut its Deposit Facility rate by 25 bps to 2.75%.
• Growing bets towards more interest rate hikes from the BoJ this year have boosted the Japanese Yen.

The EUR/JPY pair slumps to near two-day low of 161.60 in Wednesday’s European session. The cross faces a sharp selling pressure as the Euro (EUR) underperforms its major peers, except antipodeans, as market participants are confident that the European Central Bank (ECB) will cut its Deposit Rate by 25 basis points (bps) to 2.75%. This would be the fourth straight interest rate cut by the ECB in a row.

Investors have also priced in three more interest rate cuts of 25 bps in the upcoming three meetings amid fears that the imposition of tariffs by the United States (US) on the Eurozone would weaken its economic outlook. A majority of ECB officials are also comfortable with market expectations for four interest rate cuts this year due to deepening risks of inflation undershooting the central bank’s target of 2%. The completion of four interest rate cuts would push the Deposit rate lower to 2%.

Few ECB officials have considered 2% a neutral rate, which neither stimulates nor weighs on economic growth.

Meanwhile, the Japanese Yen (JPY) performs strongly across the board amid growing speculation that the Bank of Japan (BoJ) will raise interest rates further this year on hopes of higher wage growth outlook.

EUR/JPY trades in a Descending Triangle chart pattern on a daily timeframe, which indicates indecisiveness among market participants. The horizontal border of the chart pattern is plotted from the December 13 low of 159.65, while the downward-sloping border is placed from the December 30 high of 164.90.

The 20-day Exponential Moving Average (EMA) appears to be sticky to the asset’s price near 162.17, suggesting a sideways trend.

The 14-day Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, which indicates a sharp volatility contraction.

A fresh upside move toward the December 30 high of 164.90 and the November 6 high of 166.10 would appear if the asset breaks decisively above the January 24 high of 164.08.

On the flip side, a downside move below the January 16 low of 159.74 would expose the asset to the December 11 low of 158.65, followed by the December 9 low of 157.87.

EUR/JPY daily chart

The minutes of the Bank of Japan (BOJ) December meeting are outdated following last week’s 25bps policy rate hike to 0.50%, BBH FX strategists report.

BOJ policy rate to peak around 1.00%

“In December, the BOJ left the policy rate unchanged at 0.25% and the minutes showed the board discussed how high to raise the policy rate in the future. One member cautioned the BOJ ‘would need to slow the pace of policy interest rate hikes’ once the policy interest rate approached the neutral interest rate.”

“BOJ staff estimates the nominal neutral rate to be in a range of 1.00% to 2.50%. Markets continues to imply the BOJ policy rate to peak around 1.00% over the next two years. This seems about right as the BOJ expects inflation to stabilize around its 2% target in 2026. Bottom line: the BOJ shallow policy normalization cycle is an ongoing headwind for JPY.”

UK Chancellor of the Exchequer Rachel Reeves said on Wednesday, “we begun to turn things around.”

Key takeaways

Market reaction

GBP/USD was last seen trading at 1.2416, down 0.22% so far.

RBNZ Chief Economist Conway stuck to bank’s dovish guidance, BBH FX strategists report.

RBNZ/Fed policy trend remains drag for NZD/USD

“Conway noted that ‘easing domestic pricing intentions and the recent drop in inflation expectations help open the way for some further easing”, adding he anticipates “interest rates to ultimately settle around neutral’.”

“The RBNZ estimates the long-term nominal neutral interest rate to lie between 2.5% and 3.5%. In line with RBNZ guidance, markets continue to imply another 50bps rate cut to 3.75% in February and the policy rate to bottom at 3.00% over the next 12 months. RBNZ/Fed policy trend remains drag for NZD/USD.”

Australia’s Q4 CPI was soft and all but locks-in an RBA rate cut at the next meeting February 18, BBH FX strategists report.

Sluggish Chinese economic activity to weigh on AUD/USD

“Headline CPI matched consensus at 2.5% y/y vs. 2.8% in Q3, reflecting large falls in electricity (-25.2%) and Automotive fuel (-7.9%). The more policy-relevant trimmed mean CPI inflation undershot expectations eased to a three-year low at 3.2% y/y (consensus: 3.3%, RBA projection: 3.4%) vs. 3.6% in Q3.”

“Markets moved to virtually fully price-in (vs. 80% yesterday) a 25bps RBA cut to 4.10% in February and a total of 85bps of easing over the next 12 months. RBA/Fed policy trend and sluggish Chinese economic activity can further weigh on AUD/USD.”

USD/CAD is trading in a tight range around 1.4400, BBH FX strategists report.

USD/CAD has scope to overshoot to fresh cyclical highs

“The Bank of Canada (BOC) is expected to slash the policy rate 25bps to 3.00% following two consecutive 50bps rate reductions. The BOC’s updated Monetary Policy Report is also due today. Inflation is stabilizing around 2% and business sentiment remains subdued but has improved.”

“BOC Governor Tiff Macklem effectively ruled-out additional jumbo cuts, pointing out that officials will consider further rate cuts but likely at a slower pace. Markets are price-in almost 75bps of total BOC easing over next 12 months that should see the policy rate bottom near 2.50%.”

“USD/CAD has scope to overshoot to fresh cyclical highs supported by FED/BOC policy trend, risk of all-out trade war between Canada and the US, and the Trump administration’s focus to lower energy prices.”

US Dollar (USD) is firm ahead of the FOMC’s decision. The target range for the Fed funds rate is widely expected to be left unchanged at 4.25-4.50%, BBH FX strategists report.

Policy divergence continue to underpin USD strength

“The risk is the FOMC’s decision is not unanimous after Fed Governor Christopher Waller went full dove ahead of the media blackout. According to Waller ‘3 or 4 rate cuts is possible in 2025 if the data cooperates.’ In contrast, Fed funds futures and the FOMC median projection imply 2 rate cuts in 2025.”

“There is no Summary of Economic Projection. The next one is published in March. Meanwhile, Fed Chair Jay Powell’s post meeting press conference will be highly anticipated following US President Donald Trump’s jab at the Fed. Trump said that ‘with oil prices going down, I'll demand that interest rates drop immediately’. When asked if he believed Fed officials would listen to him, Trump responded, ‘Yeah.’ We expect Powell to emphasize again that the FOMC can be more cautious as we consider further adjustments to our policy rate.”

“Indeed, the bar for additional Fed funds rate cuts is high as US inflation is stalling above 2% and economic activity remains solid. The Atlanta Fed GDPNow model estimates above trend Q4 growth at 3.2% SAAR up from 3.0% on January 17. The final GDPNow update is due later today. Bottom line: monetary policy divergence between the Fed and other major central banks continue to underpin USD strength.”

• EUR/USD wobbles near 1.0420 as investors await the Fed’s policy outcome.
• The Fed is expected to keep interest rates steady with a slightly hawkish outlook.
• Trump’s tariffs plans and dovish ECB bets are expected to keep the Euro on the back foot.

EUR/USD trades with caution near 1.0420 in Wednesday’s European session, with investors focusing on the Federal Reserve (Fed) monetary policy announcement at 19:00 GMT. The Fed is widely anticipated to keep interest rates steady in the range of 4.25%-4.50% as officials are worried that the disinflation trend toward the central bank’s target of 2% has stalled and the labor market has stabilized.

As markets have fully priced in that the Fed will keep rates unchanged, investors will pay close attention to Fed Chair Jerome Powell’s press conference after the policy decision. Investors would be keen to know for how long the Fed will keep interest rates at current levels, given the stubborn inflation outlook on the assumption that the imposition of hefty tariffs by United States (US) President Donald Trump will increase prices of goods and services.

Trump’s push for higher tariffs on its trading partners has escalated global growth concerns. President Trump has recommended tariffs on pharmaceuticals, steel and sophisticated chips to boost domestic production. Meanwhile, 25% tariffs on Canada and Mexico and 10% on China are very much on the cards, as White House Press Secretary Karoline Leavitt indicated on Tuesday. Leavitt said that 25% tariffs on Canada and Mexico from February 1 are “still on the books”. Leavitt added that the President is “very much still considering 10% tariffs on China” from Saturday.

Ahead of the Fed’s policy decision, the US Dollar (USD) trades subduedly, with the US Dollar Index (DXY) wobbling around 107.90. The US Dollar has performed strongly in the past few months on the assumption that Trump’s tariffs would accelerate price pressures and force the Fed to keep interest rates unchanged for longer.

Daily digest market movers: EUR/USD skates on thin ice as ECB looks set to cut rates on Thursday

• Another reason behind the cautious performance of the EUR/USD pair is the European Central Bank’s (ECB) monetary policy meeting, scheduled for Thursday. Traders have fully priced in a 25 basis points (bps) interest rate cut, pushing the Deposit Rate lower to 2.75%. Market participants are also confident that the ECB will continue reducing its key borrowing rates in all meetings by the summer. Such a scenario would be unfavorable for the Euro’s (EUR) short and long-term outlook.
• ECB dovish bets have accelerated amid fears that Trump’s tariffs will weaken the already faltered Eurozone economy. Germany, the powerhouse of the shared bloc, is forecasted to contract this year, the Federal of German Industries (BDI) said on Tuesday. The agency expects that the German economy will shrink for the third year in a row as the government has been unable to address structural weakness in the national economy. "The situation is very serious: Growth in industry in particular has suffered a structural break," BDI President Peter Leibinger said.
• Investors will keenly focus on ECB President Christine Lagarde’s press conference on how the old continent will deal with Trump’s tariffs. Last week at the World Economic Forum (WEF) in Davos, Lagarde warned 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 ING said, “The tariff threat may be perceived more seriously given the Treasury’s active planning, and that materially shrinks the upside potential for the euro.” On Monday, US Treasury Secretary Scott Bessent proposed imposing a 2.5% tariff universally and also guided to raise them at a similar pace every month.

Technical Analysis: EUR/USD faces pressure near 50-day EMA

EUR/USD continues to struggle around the 50-day Exponential Moving Average (EMA), which trades around 1.0455, on Wednesday. The major currency pair corrects to near 1.0410 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 1.0395. 

The 14-day Relative Strength Index (RSI) failed to climb above the 60.00 hurdle after recovering from below the 40.00 level, suggesting that the trend would be sideways.

Looking down, the downward-sloping trendline from the September 30, 2024, high of 1.1209 will act as major support for the pair near the round level of 1.0300, followed by the January 20 low of 1.0266. Conversely, the December 6 high of 1.0630 will be the key barrier for the Euro bulls.

Copper dropped below $8,000/t in yesterday’s trading session after US President Donald Trump’s latest in a series of tariff threats, ING’s commodity analysts Ewa Manthey and Warren Patterson note.

Metals markets are turning nervous about the prospect of tariffs

“Trump said on Monday that he plans to impose tariffs on Copper, Aluminum and steel, as well as computer chips and pharmaceuticals, to boost domestic production. Trump also said on Monday evening that he wants to impose across-the-board tariffs that are “much bigger” than 2.5%. When asked about a report that incoming Treasury Secretary Scott Bessent favored starting with a global rate of 2.5%, Trump said he didn’t think Bessent supported that and wouldn’t favor it himself. He added he wanted a rate ‘much bigger’ than 2.5%.”

“Metals markets are turning increasingly nervous about the prospect of tariffs. 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. A prolonged trade conflict would slow global growth and hurt demand. Tariffs are a major headwind to metals, whether in force yet or not.”

“The latest LME COTR report shows that speculators increased their net long position in Aluminum by 5,269 lots for a second consecutive week to 117,876 lots for the week ending 24 January, the highest since the week ending on 15 November 2024. Similarly, net bullish bets for Copper rose by 3,507 lots for a fourth consecutive week to 67,624 lots (the highest since the week ending 8 November 2024) at the end of last week. In contrast, money managers decreased net bullish bets for zinc by 651 lots to 28,853 lots as of last Friday.”

USD/CAD has evolved within a brief pause after facing interim resistance near 1.4470/1.4515, Societe Générale’s FX analysts report.

The up move can extend towards 1.4610 and 1.4670

“It is at a steep ascending trend line; the 50-DMA near 1.4260 is a crucial support in short-term. Only if this is breached would there be risk of a deeper pullback.”

“Short-term price action could remain within a range. A move beyond 1.4470/1.4515 is essential to confirm next leg of uptrend. If this break materializes, the up move could extend towards projection of 1.4610 and 1.4670.”

The European Union is reportedly proposing a phased ban on imports of Russian Aluminum to the bloc, ING’s commodity analysts Ewa Manthey and Warren Patterson note.

EU sanctions are likely to spur LME prices

“The proposal calls for an import quota for a year before the complete ban comes into effect. Although the EU continues to import Russian Aluminum, volumes have fallen over the past two years, with European buyers self-sanctioning since the invasion of Ukraine.”

“The EU imported more than 320kt of unwrought Aluminum from Russia in the first 11 months of 2024, accounting for around 6% of total imports, according to Un Comtrade data, a relatively small fraction of the global Aluminum market.”

“Meanwhile, Russia has steadily increased sales to Asian consumers over the last three years, particularly China. If enacted, EU sanctions are likely to spur LME prices. It is not a given that the EU will agree to the package. The proposal will require backing from all member states and may still change before being formally proposed to members, according to reports.”

AUD/USD briefly challenged lows of 2022 near 0.6170/0.6130 but has quickly rebounded, Societe Générale’s FX analysts report.

Break above MA near 0.6310 can lead to a larger bounce

“It has crossed above the upper limit of a steep down sloping channel. The rebound has so far remained contained near 50-DMA (now at 0.6310). Currently a pullback is under way, but it will be interesting to see if the pair can carve out a higher trough than 0.6130. Overcoming the MA near 0.6310 can lead to a larger bounce.”

Crude oil prices steadied yesterday after a sharp fall over the past few sessions as the US prepares to impose tariffs on imports from Canada, Mexico and China from Saturday, ING’s commodity analysts Ewa Manthey and Warren Patterson note.

Demand for Middle East crude remains strong

“NYMEX WTI currently trades at US$73.6/bbl while ICE Brent trades at US$77.3/bbl. WTI’s discount to Brent has narrowed to an average of US$3.6/bbl this year so far compared to an average of US$4.4/bbl for the full year 2024 as higher tariffs could make the oil supplies relatively tight in the US market.”

“The weekly inventory report from the American Petroleum Institute was a mixed bag. The API reported that the US crude oil inventory increased by 2.86m barrels over the last week although crude oil stocks at Cushing, Oklahoma fell by 144k barrels. For products, gasoline inventory was reported to have increased by 1.89m barrels while distillate inventory dropped by 3.75m barrels.”

“Despite the recent weakness in the oil market, demand for Middle East crude appears to remain strong with the market expecting Saudi Arabia to raise official selling price by around US$2/bbl for Asian buyers for March deliveries. Saudi Arabia has raised the OSP by around US$0.6/bbl for Feb deliveries for Asian buyers.”

Silver prices (XAG/USD) rose on Wednesday, according to FXStreet data. Silver trades at $30.44 per troy ounce, up 0.31% from the $30.35 it cost on Tuesday.

Silver prices have increased by 5.37% since the beginning of the year.

The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 90.72 on Wednesday, down from 91.08 on Tuesday.

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The Riksbank has already reduced rates by 150bp since last May, and these cuts are starting to show early signs of success, with high-frequency indicators and the housing market having rebounded quite markedly of late, ING's FX analyst Francesco Pesole notes.

EUR/SEK is long due a recovery in volatility

"That said, hard data is lagging and still shows an elevated unemployment rate. When paired with core inflation at target and headline CPIF at 1.5%, the case for another 25bp cut to 2.25% today is strong."

"For the moment, our view is that the Riksbank will stop easing at the 2.0% mark, and that today’s policy announcement will give away some hints that the easing cycle is nearing its end. That said, we expect the Riksbank to retain dovish flexibility based on the economic impact of US tariffs, and risks are markedly skewed to more cuts compared to our forecast."

"The ultra-stable EUR/SEK is long due a recovery in volatility, and while today’s Riksbank announcement may not be the trigger for that as policymakers may just match market expectations, the mix of equity market risks and US protectionism points to upside potential for the pair. Crucially, we don’t think the Riksbank will necessarily show discontent with a weaker krona, as that can help Swedish exporters in a global trade slowdown."

• USD/CAD extends gains as the Fed is widely anticipated to maintain its current rates on Wednesday.
• The pair rises due to the potential for a widening interest rate differential between the US and Canada.
• The commodity-linked CAD could have struggled amid weaker crude Oil prices.

USD/CAD gains ground for the third consecutive day, trading around 1.4420 during the European hours on Wednesday. The pair may further appreciate as the US Dollar (USD) receives support from the Federal Reserve’s (Fed) cautious stance regarding upcoming Wednesday’s policy decision.

According to the CME FedWatch tool, market expectations indicate nearly 100% certainty that the Fed will maintain its policy rate within the target range of 4.25%-4.50%. However, traders will be closely monitoring Fed Chair Jerome Powell’s press conference for any hints regarding the future direction of monetary policy.

The Canadian Dollar (CAD) is under pressure due to diverging monetary policy expectations, as traders anticipate a widely expected rate cut from the Bank of Canada (BoC) while the US Federal Reserve is expected to hold rates steady. Both decisions are scheduled for tomorrow.

The USD/CAD pair gained support from increased risk aversion following tariff threats made by US President Donald Trump. The risk-sensitive CAD weakened following renewed concerns over US trade policy after President Donald Trump threatened over the weekend to impose a 25% tariff on Canadian goods starting February 1.

This potential tariff threat has sparked fears of major trade disruptions with the United States, Canada’s largest trading partner, potentially reducing foreign exchange inflows, particularly in the manufacturing sector.

Additionally, the commodity-linked CAD may have faced additional downward pressure from declining crude Oil prices, as Canada is the largest crude exporter to the United States. Oil prices have fallen amid investor concerns over the broader economic impact of tariffs on Canada, Mexico, and China, which could weaken global energy demand and overall economic growth.

The Bank of Canada (BoC) is widely expected to cut rates by 25bp today. That is also our call and markets are fully pricing it in. The focus will therefore be on forward-looking indications from Governor Tiff Macklem, and on that we think the risks are skewed to the dovish side, ING's FX analyst Francesco Pesole notes.

USD/CAD has a chance to move above 1.45

"The market is pricing in a total of 70bp by year-end but embedding a pause at the March meeting. Given the tangible risk of US tariffs on Canada, whether ad-hoc or part of universal protectionism, we think the BoC will err on the dovish side and fail to signal it is close to reaching the terminal rate."

"This means there are mostly downside risks for CAD today. Importantly, any indications from the BoC that US tariff risk can feed into a more dovish stance would further increase CAD’s sensitivity to protectionism. That’s because markets will feel more flexible to price in BoC cuts in a tariff scenario. We continue to see risks above 1.45 in USD/CAD."

• Silver scales higher for the second straight day and climbs back closer to the weekly top.
• The technical setup favors bulls and supports prospects for a further appreciating move.
• Any subsequent move up might continue to face stiff resistance near the 100-day SMA.

Silver (XAG/USD) attracts buying for the second straight day on Wednesday and trades near the top end of its weekly range, around mid-$30.00s during the first half of the European session, up over 0.40% for the day. 

Meanwhile, technical indicators on the daily chart have again started gaining positive traction and support prospects for further appreciating move. That said, any subsequent move up might continue to confront stiff resistance near the $31.00 mark, or the 100-day Simple Moving Average (SMA). The said barrier should act as a key pivotal point for the XAG/USD, which if cleared decisively might trigger a short-covering rally. 

The subsequent move up could extend towards the next relevant hurdle near the $31.45-$31.50 area en route to the $32.00 mark and the December monthly swing high, around the $32.30 region. Some follow-through buying will suggest that the corrective decline from a multi-year peak touched in October 2024 has run its course and pave the way for additional gains.

On the flip side, the 200-day SMA, currently pegged just ahead of the $30.00 psychological mark, should act as an immediate strong support. A convincing break below could make the XAG/USD vulnerable to retesting the weekly swing low, around the $29.70 region touched on Monday. The downward trajectory could extend further towards the $29.10-$29.00 area en route to 
the $28.75-$28.70 region, or a multi-month low touched in December.

Silver daily chart

• Bank of Canada (BoC) is expected to cut its policy rate by 25 bps.
• The Canadian Dollar remains on the defensive against the US Dollar.
• Headline inflation in Canada remains below the bank’s 2% target.
• The BoC will also release its Monetary Policy Report (MPR).

The spotlight is on the Bank of Canada (BoC) this Wednesday, with widespread expectations that it will lower its policy rate for the sixth meeting in a row. This time, however, the buzz surrounds a potential 25-basis-point cut—a smaller move than in the previous couple of gatherings—which would bring the benchmark rate down to 3.00%.

Meanwhile, the Canadian Dollar (CAD) has embarked on a consolidative phase since mid-December, looking to stabilise following yearly lows north of the 1.4500 level vs. the US Dollar (USD), and the sharp depreciation that kicked in along with the so-called “Trump trade” back in October.

Canada’s inflation story adds an intriguing layer to the BoC’s rate decision. December marked the second consecutive pullback as the annual inflation rate, measured by the headline Consumer Price Index (CPI), dipped to 1.8%. Although the BoC’s core CPI edged up last month, it remains below the central bank’s goal.

Further easing appears on the cards

Despite the anticipated rate cut, the Bank of Canada is expected to maintain a bearish outlook. This sentiment comes against the backdrop of easing inflation, a softening labour market and GDP hovering close to the bank’s most recent forecasts.

In the BoC’s Business Outlook Survey published on January 20, Canadian businesses are cautiously optimistic about the year ahead. They expect better demand and stronger sales, thanks in part to recent rate cuts. However, many are keeping a wary eye on potential fallout from upcoming United States (US) policies.

According to the Minutes released on December 23, the BoC’s decision to cut rates by 50 basis points on December 11 was a tight call, with some members of the governing council leaning toward a smaller reduction. Discussions among council members revolved around whether a 50 or 25 basis point cut was the right move. Those advocating for a larger cut were particularly concerned about weaker growth projections and downside risks to inflation. However, they acknowledged that not all recent data fully supported such an aggressive move.

Ultimately, the decision to opt for a 50 basis point cut was driven by a dimmer growth outlook than anticipated in October and the recognition that monetary policy no longer needed to remain firmly restrictive.

The central bank lowered its key policy rate to 3.25% in response to slowing economic growth. Governor Tiff Macklem signaled that any future rate cuts would be more measured, marking a shift from earlier statements that emphasized the need for continuous easing to bolster the economy.

Previewing the BoC’s interest rate decision, Assistant Chief Economist at Royal Bank of Canada Nathan Janzen noted: “The Bank of Canada is expected to cut interest rates at a more gradual 25 basis-point pace on Wednesday following 50 bps cuts in each of the two prior meetings—widening a gap with US policy rates as the Federal Reserve is widely expected to forego a January rate cut… The BoC clearly communicated in its December policy decision that with the interest rate no longer at obviously ‘restrictive’ levels, the pace of future rate cuts would likely be more gradual, and contingent on economic data… We continue to expect the BoC will ultimately need to cut the overnight rate to a slightly stimulative 2% this year.” 

When will the BoC release its monetary policy decision, and how could it affect USD/CAD?

The Bank of Canada is set to announce its policy decision on Wednesday at 14:45 GMT, followed by a press conference from Governor Tiff Macklem at 15:30 GMT. While no major surprises are expected, market focus will likely be on the central bank’s tone, which could have a bigger influence on the Canadian Dollar (CAD) than the actual rate decision.

Pablo Piovano, Senior Analyst at FXStreet, highlights that USD/CAD now appears sidelined in the upper end of the recent range, following a strong upward trajectory in place since October, with the pair reaching a 2025 peak at 1.4516 on January 21.

Looking ahead, Pablo notes: "The next key target is the 2020 high at 1.4667, recorded on March 20."

He also points out potential downside levels, saying: "Occasional bearish moves could push USD/CAD to test the 2025 bottom of 1.4260 (January 20), while provisional contention emerges at the 55-day and 100-day SMAs at 1.4226, and 1.3989, respectively.

Today’s FOMC meeting is not anticipated to be a big market-moving event. The Fed needs to see significant economic weakness and lower inflation to justify further rate cuts. For the moment, the job market and wages are gradually cooling, but not enough for resuming easing. According to market pricing, the conditions for a cut won’t be in place until June, ING's FX analyst Francesco Pesole notes.

USD is set to consolidate gains

"The greater risk of a dovish repricing now is another sharp tech-led equity selloff rather than a tilt in communication by the Fed, in our view. Despite the slightly lower-than-expected inflation in December, the strength of the jobs market should keep Chair Jerome Powell's communication on the cautious side and markets may still lack a catalyst to price in more than the 50bp of cuts currently in the curve by year-end."

"The themes of tech stock turmoil – even though sentiment stabilized yesterday – and the Fed’s independence in light of President Trump’s insistent calls for lower rates may be raised at the press conference. However, we don’t think equity volatility this week has raised enough concerns at the FOMC about the potential knock-on wealth effect to warrant a comment by Powell. And expect a firm reiteration of the independence from political pressure."

"If US tech stocks enjoy another calm day and the Fed remains cautious on easing as we expect, the dollar should consolidate gains as the revamped universal tariff risk justifies the current short-term USD overvaluation."

The euro continues to be driven by US events, from tech news to the tariff threat. Neither a cautious Fed today nor a dovish-leaning ECB tomorrow will trigger a material EUR/USD rebound, ING's FX analyst Francesco Pesole notes.

Risks are skewed towards a move below 1.040

"We estimate the risk premium on EUR/USD at 2%, which is consistent with the resurging risk of universal tariffs by the US following Trump's comments earlier this week. We think that the confirmation that the US Treasury is actively laying out a plan for tariff implementation should prevent that risk premium gap from being closed."

"We don’t expect EUR/USD to trade much further from the current spot by the end of the week. If anything, we believe the risks are skewed towards a move below 1.040 rather than a return above 1.050."

• GBP/JPY inches lower as traders expect the BoJ to deliver more rate hikes in the future.
• BoJ reiterated its commitment to further rate hikes if the outlook presented at the January meeting unfolds as expected.
• The Pound Sterling faces challenges due to the potential risk of stagflation in the UK economy.

GBP/JPY surrenders its recent gains from the previous session, trading around 193.30 during the European hours on Wednesday. The Japanese Yen (JPY) strengthened against its peers amid increasing expectations that the Bank of Japan (BoJ) will continue raising interest rates. Minutes of the December Bank of Japan meeting released this Wednesday showed that members emphasized the need for cautious monetary policy adjustments.

Meanwhile, investors are more confident that the BoJ will continue its move toward normalization and deliver additional interest rate hikes in 2025. 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.

Further downside risks of the GBP/JPY cross seem possible as the Pound Sterling (GBP) could face challenges due to the increased likelihood of the risk of stagflation in the UK economy, driven by weakening labor demand and persistent inflation.

Traders are currently pricing in a 25 basis point (bps) rate cut in the Bank of England’s (BoE) first monetary policy decision of 2025 on February 6, which would bring borrowing rates down to 4.5% amid the sluggish economic outlook.

On Tuesday, UK Prime Minister Keir Starmer gave optimistic remarks on the economy in a Bloomberg interview. Starmer emphasized that the Labour government’s top priority is "growth" and noted that the economy is beginning to "turn around." He also highlighted the strong trade ties between the United States (US) and the UK, stating that "we’ve got a huge amount of trade with the United States already, and the base is there for even better trading relations. We need to build on that."

• The Pound Sterling moves higher against the US Dollar, as investors focus on the Fed’s monetary policy decision.
• Fading concerns over DeepSeek’s low-cost AI model to challenge US AI models’ dominance have diminished some US Dollar risk-premium.
• UK Keir Starmer expects the economy is starting to turn around.

The Pound Sterling (GBP) ticks higher to near 1.2450 against the US Dollar (USD) in Wednesday’s European session. The GBP/USD pair gains as the US Dollar retrace as investors liquidate some risk-off trades built on concerns that Chinese DeepSeek’s affordable Artificial Intelligence (AI) model would challenge the dominance of top chatbots, such as OpenAI and Meta, which will reduce China’s technology gap with the United States (US).

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, falls to near 107.75. The Greenback is also trading cautiously ahead of the Federal Reserve’s (Fed) monetary policy decision, which will be announced at 19:00 GMT.

Traders are confident that the Fed will announce a pause in the current policy easing spell and keep interest rates unchanged in the range of 4.25%-4.50%, according to the CME FedWatch tool. In the last three policy meetings, the Fed has reduced its key borrowing rates by 100 basis points (bps). 

Therefore, the Fed’s guidance on how long it will keep borrowing costs at their current levels will significantly influence the US Dollar. Apart from that, investors will also pay attention to the Fed’s views on US President Donald Trump’s tariffs plans and their impact on the monetary policy outlook and inflation.

White House Press Secretary Karoline Leavitt stated on Tuesday that 25% tariffs on Canada and Mexico from February 1 are “still on the books”. Leavitt added that the President is “very much still considering 10% tariffs on China” from Saturday.

This week, Trump also said that he planned to impose tariffs on the import of pharmaceuticals, advanced chips, and steel in an attempt to encourage domestic manufacturing.

Daily digest market movers: Pound Sterling gains as UK Starmer hopes turnaround in economic prospects

• The Pound Sterling gains against its major peers on Wednesday as United Kingdom (UK) Prime Minister Keir Starmer indicated better trade relations with the US in an interview with Bloomberg on Tuesday. Starmer said that we've already got a “huge amount of trade” between our two countries, and the base is there for even “better trading relations”. 
• Starmer’s optimistic comments on trade relations with the US have eased fears that the UK will face tariff threats from Trump. On the economic outlook, Starmer said that the number one priority of our government is “growth,” and the economy is on the brisk of a “turnaround”.
• For more cues on the economic outlook, investors will focus on Chancellor of the Exchequer Rachel Reeves’s speech in Oxfordshire on Wednesday. In it, she is expected to unveil new plans to deliver the Oxford-Cambridge Growth Corridor that will boost the UK economy, Gov.UK reported. The agency also reported that the development is expected to boost the UK economy by up to £78 billion by 2035.
• On the monetary policy front, traders are confident that the Bank of England (BoE) will reduce interest rates by 25 bps to 4.5% in its first policy meeting of the year on February 6. Traders have priced in a 25 bps interest rate reduction as the UK inflation grew at a slower-than-projected pace and Retail Sales surprisingly declined in December. Also, the labor demand has slowed due to Rachel Reeves’ decision to hike employers’ contributions to National Insurance (NI).

Technical Analysis: Pound Sterling rebounds from 1.2400

The Pound Sterling regains ground on Wednesday after correcting to near 1.2400 against the US Dollar the previous day. The GBP/USD pair rebounds as its near-term outlook remains firm, given it holds the 20-day Exponential Moving Average (EMA), which trades around 1.2400. However, the 50-day EMA near 1.2510 continues to be a major barrier for the Sterling bulls.

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.

• NZD/USD loses ground amid risk aversion ahead of Fed interest rate decision on Wednesday.
• Traders expect the Fed to maintain its policy rate within the target range of 4.25%-4.50%.
• The RBNZ is widely expected to deliver another bumper 50 bps rate cut in February.

NZD/USD continues to lose ground for the third consecutive day, trading around 0.5660 during the European hours on Wednesday. The pair faces challenges amid risk-off sentiment ahead of the Federal Reserve’s (Fed) interest rate decision scheduled later in the North American session.

The US Dollar Index (DXY), which measures the US Dollar’s (USD) value against six major currencies, remains steady around 108.00 at the time of writing. The US Dollar receives support from the Federal Reserve’s (Fed) cautious stance regarding its policy outlook.

According to the CME FedWatch tool, market expectations indicate nearly 100% certainty that the Fed will maintain its policy rate within the target range of 4.25%-4.50%. However, traders will be closely monitoring Fed Chair Jerome Powell’s press conference for any hints regarding the future direction of monetary policy.

Additionally, the Greenback gained ground 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.

The New Zealand 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.

RBNZ Chief Economist Conway stated on Wednesday that the Official Cash Rate (OCR) is expected to move toward the neutral interest rate in the absence of future shocks. The long-term nominal neutral interest rate is currently estimated to be between 2.5% and 3.5%. The Monetary Policy Committee remains confident that persistent domestic inflationary pressures will subside. A decline in domestic pricing intentions and inflation expectations is expected to pave the way for further easing of the OCR, as indicated in November.

Following his video conference with new US Treasury Secretary Scott Bessent on Wednesday, Japan’s Finance Minister Katsunobu Kato declined to say whether tariff was discussed.

Additional quotes

Market reaction

USD/JPY recovers losses to trade near 155.35 following these comments, still down 0.17% on the day.

Here is what you need to know on Wednesday, January 29:

The US Dollar (USD) struggles to build on Tuesday's gains as investors move to the sidelines ahead of the Federal Reserve's (Fed) highly-anticipated monetary policy announcements. The US economic docket will also feature Goods Trade Balance data for December. Additionally, the Bank of Canada (BoC) will release its interest rate decision in the early trading hours of the American session on Wednesday.

The USD Index gained traction and rose nearly 0.5% on Tuesday as the uncertainty surrounding US President Donald Trump's tariff policy forced markets to adopt a cautious stance. Early Wednesday, the USD Index stays in a consolidation phase slightly below 108.00. The Fed is widely anticipated to keep its monetary policy settings unchanged following the first meeting of the year. After the Fed releases its policy statement, Chairman Jerome Powell will respond to questions in a press conference starting at 19:30 GMT.

USD/CAD holds steady at around 1.4400 after posting small gains on Tuesday. The BoC is expected to lower the policy rate by 25 basis points (bps) to 3%. 

During the Asian trading hours on Wednesday, the data from Australia showed that the Consumer Price Index (CPI) rose 2.4% on a yearly basis in the fourth quarter. This reading followed the 2.8% increase recorded in the third quarter and came in below the market expectation of 2.5%. Assessing the inflation report, Australian Treasurer Jim Chalmers said the worst of the inflation challenge is well and truly behind them and added that the soft landing they have been planning for is looking more and more likely. AUD/USD stays under modest bearish pressure in the European morning and trades below 0.6250.

According to the Bank of Japan's (BoJ) Monetary Policy Meeting Minutes, some policymakers preferred to raise the interest rate to 0.5%, while the majority voted to keep rates unchanged at 0.25%, citing uncertainties in wage growth and global economic conditions. USD/JPY showed no immediate reaction to this publication and was last seen trading near 155.20.

EUR/USD turned south and lost more than 0.5% on Tuesday. The pair holds steady at around 1.0430 to begin the European session on Wednesday. The European Central Bank will release Private Loans data for December later in the session.

GBP/USD closed in negative territory on Tuesday and snapped a three-day winning streak. The pair trades marginally higher on the day above 1.2450 early Wednesday.

Following the bearish opening to the week, Gold regained its traction and rose more than 0.8% on Tuesday. XAU/USD struggles to preserve its bullish momentum but holds comfortably above $2,750.

• EUR/GBP depreciates amid the increased likelihood of the ECB delivering 25 basis points on Thursday.
• The Pound Sterling may depreciate as traders expect the BoE to reduce interest rates by 25 basis points in February.
• UK PM Starmer emphasized that economic growth is his top priority, highlighting signs that the economy is starting to recover.

EUR/GBP extends its losing streak for the fifth successive session, trading around 0.8380 during the early European hours on Wednesday. Further downside risks for the EUR/GBP cross seem possible as the Euro (EUR) could weaken due to the increased likelihood that the European Central Bank (ECB) will lower its Deposit Facility rate by 25 basis points (bps) to 2.75% on Thursday. This expectation stems from the sluggish economic outlook in the Eurozone and confidence that inflation will sustainably return to the ECB’s 2% target.

With a 25 bps rate cut already priced in, investors will closely monitor President Christine Lagarde’s press conference for insights on how potential tariffs from Trump might influence economic and monetary policy.

However, this downside of the EUR/GBP cross could be limited as the Pound Sterling (GBP) remains under pressure amid rising concerns over the risk of stagflation in the UK economy, driven by weakening labor demand and persistent inflation.

Traders are currently pricing in a 25 basis point (bps) rate cut in the Bank of England’s (BoE) first monetary policy decision of 2025 on February 6, which would bring borrowing rates down to 4.5% amid the sluggish economic outlook.

On Tuesday, UK Prime Minister Keir Starmer gave optimistic remarks on the economy in a Bloomberg interview. Starmer emphasized that the Labour government’s top priority is "growth" and noted that the economy is beginning to "turn around." He also highlighted the strong trade ties between the United States (US) and the UK, stating that "we’ve got a huge amount of trade with the United States already, and the base is there for even better trading relations. We need to build on that."

• USD/CHF softens to around 0.9035 in Wednesday’s early European session. 
• Investors brace for the Fed rate decision on Wednesday, with no change in rate expected. 
• The Swiss Franc jumps as investors seek safety. 

The USD/CHF pair loses ground to near 0.9035 on Wednesday during the early European trading hours. The weaker US Dollar (USD) and a decline in US Treasury yields drag the pair lower. The markets might turn cautious ahead of the US Federal Reserve (Fed) interest rate decision later on Wednesday.

The Fed is widely expected to hold its benchmark rate unchanged at its January meeting on Wednesday. The strong US fundamental story, elevated inflation, and a more hawkish Fed continue to favor the Greenback in the near term. There is no updated Summary of Economic Projections (SEP), but investors will closely watch Fed Chair Jerome Powell’s press conference as it might offer some hints about the monetary policy outlook.

On the other hand, the Swiss Franc (CHF) strengthens as investors rush into safe-haven assets. The uncertainty surrounding US President Donald Trump's tariff policies and the ongoing Russia and Ukraine conflict could lift the CHF against the USD. Officials and media outlets reported on Wednesday that Ukrainian drones targeted oil and power facilities in western parts of Russia. 

• EUR/CAD edges higher to around 1.5025 in Wednesday’s early European session. 
• The cross keeps the positive outlook above the 100-day EMA with a bullish RSI indicator. 
• The immediate resistance level emerges at the 1.5095–1.5100 region; the first downside target is seen at 1.4936. 

The EUR/CAD cross trades in positive territory around 1.5025 during the early European session on Wednesday. The Bank of Canada (BoC) will likely cut its key benchmark rate by 25 basis points (bps) at its January meeting on Wednesday. 

The rising bets of BoC rate cut bets and the concerns about tariff policies from US President Donald Trump could weigh on the Canadian Dollar (CAD) against the Euro (EUR) in the near term. Trump said last week that he will impose a 25% tariff on Canada and Mexico from February 1.

Technically, the bullish outlook of EUR/CAD remains intact as the cross holds above the key 100-day Exponential Moving Averages (EMA) on the daily chart. The upward momentum is supported by the 14-day Relative Strength Index (RSI), which is located above the midline near 59.50. This indicates that further upside looks favorable. 

The first upside barrier for the cross is in the 1.5095-1.5100 zone, representing the upper boundary of the Bollinger Band and psychological level. Further north, the next hurdle is seen at 1.5130, the high of January 27. A decisive break above this level will see a rally to 1.5172, the high of November 1, 2024. 

On the other hand, the low of January 23 at 1.4936 acts as an initial support level for EUR/CAD. The crucial contention level to watch is 1.4905, the 100-day EMA. The additional downside filter is located at 1.4760, the low of January 2.  

EUR/CAD daily chart

• EUR/JPY drifts lower on Wednesday amid the emergence of some JPY buying.
• BoJ rate hike bets and trade war fears continue to underpin the safe-haven JPY.
• The technical setup favors bears and supports prospects for a further downfall. 

The EUR/JPY cross struggles to capitalize on the overnight bounce from the vicinity of mid-161.00s and attracts some intraday sellers during the Asian session on Wednesday. Spot prices slide back closer to the 162.00 round figure in the last hour and seem vulnerable to weaken further amid the emergence of some buying around the Japanese Yen (JPY).

Despite a generally positive tone around the equity markets, expectations that the Bank of Japan (BoJ) will hike interest rates further this year continue to underpin the JPY. Apart from this, persistent worries about the potential economic fallout from US President Donald Trump's trade policies further benefit the JPY's relative safe-haven status and further contribute to capping the upside for the EUR/JPY cross. 

From a technical perspective, the recent repeated failures near the 164.70-164.80 region, which coincides with the 200-day Simple Moving Average (SMA), constitute the formation of multiple tops on the daily chart. That said, neutral oscillators on the daily chart warrant caution before placing bearish bets around the EUR/JPY cross ahead of the European Central Bank (ECB) meeting on Thursday. 

In the meantime, the 161.55-161.50 ara, or the weekly low touched on Monday, might continue to offer some support ahead of the 161.00 round figure. Some follow-through selling will reaffirm the negative bias and make the EUR/JPY cross vulnerable to accelerate the fall towards the 160.60 intermediate support en route to the 160.00 psychological mark and the 159.70-159.65 area, or the monthly trough.

On the flip side, the overnight swing high, around the 162.70 area, could act as an immediate hurdle ahead of the 163.00 mark. A sustained strength beyond the latter could trigger a short-covering rally towards the 163.65-163.70 horizontal resistance before the EUR/JPY cross aims to reclaim the 164.00 mark. The momentum could extend further towards testing the 200-day SMA pivotal resistance, around the 164.50 area.

EUR/JPY daily chart

• AUD/JPY depreciates as softer Australian CPI data has strengthened the case for a potential RBA rate cut in February.
• Australia’s Monthly CPI for December 2024 increased by 2.5% YoY, remaining within the RBA target range of 2-3%.
• The Japanese Yen rises amid the increased likelihood of the BoJ’s hawkish policy outlook.

AUD/JPY depreciates as the Australian Dollar (AUD) falls against its peers following the release of softer Consumer Price Index (CPI) data from Australia on Wednesday. The currency cross trades around 96.90 during the Asian hours on Wednesday.

Australia’s CPI inflation eased to 2.4% year-over-year in Q4 from 2.8% in Q3, also below the consensus forecast of 2.5%. Monthly CPI for December 2024 increased by 2.5% year-over-year, in line with forecasts and up from November’s 2.3%. This marked the highest reading since August but remained within the Reserve Bank of Australia’s (RBA) target range of 2% to 3% for the fourth consecutive month.

The easing inflationary pressures at the end of 2024 have strengthened the case for a potential interest rate cut by the RBA in February. The central bank has held the Official Cash Rate (OCR) steady at 4.35% since November 2023, emphasizing that inflation must “sustainably” return to its 2%-3% target range before any rate cut can be considered.

Australian Treasurer Jim Chalmers stated that "the worst of the inflation challenge is well and truly behind us." Chalmers further emphasized that "the soft landing we have been planning and preparing for is looking more and more likely," according to Reuters.

Moreover, the Japanese Yen (JPY) strengthens amid increasing expectations that the Bank of Japan (BoJ) will continue raising interest rates. Minutes of the December Bank of Japan meeting released this Wednesday showed that members emphasized the need for cautious monetary policy adjustments.

Meanwhile, investors are more confident that the BoJ will continue its move toward normalization and deliver additional interest rate hikes in 2025. 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.

Gold prices remained broadly unchanged in India on Wednesday, according to data compiled by FXStreet.

The price for Gold stood at 7,693.90 Indian Rupees (INR) per gram, broadly stable compared with the INR 7,695.18 it cost on Tuesday.

The price for Gold was broadly steady at INR 89,740.09 per tola from INR 89,755.02 per tola a day earlier.

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.

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

• Gold price consolidates in a narrow band on Wednesday amid mixed fundamental cues.
• A positive risk tone caps the XAU/USD, though sliding US bond yields lend some support.
• Traders also seem reluctant to place directional bets ahead of the FOMC policy decision. 

Gold price (XAU/USD) struggles to capitalize on the previous day's positive move and oscillates in a range above the $2,760 level during the Asian session on Wednesday. Signs of stability in the equity markets act as a headwind for the safe-haven precious metal. Meanwhile, a fresh leg down in the US Treasury bond yields and bets that the Federal Reserve (Fed) will cut rates further this year cap the US Dollar (USD) recovery from over a one-month low. This, along with concerns about US President Donald Trump's tariff plans, lends support to the non-yielding yellow metal. 

Traders also seem reluctant to place aggressive bets around the Gold price and opt to wait on the sidelines ahead of the key central bank event risk – the outcome of a two-day FOMC monetary policy meeting. The Fed is scheduled to announce its decision later during the North American session and is widely expected to stand pat, despite Trump's demand to cut interest rates immediately. Nevertheless, the Fed's policy outlook will play a key role in influencing the near-term USD price dynamics and determining the next leg of a directional move for the precious metal. 

Gold price bulls turn cautious ahead of the Fed policy update; downside seems cushioned

• Calmer conditions across global markets dent demand for traditional safe-haven assets and fail to assist the Gold price to build on Tuesday's positive move ahead of the key central bank event risk. 
• The yield on the benchmark 10-year US government bond languishes near a one-month trough, capping the overnight US Dollar recovery and acting as a tailwind for the non-yielding yellow metal. 
• Investors remain concerned about the potential economic fallout from US President Donald Trump's plans to impose tariffs on imported computer chips, pharmaceuticals, aluminum, steel and copper. 
• The move, aimed at pushing the companies to boost production in the US, could trigger a fresh wave of global trade wars and might continue to act as a tailwind for the safe-haven precious metal.
• Data released on Tuesday by the US Census Bureau showed that Durable Goods Orders declined 2.2% in December, compared to a 2% fall in November and market expectations for a 0.8% rise.
• Separately, the Conference Board (CB) reported that the Consumer Confidence Index dropped to 104.1 in January from 109.5 in the previous month and the Present Situation Index fell to 134.3. 
• Meanwhile, the market focus remains glued to the Federal Reserve's policy decision first meeting this year, which will drive the US Dollar demand and provide a fresh impetus to the XAU/USD. 

Gold price could aim to challenge all-time peak once the $2,772-2,773 hurdle is cleared decisively

From a technical perspective, the recent breakout through the $2,720-2,725 horizontal barrier and positive oscillators on the daily chart suggest that the path of least resistance for the Gold price remains to the upside. A subsequent move above the $2,772-2,773 area will reaffirm the constructive outlook and lift the XAU/USD beyond the $2,786 area, or the highest level since October 2024 touched last Friday, towards 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.

On the flip side, weakness below the $2,755-2,753 immediate support might continue to attract some buyers and remain limited near the weekly swing low, around the $2,730 area touched on Monday. Some follow-through selling below the $2,725-2,720 resistance-turned-support could pave the way for deeper losses and drag the Gold price to the $2,707-2,705 area en route to the $2,684 region.

• Silver price edges higher to around $30.40 in Wednesday’s Asian session. 
• The Fed is anticipated to keep interest rates on hold on Wednesday. 
• Safe-haven flows could support the Silver price. 

The Silver price (XAG/USD) trades with mild gains around $30.40 during the Asian trading hours on Wednesday. The uncertainty surrounding new tariff policies under US President Donald Trump’s administration could provide some support to the precious metal. Later on Wednesday, all eyes will be on the Federal Reserve (Fed) meeting. 

The Fed interest rate decision on Wednesday will play a pivotal role in shaping the direction of Silver price. The US central bank is expected to hold its benchmark rate steady at its January meeting at its current range of 4.25%–4.50%. In December Fed Chair Jerome Powell signaled that the Fed would deliver fewer rate cuts in 2025 than it had earlier projected

However, investors will closely watch the Press Conference for more cues about the US rate outlook. If the Fed takes a wait-and-see approach to the Trump administration's policies, this could lift the Greenback and weigh on the USD-denominated commodity price in the near term. 

Additionally, China’s economic growth concerns could weigh on Silver demand as China is a major consumer of silver. China's manufacturing activity unexpectedly contracted in January, its weakest since August. The country’s Manufacturing Purchasing Managers' Index (PMI) contracted to 49.1 in January. This reading came in below the previous reading and market consensus of 50.1.

On the other hand, safe-haven demand amid the ongoing Russia and Ukraine conflicts could boost the white metal. Officials and media outlets reported on Wednesday that Ukrainian drones targeted oil and power facilities in western parts of Russia. 

• EUR/USD could lose ground amid increased risk aversion ahead of Fed policy decision on Wednesday.
• CME FedWatch tool suggests nearly 100% odds of the Fed maintaining its policy rate within the target range of 4.25%-4.50%.
• Traders expect the European Central Bank to deliver a 25 basis points rate cut at Thursday’s policy meeting.

EUR/USD halts its two-day losing streak, trading around 1.0440 during the Asian hours on Wednesday. However, the pair could continue facing challenges amid risk-off sentiment ahead of the Federal Reserve’s (Fed) interest rate decision scheduled later in the North American session.

The US Dollar (USD) receives support from the Federal Reserve’s (Fed) cautious stance regarding its policy outlook. According to the CME FedWatch tool, market expectations indicate nearly 100% certainty that the Fed will maintain its policy rate within the target range of 4.25%-4.50%. However, traders will be closely monitoring Fed Chair Jerome Powell’s press conference for any hints regarding the future direction of monetary policy.

Moreover, the Greenback gained ground 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.

The Euro (EUR) could weaken as traders anticipate the European Central Bank (ECB) will lower its Deposit Facility rate by 25 basis points (bps) to 2.75% on Thursday. This expectation stems from the sluggish economic outlook in the Eurozone and confidence that inflation will sustainably return to the ECB’s 2% target.

With a 25 bps rate cut already priced in, investors will closely monitor President Christine Lagarde’s press conference for insights on how potential tariffs from Trump might influence economic and monetary policy.

FX option expiries for Jan 29 NY cut at 10:00 Eastern Time via DTCC can be found below.

EUR/USD: EUR amounts

• 1.0300 1.8b
• 1.0500 1.2b
• 1.0600 1b

USD/JPY: USD amounts                     

• 155.00 1.4b
• 148.00 930m

AUD/USD: AUD amounts

• 0.6220 580m
• 0.6350 441m

USD/CAD: USD amounts       

• 1.4500 1.3b
• 1.4190 414m

NZD/USD: NZD amounts

• 0.5625 320m

• USD/CAD tests the immediate barrier at the psychological level of 1.4400.
• The bullish bias persists, as the 14-day RSI remains above the 50 mark.
• The immediate support appears at the lower boundary of the ascending channel, near the 1.4350 mark.

The USD/CAD pair maintains its position after two consecutive days of gains, trading close to 1.4400 during the Asian session on Wednesday. On the daily chart, the pair is within an ascending channel, indicating a prevailing bullish trend.

The 14-day Relative Strength Index (RSI) hovers just above the 50 mark, signaling sustained positive momentum. A consistent RSI above 50 would further endorse the bullish sentiment.

Additionally, the USD/CAD pair trades slightly above the nine- and 14-day Exponential Moving Averages (EMAs), reinforcing the bullish trend and suggesting strong short-term price action. This alignment reflects solid buying interest and hints at the potential for further upside movement.

On the upside, the USD/CAD pair is testing the psychological level of 1.4400 and is positioned to challenge 1.4518—its highest level since March 2020, achieved on January 21. Further resistance is expected near the upper boundary of the ascending channel, around 1.4840.

Immediate support lies at the nine-day EMA at 1.4380, closely followed by the 14-day EMA at 1.4377. This level coincides with the lower boundary of the ascending channel, near the 1.4350 mark, providing a robust support zone.

USD/CAD: Daily Chart

• WTI struggles to capitalize on the overnight bounce from a multi-week top.
• Worries that a global trade war could dent demand weigh on Crude Oil prices.
• A smaller-than-expected rise in US inventories helps limit any further losses.

West Texas Intermediate (WTI) US Crude Oil prices tick lower during the Asian session on Wednesday and erode a part of the previous day's modest recovery gains from a nearly three-week low. The commodity currently trades around the $71.00 mark, down over 0.25% for the day, and seems vulnerable to prolonging its recent downfall witnessed over the past two weeks or so.

Investors remain concerned that US President Donald Trump’s threat to impose trade tariffs against Canada, China, and Mexico by February 1 could dent fuel demand. Moreover, the official Chinese PMIs released on Monday pointed to sustained weakness in the world's second-largest economy and the world’s biggest oil importer, which, in turn, is seen undermining the black liquid. Crude Oil prices are also pressured by Trump's planning for increased energy production in the US and demand that the Organization of Petroleum Exporting Countries increase production to bring down prices.

The downside in Crude Oil prices, however, remains cushioned in the wake of a slightly smaller-than-expected build in US inventories. In fact, the American Petroleum Institute reported on Tuesday that US oil inventories grew by 2.86 million barrels in the week to January 24 and raised expectations for a similar trend from the official inventory data, due later this Wednesday. Traders also seem reluctant to place aggressive directional bets and opt to wait on the sidelines heading into the key central bank event risk – the outcome of the highly-anticipated two-day FOMC monetary policy meeting. 

The Federal Reserve (Fed) is widely expected to stand pat and stick to its hawkish stance. This assists the US Dollar (USD) to preserve the overnight recovery gains from over a one-month low and might continue to act as a headwind for the commodity. Meanwhile, the Fed's policy outlook will play a key role in influencing the near-term USD price dynamics and provide some meaningful impetus to Crude Oil prices later during the US session.

• The Japanese Yen is undermined by concerns about the economic fallout from Trump's tariff. 
• A positive risk tone also dents demand for the safe-haven JPY and lends support to USD/JPY. 
• The USD bulls seem reluctant to place aggressive bets and opt to wait for the Fed decision. 

The Japanese Yen (JPY) remains on the defensive against its American counterpart during the Asian session on Wednesday, though it lacks bearish conviction amid expectations of more interest rate hikes by the Bank of Japan (BoJ). Apart from this, the recent decline in the US Treasury bond yields, fueled by rising bets that the Federal Reserve (Fed) would keep cutting rates in 2025, should limit the downside for the lower-yielding JPY. 

Meanwhile, concerns about the economic fallout from US President Donald Trump's threatened tariffs, along with a generally positive risk tone, undermine the safe-haven JPY. Adding to this, the overnight strong US Dollar (USD) positive move assists the USD/JPY pair to trade with a positive bias above mid-155.00s. Traders, however, might opt to wait on the sidelines ahead of the FOMC monetary policy decision, due to be announced later today. 

Japanese Yen bulls seem reluctant amid Trump’s tariff threats, despite BoJ rate cut bets

• The Japanese Yen retreated sharply on Tuesday, from a six-week high touched the previous day, following fresh tariff threats from US President Donald Trump.
• Trump said late on Monday that he plans to impose duties on imported computer chips, pharmaceuticals, and metals to push companies to boost domestic production. 
• The US Dollar staged a solid recovery from over a one-month low amid speculations that Trump's protectionist policies could reignite inflationary pressures. 
• The US Census Bureau reported on Tuesday that Durable Goods Orders declined 2.2% in December, compared to a 2% fall in November and a 0.8% rise expected.
• The Conference Board's (CB) Consumer Confidence Index dropped to 104.1 in January from 109.5 previous, while the Present Situation Index fell to 134.3. 
• Minutes of the December Bank of Japan meeting released this Wednesday showed that members emphasized the need for cautious monetary policy adjustments.
• Meanwhile, investors are more confident that the BoJ will continue its move towards normalization and deliver additional interest rate hikes in 2025. 
• Moreover, hopes that Japan's spring wage negotiations will result in strong hikes again this year, which should allow the BoJ to tighten its policy further. 
• In contrast, market participants have been pricing in the possibility that the Federal Reserve will lower borrowing costs twice by the end of this year.
• Investors await the outcome of a two-day FOMC meeting, which will play a key role in driving the USD and provide a fresh impetus to the USD/JPY pair. 

USD/JPY could attract sellers at higher levels and remain capped near the 156.70 hurdle

This week's breakdown below a multi-month-old ascending channel favors bearish traders amid slightly negative oscillators on the daily chart. Hence, any subsequent move up beyond the 156.00 mark could be seen as a selling opportunity and remain capped near the 156.60-156.70 supply zone. Some follow-through buying, however, could trigger a short-covering rally and lift the USD/JPY pair beyond the 157.00 mark, towards the 157.45 hurdle. The momentum could extend further towards the 158.00 mark en route to the 158.85-158.90 region, or a multi-month top touched on January 10.

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 and the 154.00 round figure. This is closely followed by the weekly swing low, around the 153.70 area touched Monday, below which the USD/JPY pair could accelerate the fall further towards the 153.30 support before eventually dropping to the 153.00 mark.

• GBP/USD steadies due to increased risk aversion ahead of the Fed policy decision on Wednesday.
• CME FedWatch tool suggests nearly 100% odds of the Fed maintaining its policy rate within the target range of 4.25%-4.50%.
• The Pound Sterling struggles amid growing concerns over stagflation in the UK, fueled by weakening labor demand and stubborn inflation.

GBP/USD remains steady after registering losses in the previous session, trading around 1.2440 during the Asian hours on Wednesday. The pair’s downside could be attributed to the increased risk aversion due to tariff threats made by US President Donald Trump.

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.

Moreover, the GBP/USD pair could further depreciate as US Dollar (USD) receives support from the Federal Reserve’s (Fed) cautious stance regarding upcoming Wednesday’s policy decision. According to the CME FedWatch tool, market expectations indicate nearly 100% certainty that the Fed will maintain its policy rate within the target range of 4.25%-4.50%. However, traders will be closely monitoring Fed Chair Jerome Powell’s press conference for any hints regarding the future direction of monetary policy.

The Pound Sterling (GBP) remains under pressure as concerns grow over the risk of stagflation in the UK economy, driven by weakening labor demand and persistent inflation. Traders are currently pricing in a 25 basis point (bps) rate cut in the Bank of England’s (BoE) first monetary policy decision of 2025 on February 6, which would bring borrowing rates down to 4.5% amid the sluggish economic outlook.

Despite UK Prime Minister Keir Starmer’s optimistic remarks on the economy in a Bloomberg interview on Tuesday, the British Pound trades cautiously. Starmer emphasized that the Labour government’s top priority is "growth" and noted that the economy is beginning to "turn around." He also highlighted the strong trade ties between the United States (US) and the UK, stating that "we’ve got a huge amount of trade with the United States already, and the base is there for even better trading relations. We need to build on that."

• The Indian Rupee trades flat in Wednesday’s early Asian session. 
• The concerns about Trump's tariffs and equity outflows weigh on the INR, but RBI intervention could help contain excessive losses. 
• The Fed monetary policy meeting will be closely monitored later on Wednesday. 

The Indian Rupee (INR) flat lines on Wednesday after its largest single-day fall in two weeks in the previous session. The local currency remains on the defensive amid renewed concerns about trade tariffs from US President Donald Trump, along with the sustained foreign fund outflows. Nonetheless, the routine foreign exchange intervention from the Reserve Bank of India (RBI) might help limit the INR’s losses. 

The US Federal Reserve (Fed) interest rate decision will be in the spotlight later on Wednesday, with no change in rate expected. Investors will closely monitor Fed Chair Jerome Powell’s press conference as it might offer additional insights into the monetary policy outlook. The cautious stance from the Fed officials could provide some support to the Greenback and act as a headwind for the pair. On the Indian docket, the Federal Fiscal Deficit will take center stage on Friday. 

Indian Rupee steadies amid Trump’s tariff threats

• India must shift away from its dependence on raw material exports and focus on further expanding its manufacturing sector to boost economic growth, said Indian Prime Minister Narendra Modi. 
• "Malaysia, Singapore and India stand out as the economies within Emerging Asia where these critical products might account for significant proportions of their shipments to the U.S., followed by Taiwan, the Philippines, Thailand and Korea," Barclays said in a note.
• Late Tuesday, US President Donald Trump's press secretary, Karoline Leavitt, said that the plan to impose Canada and Mexico with punishing tariffs on February 1 is still in play.
• The Durable Goods Orders in the US declined by 2.2%, or $6.3 billion, in December to $276.1 billion, according to the US Census Bureau 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%.
• Market pricing is pointing to a near 100% certainty that the Fed will keep the policy rate in a target range of 4.25%-4.50%, according to the CME FedWatch tool.

USD/INR maintains its constructive bias in the longer term

The Indian Rupee trades a flat note on the day. The USD/INR pair keeps the bullish vibe on the daily timeframe as the price has broken above the descending triangle pattern while being well-supported above the key 100-day Exponential Moving Average (EMA). The upward momentum is confirmed by the 14-day Relative Strength Index (RSI), which is located above the midline near 65.30, indicating that further upside cannot be ruled out. 

The key resistance level for USD/INR emerges at an all-time high of 86.69. Sustained trading above the mentioned level could see a rally to the 87.00 psychological mark.

In the bearish event, the initial support level is seen at 86.31, the low of January 28. A breach of this level could pave the way to 86.14, the low of January 24. Further south, the next contention to watch is 85.85, the low of January 10. 

Australian Treasurer Jim Chalmers said on Wednesday, “the worst of the inflation challenge is well and truly behind us.”

He noted further that “the soft landing we have been planning and preparing for is looking more and more likely.”

Market reaction

AUD/USD was last seen trading at 0.6229, down 0.30% on the day.

• The Australian Dollar depreciates following the release of softer CPI data on Wednesday.
• Australia’s Monthly CPI for December 2024 increased by 2.5% YoY, remaining within the RBA target range of 2-3%.
• Traders expect the Fed to maintain its policy rate within the target range of 4.25%-4.50%.

The Australian Dollar (AUD) extends its losses for the third consecutive day against the US Dollar (USD), driven by lower-than-expected Consumer Price Index (CPI) data from Australia released on Wednesday.

Australia’s CPI rose by 0.2% quarter-on-quarter in the fourth quarter of 2024, matching the growth seen in the previous quarter but falling short of the market expectation of 0.3%. On an annual basis, CPI inflation eased to 2.4% in Q4 from 2.8% in Q3, also below the consensus forecast of 2.5%.

Australia’s Monthly CPI for December 2024 increased by 2.5% year-over-year, in line with forecasts and up from November’s 2.3%. This marked the highest reading since August but remained within the Reserve Bank of Australia’s (RBA) target range of 2% to 3% for the fourth consecutive month. The RBA’s Trimmed Mean CPI rose by 3.2% YoY, the slowest pace in three years, slightly under the expected 3.3% but still above the central bank’s target range.

The easing inflationary pressures at the end of 2024 have strengthened the case for a potential interest rate cut by the RBA in February. The central bank has held the Official Cash Rate (OCR) steady at 4.35% since November 2023, emphasizing that inflation must “sustainably” return to its 2%-3% target range before any rate cut can be considered.

The AUD also faced challenges amid increased risk aversion due to tariff threats made by US President Donald Trump. 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.

Australian Dollar depreciates as US Dollar remains stronger amid cautious Fed

• The US Dollar Index (DXY), which measures the US Dollar’s value against six major currencies, remains steady around 108.00 at the time of writing. Investors are focused on the upcoming US Federal Reserve (Fed) interest rate decision, which is set to take center stage later in the North American session. The Fed’s cautious policy stance continues to provide support for the Greenback.
• According to the CME FedWatch tool, market expectations indicate nearly 100% certainty that the Fed will maintain its policy rate within the target range of 4.25%-4.50%. However, traders will be closely monitoring Fed Chair Jerome Powell’s press conference for any hints regarding the future direction of monetary policy.
• “Nobody knows what to expect from the White House. The policy moves are still very unclear, but we do know that a number of those proposals that have been talked about in the White House are a bit inflationary, and I think that’s going to keep the Fed in check,” said US Bank chief economist Beth Ann Bovino.
• 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.
• Speaking with reporters aboard Air Force One early Tuesday, US President Donald Trump stated that he “wants tariffs ‘much bigger’ than 2.5%,” as Treasury Secretary Scott Bessent proposed. However, Trump has not yet decided on the specific tariff levels.
• 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.

Australian Dollar moves below 0.6250 after breaking below ascending channel

The AUD/USD pair trades near 0.6230 on Wednesday, having broken below the ascending channel on the daily chart, signaling a shift toward a bearish bias. Additionally, the 14-day Relative Strength Index (RSI) has dropped below the 50 level, reinforcing the bearish sentiment in the market.

A decisive break below the key support zone at the lower boundary of the ascending channel has further strengthened the bearish outlook. This could push the AUD/USD pair toward the 0.6131 level, its lowest since April 2020, recorded on January 13.

On the upside, immediate resistance lies at the nine-day Exponential Moving Average (EMA) at 0.6256, which aligns with the channel’s lower boundary. A rebound above this level and a return into the ascending channel could shift the bias back to bullish, with the pair potentially targeting the upper boundary near 0.6360.

AUD/USD: Daily Chart

• NZD/USD softens to around 0.5665 in Wednesday’s early Asian session. 
• The Fed is expected to hold its benchmark rate steady on Wednesday. 
• RBNZ’s Conway said rate will tend towards neutral in the absence of future shocks to the system as pandemic-related disruptions fade.

The NZD/USD pair extends the decline to near 0.5665 during the early Asian session on Wednesday, pressured by the renewed US Dollar (USD) demand. The US Federal Reserve interest rate decision will take center stage later on Wednesday. 

Market pricing is pointing to a near 100% certainty that the Fed will keep the policy rate in a target range of 4.25%-4.50%, according to the CME FedWatch tool. However, investors will closely watch Fed Chair Jerome Powell’s press conference as it might offer additional insights into the monetary policy outlook. The cautious stance from the Fed officials could provide some support to the Greenback and act as a headwind for the pair. 

“Nobody knows what to expect from the White House. The policy moves are still very unclear, but we do know that a number of those proposals that have been talked about in the White House are a bit inflationary, and I think that’s going to keep the Fed in check,” said U.S. Bank chief economist Beth Ann Bovino.

Late Tuesday, RBNZ Chief Economist Paul Conway said that 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.

The dovish bets of the Reserve Bank of New Zealand (RBNZ) could undermine the New Zealand Dollar (NZD). Swaps markets are now pricing in nearly 90% possibility of another 50 basis points (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.

The Bank of Japan (BoJ) board members shared their views on the monetary policy outlook on Wednesday, per the BoJ Minutes of the December meeting.   

Key quotes

Market reaction to the BoJ Minutes

At the time of writing, USD/JPY was up 0.04% on the day at 155.58.