Category: Currencies

  • Euro Climbs Amid Geopolitical Tensions – Tuesday, 20 January

    The euro has been gaining ground, reaching its strongest level in several weeks, buoyed by positive German economic data and a weakening US dollar. Concerns over US trade policy and geopolitical tensions are weighing on the dollar, while the euro benefits from improved economic sentiment in the Eurozone. Investors are closely monitoring the EU-US trade dispute and upcoming economic data releases for further direction.

    • The euro extended gains above $1.17, reaching its strongest level since January 6.
    • Germany’s ZEW Economic Sentiment Index jumped to 59.6 in January, its highest since July 2021.
    • The dollar weakened following renewed tariff threats from the US President.
    • EUR/USD climbed to a two-week high above 1.1700.
    • The pair’s resurgence of the upside impulse follows renewed downside pressure on the US Dollar (USD).
    • The European Central Bank (ECB) also held rates steady at its December 18 meeting.
    • Non-commercial positioning continues to favor the Euro (EUR).

    The asset is experiencing a period of strengthening influenced by a combination of factors. Positive economic indicators from key Eurozone economies are boosting confidence, while external pressures on the US dollar provide additional tailwinds. While some anticipate potential shifts based on future data releases and policy decisions, current conditions suggest continued upward momentum for the asset.

  • Dollar Weakens Amid Trade Tensions – Tuesday, 20 January

    The US Dollar Index is under pressure, falling below 99 amidst escalating trade tensions between the US and Europe. Concerns over President Trump’s proposal to purchase Greenland and the potential for retaliatory tariffs from Europe are weighing on the dollar. Investors are also awaiting key US economic data releases this week.

    • The dollar index fell below 99.
    • Tensions between the US and Europe over Greenland are undermining confidence in US assets.
    • Trump threatened tariffs on European countries opposing the Greenland purchase.
    • European leaders condemned Trump’s rhetoric and are considering retaliation.
    • Europe holds a significant amount of US bonds and equities.
    • Investors are watching for key US data this week, including PCE price indices, Q3 GDP estimates, S&P PMIs, and the University of Michigan consumer sentiment survey.
    • The US Dollar Index is losing ground and trading around 99.20.
    • Technical analysis suggests a persistent bullish bias within an ascending channel pattern.
    • The US Dollar Index tests nine-day EMA support near 99.00.

    The current environment suggests potential headwinds for the dollar. Trade disputes and the threat of retaliatory measures could negatively impact its value. While technical indicators point to an upward trend, external factors are creating uncertainty. Market participants should closely monitor the release of upcoming US economic data as it may offer insights into the dollar’s near-term trajectory.

  • Asset Summary – Monday, 19 January

    Asset Summary – Monday, 19 January

    US DOLLAR is currently experiencing mixed signals. While technical analysis suggests an ongoing bullish trend with the dollar index moving within an ascending channel, recent geopolitical developments are creating downward pressure. President Trump’s threat of tariffs on several European countries has triggered concerns about potential retaliatory measures and the overall impact on the US economy, causing the dollar to weaken against safe-haven currencies like the yen and Swiss franc. The initial gains against the euro and sterling were short-lived as investors reassessed the situation.

    BRITISH POUND is exhibiting signs of recovery, bolstered by better-than-expected UK economic growth data. The UK’s GDP surpassed forecasts, leading to a slight shift in market expectations regarding monetary easing by the Bank of England, though rate cuts are still anticipated. The pound is also benefiting from a weaker US dollar, influenced by President Trump’s trade actions. While US inflation data supported the dollar initially, continued pressure from the US President on the Federal Reserve, coupled with global central bank support for the Fed’s independence, adds uncertainty to the dollar’s strength, indirectly supporting the pound.

    EURO is experiencing mixed signals. It initially gained ground against the US dollar due to weakened confidence in the dollar following tariff threats by the US president against several European nations. These threats, linked to the potential acquisition of Greenland, raised concerns about the ramifications for NATO and transatlantic relations, potentially impacting the GDP of countries like the UK and Germany. However, despite this initial boost, concerns about the potential political and geopolitical repercussions of the tariff threats and the EU’s retaliatory measures capped the euro’s gains, creating uncertainty for its future direction. The euro also benefitted from risk aversion gripping financial markets and a slight drop in the US dollar, although thin liquidity due to the US market holiday could amplify market reactions to fundamental headlines.

    JAPANESE YEN is currently experiencing a complex interplay of factors influencing its value. Heightened geopolitical and trade concerns are bolstering its safe-haven appeal, while domestic political developments, specifically Prime Minister Takaichi’s call for a snap election focused on increased spending and a new security strategy, introduce uncertainty. Potential intervention by Japan’s Finance Minister to address Yen weakness, coupled with speculation about an earlier-than-expected interest rate hike by the Bank of Japan, provide further support. However, the US Dollar’s weakness and associated risk aversion related to potential tariffs on European goods are significant drivers. Traders are likely to remain cautious, closely monitoring upcoming economic data releases and the Bank of Japan’s monetary policy decision, which will play a role in establishing the currency’s near-term trajectory.

    CANADIAN DOLLAR is experiencing a period of relative stability, supported by several factors. While headline inflation edged up, suggesting a potential pause in interest rate cuts, underlying inflation metrics offer a mixed picture. Oil prices are providing additional support due to consistent exports to the US and a balanced North American crude market, bolstering Canada’s trade outlook. Furthermore, weakness in the US dollar, driven by renewed trade tariff concerns, has contributed to the Canadian dollar’s strength, pushing the USD/CAD pair below the 1.3900 level.

    AUSTRALIAN DOLLAR is gaining ground, fueled by a weaker US dollar and rising expectations of higher Australian interest rates. The US dollar’s decline stems from potential tariffs imposed on goods from several European countries. While Australian inflation remains above the Reserve Bank of Australia’s target range, adding pressure for monetary policy tightening, recent data indicates a potential easing of price pressures. The Reserve Bank of Australia is anticipated to maintain a patient approach, but the market is beginning to factor in a potential rate hike, providing support for the Australian dollar, particularly in the lead-up to the February meeting. In the US, data suggests the Federal Reserve may hold interest rates steady, further contributing to the Australian dollar’s relative strength.

    DOW JONES is facing potential downward pressure following news of proposed US tariffs on several European countries. The threat of these tariffs, aimed at compelling the purchase of Greenland, has triggered concerns among investors and could lead to retaliatory measures from the EU. This uncertainty is reflected in the decline of Dow futures, suggesting a negative outlook for the index when trading resumes. While upcoming earnings reports from major companies like Netflix, Visa, and Intel may offer some support, the immediate impact of the tariff news appears to be weighing heavily on market sentiment.

    FTSE 100 is demonstrating resilience despite downward pressure stemming from renewed trade concerns fueled by US tariff threats. While global risk sentiment is negatively impacting more cyclical sectors, the index’s defensive composition, particularly the strength of healthcare and consumer staples stocks like AstraZeneca and Unilever, is helping to mitigate losses. Precious metals miners and defense stocks are also contributing positively, offsetting weakness in banking shares which are more vulnerable to economic uncertainty.

    DAX is facing downward pressure due to escalating trade tensions between the US and Europe, specifically concerning potential tariffs imposed by the US on imports from several European countries, including Germany. This has negatively impacted market sentiment and led to a decline in the index, with auto stocks experiencing significant losses. The prospect of retaliatory measures from the EU further exacerbates the uncertainty surrounding the DAX. However, some defense firms and Bayer experienced gains, offering a slight counterbalance to the overall negative trend.

    NIKKEI experienced a decline, influenced by a confluence of factors including international trade tensions sparked by potential US tariffs on European nations. This, coupled with domestic anticipation surrounding the Bank of Japan’s upcoming policy decision and speculation about a possible snap election, contributed to investor uncertainty. Declines in major stocks such as Mitsubishi UFJ, Fujikura, SoftBank Group, Advantest, and Toyota Motor further pressured the index downwards. The market is showing sensitivity to geopolitical developments and domestic political and economic policy expectations.

    GOLD is exhibiting significant upward momentum, driven by a confluence of factors. Political uncertainty stemming from potential US tariffs on European goods and ongoing geopolitical tensions in the Middle East are fueling safe-haven demand for the precious metal. Despite strong US economic data, including positive retail sales and a robust labor market, concerns over sticky inflation and delayed expectations for Federal Reserve rate cuts are also contributing to gold’s appeal. A weakening US Dollar further supports gold’s price, offsetting some of the pressure from positive economic indicators that would typically diminish its attractiveness. These combined factors suggest a continued bullish outlook for gold in the near term.

    OIL is exhibiting volatility, influenced by a complex interplay of geopolitical factors and trade dynamics. Easing tensions with Iran initially relieved upward pressure on prices, yet the possibility of renewed conflict keeps a risk premium embedded in the market. Simultaneously, renewed trade disputes with Europe are creating headwinds as they threaten to weaken global demand. While potential oversupply is a concern, supply chain disruptions in regions like the Black Sea provide some support, creating a mixed outlook for oil prices.

  • Aussie Dollar Gains Ground Amid US Dollar Weakness – Monday, 19 January

    The Australian Dollar is showing strength, rebounding against the US Dollar due to a confluence of factors. A weaker US Dollar, influenced by geopolitical tensions and shifting expectations regarding interest rate policies, provides a supportive backdrop. Domestically, Australian inflation data is mixed, with some indicators suggesting a re-acceleration, adding pressure on the Reserve Bank of Australia (RBA) to consider further tightening. This contrasts with expectations of potential easing by the US Federal Reserve later in the year, further bolstering the Aussie.

    • The Australian Dollar rose to around $0.669.
    • A weaker US dollar, partly due to proposed tariffs on goods from several European countries, supported the Australian Dollar.
    • Australia’s Monthly Inflation Gauge rose 1% month-on-month in December 2025.
    • Consumer Inflation Expectations eased slightly to 4.6% in January.
    • Inflation remains above the RBA’s 2% to 3% target.
    • The RBA is expected to remain patient but faces pressure to tighten monetary policy.
    • The market is starting to price in an RBA rate hike.
    • The US Federal Reserve is expected to keep interest rates unchanged in the first quarter but may ease later in 2026.

    The Australian Dollar is currently benefiting from a favorable divergence in monetary policy expectations. While the US Federal Reserve is anticipated to potentially ease its stance later in the year, the Reserve Bank of Australia is facing increased pressure to tighten monetary policy in response to persistent inflationary pressures. This situation creates a supportive environment for the Australian Dollar, at least in the short term, as higher interest rates typically attract foreign investment and strengthen a currency. However, economic data will be closely watched to see if this trend continues.

  • Canadian Dollar Weighed by USD Strength and Oil – Monday, 19 January

    The Canadian Dollar is navigating a complex landscape, influenced by both domestic and international factors. Renewed US dollar strength, fueled by positive US economic data and tempered geopolitical tensions impacting oil prices, are creating headwinds. Domestically, softer labor dynamics are preventing significant gains, although improved broader fundamentals and stabilized rate spreads are providing some support.

    • The Canadian dollar softened towards 1.39 per US dollar.
    • Renewed US dollar support and weaker oil prices are weighing on the CAD.
    • Strong US initial jobless claims are boosting the USD and reducing the urgency for Fed easing.
    • President Trump’s calmer tone on Iran reduced the geopolitical premium in crude oil, lowering oil prices.
    • Softer Canadian labor dynamics, with unemployment near 6.8%, reinforce the Bank of Canada’s neutral stance.
    • Broader Canadian fundamentals have improved modestly, with gains in oil and gold and a stabilization in rate spreads providing a floor.
    • USD/CAD dips below 1.3900 amid generalised US Dollar weakness.
    • US President Donald Trump’s announcement of a new round of trade tariffs is weighing heavily on the Greenback.

    The Canadian Dollar’s value is being pulled in different directions. While positive domestic factors offer some stability, external pressures from a stronger US dollar and fluctuating oil prices are exerting downward pressure. The currency’s future performance will likely depend on the interplay between these competing forces and whether domestic economic indicators improve sufficiently to offset the external challenges.

  • Yen Gains on Safe-Haven Demand – Monday, 19 January

    The Japanese Yen strengthened against the US Dollar as renewed geopolitical and trade concerns spurred demand for safe-haven assets. Escalating trade tensions, particularly the threat of US tariffs on European nations, and ongoing geopolitical risks such as the Russia-Ukraine war, contributed to the Yen’s appreciation. Investors are also anticipating the Bank of Japan’s upcoming policy decision and assessing potential fiscal policy shifts following the Prime Minister’s announcement of a snap election.

    • The Japanese Yen reached a one-week high, appreciating past 158 per dollar.
    • US President Trump threatened new tariffs on eight European countries.
    • Japan’s Prime Minister Sanae Takaichi plans to dissolve parliament and call a snap election in February.
    • The Bank of Japan (BoJ) is widely expected to keep rates unchanged this week, but markets are eyeing a possible move in June or even as early as April.
    • Japan’s Finance Minister has suggested that intervention is possible to counter weakness in the Yen.
    • Some policymakers within the Bank of Japan see scope to raise interest rates sooner than markets expect.

    The Yen appears to be benefiting from multiple factors. Global uncertainty is driving investors toward safer assets, while potential shifts in Japanese monetary and fiscal policy may also be supporting the currency. Political developments within Japan, specifically a potential shift towards expansionary policies, could influence the Yen’s trajectory, although the overall impact remains uncertain. Changes in external pressures from other countries also appear to move the currency, indicating its importance for international trading.

  • Pound Recovers as UK Growth Exceeds Expectations – Monday, 19 January

    The British Pound has shown resilience, paring losses against the dollar and holding near $1.34 after better-than-expected UK economic growth data. This positive GDP release has slightly shifted market expectations for monetary easing by the Bank of England, with traders now anticipating rate cuts later in the year. The Pound also benefits from a weaker Greenback.

    • UK GDP rose 0.3% in November, exceeding forecasts of a 0.1% increase.
    • Over the three months to November, GDP expanded 0.1%, defying expectations of a 0.2% contraction.
    • Market expectations for monetary easing have adjusted, pricing in around 46 basis points of cuts by year-end.
    • There is an 84% probability of a second 25-basis-point rate reduction in December.
    • A first rate cut remains fully priced in by June, with an 88% chance it will occur in April.
    • The Pound Sterling trades 0.2% higher near 1.3445 against the US Dollar.
    • The UK Office for National Statistics (ONS) is expected to show that the economy expanded 0.1% in November.
    • BOE policymaker Alan Taylor expects interest rates to fall to their neutral levels soon.

    The British Pound is demonstrating strength on the back of positive economic data, which has tempered expectations for aggressive monetary easing. The currency’s performance is further supported by a weaker dollar and global central bank support for central bank independence. This suggests a potential for continued stability or further gains for the pound in the near term, contingent on sustained economic performance and the evolving monetary policy landscape.

  • Euro Edges Higher Amid Tariff Threats – Monday, 19 January

    Market sentiment regarding the euro is mixed. While it has seen a recent uptick against the dollar, fueled by dollar weakness and potential retaliatory EU tariffs, significant risks persist. These risks stem from potential transatlantic tensions arising from US trade policy and geopolitical ambitions, which could negatively impact European economies.

    • The euro recovered from a three-month low, rising to around $1.162.
    • President Trump threatened 10% tariffs on several European countries due to the Greenland situation.
    • The EU is considering retaliatory tariffs of up to €93 billion on US goods.
    • The UK and Germany face the largest export exposure to the US, with potential GDP reductions from tariffs.
    • Risk aversion gripped financial markets following Trump’s decision to escalate tensions with Europe.
    • The US Dollar trimmed gains and traded with modest losses against most major rivals.
    • New 10% levies on eight European countries will come into place on February 1 and could increase to 25% on June 1.

    The euro’s performance is caught between upward pressure from dollar weakness and potential EU countermeasures, and downward pressure from political tensions and the vulnerability of key European economies to US tariffs. The threat of tariffs is significant and could undermine economic growth, while the EU’s response introduces further uncertainty. Overall, the situation presents a complex picture for the asset’s near-term prospects.

  • Dollar Retreats Amid Tariff Threats – Monday, 19 January

    The US dollar is weakening, retreating from multi-week highs, primarily against safe-haven currencies like the yen and Swiss franc. This downturn follows President Trump’s threat of new tariffs on several European countries, raising concerns about potential economic repercussions and prompting discussions of retaliatory measures. The dollar initially gained before reversing course as investors assessed the impact of the tariff threats. The US Dollar Index (DXY) is currently testing support levels.

    • The dollar index fell toward 99.
    • Trump threatened eight European countries with new tariffs.
    • The tariffs could start at 10% on Feb. 1, rising to 25% in June.
    • European leaders discussed retaliatory measures, potentially reviving plans to impose tariffs on US goods.
    • The dollar initially gained against the euro and sterling before reversing.
    • US Dollar Index (DXY) is trading around 99.20.
    • The dollar index moves upward within an ascending channel pattern, suggesting a persistent bullish bias.
    • US Dollar Index tests nine-day EMA support near 99.00

    The dollar’s performance is currently being influenced by geopolitical tensions and the potential for trade conflicts. While the technical outlook suggests an underlying bullish trend, the immediate impact of tariff threats is creating downward pressure. The situation is fluid, with the dollar’s future movements heavily dependent on the resolution of trade disputes and the reactions of global markets.

  • Asset Summary – Friday, 16 January

    Asset Summary – Friday, 16 January

    US DOLLAR is exhibiting resilience, supported by encouraging US economic data that has reduced expectations for near-term Federal Reserve interest rate cuts. Strong labor market figures, as indicated by lower-than-expected jobless claims, and positive manufacturing survey results contribute to this sentiment. Comments from Fed officials highlighting labor market stability and concerns about inflation further solidify expectations for a pause in rate cuts. Reduced tariffs on Taiwanese goods and commitments from Taiwanese companies to invest in US chip manufacturing may also subtly bolster the dollar’s standing. Investors are now looking toward upcoming industrial production data and further remarks from Federal Reserve officials for future direction.

    BRITISH POUND is gaining ground following better-than-expected UK economic growth figures, specifically a rebound in GDP for November. This positive data has slightly reduced market expectations for aggressive monetary easing by the Bank of England, supporting the currency. While interest rate cuts are still anticipated, their timing and magnitude are being re-evaluated. Furthermore, broader market sentiment and a slightly weaker US Dollar are contributing to the Pound’s recent strength, although US inflation data and pressure on the Federal Reserve remain factors to watch.

    EURO is facing downward pressure due to a stronger US dollar, influenced by positive US economic data and higher Treasury yields. While the Eurozone economy shows signs of recovery and inflation is near the ECB’s target, the ECB is expected to maintain current interest rates, contrasting with expectations of potential rate cuts in the US. The speculation around the Fed’s future policy and leadership adds further uncertainty, favoring the dollar. Technically, a break below key moving averages could signal a more significant correction for the euro in the medium term.

    JAPANESE YEN is gaining some ground as investors anticipate potential shifts in the Bank of Japan’s monetary policy, particularly regarding future rate hikes. While the central bank is expected to maintain its current policy in the near term, growing speculation surrounds a possible rate increase around June. Verbal warnings from Japanese authorities about intervening to curb excessive currency movements are also providing support. However, uncertainty persists due to expectations of looser fiscal policy aimed at stimulating economic growth and speculation about a snap election, both of which could exert downward pressure on the yen. Meanwhile, the US Federal Reserve’s anticipated decision to hold interest rates steady further complicates the outlook for the currency pair.

    CANADIAN DOLLAR’s value is facing mixed pressures. While improved oil and gold prices along with stable rate spreads offer some support, the currency is being weighed down by a stronger US dollar and softer labor market dynamics within Canada. The US dollar’s strength is fueled by positive economic data, reducing expectations for near-term Federal Reserve interest rate cuts. Meanwhile, Canada’s relatively high unemployment rate is reinforcing the Bank of Canada’s neutral monetary policy stance, limiting the potential for tighter financial conditions to boost the currency. Technical analysis suggests a potential for further US dollar gains against the Canadian dollar, although dips may be limited.

    AUSTRALIAN DOLLAR is currently experiencing upward pressure due to several factors, including rising expectations of an imminent rate hike by the Reserve Bank of Australia (RBA). Major Australian banks are increasing mortgage rates, signaling a belief that the cash rate will remain elevated for an extended period. Market sentiment reflects this, with increased probabilities of a rate hike at the RBA’s upcoming meetings. Additionally, positive performance in the Australian stock market and a generally optimistic global stock market environment are providing further support. While inflation remains above the RBA’s target range, adding pressure for tightening, the US Federal Reserve is anticipated to hold interest rates steady, further contrasting the monetary policy outlooks and bolstering the Australian currency.

    DOW JONES is exhibiting a mixed outlook. While Dow Jones futures were near flat ahead of the market open, suggesting limited upward or downward pressure in the immediate term, the overall trend for the week points toward a slight decline. The positive performance of other indices and strong earnings from some companies like PNC Financial Services could offer some support. However, weakness in other megacap stocks and the general negative weekly performance across major indices implies the Dow Jones may struggle to achieve significant gains and could remain under pressure.

    FTSE 100 experienced a slight decrease, primarily influenced by the downturn in commodity prices. The decline was most pronounced in the mining and energy sectors, with significant losses seen in companies heavily involved in metals and oil. This pullback follows a period of strong performance in raw material prices, suggesting a potential correction. Despite the single-day dip, the index remains positive for the week and is on track for its third consecutive week of gains, indicating an overall upward trend despite the recent commodity-driven weakness.

    DAX is experiencing a mixed trading environment. While some investors are taking profits after recent gains, optimism surrounding tech and AI is providing support. Concerns about geopolitical tensions and disappointing sales forecasts from companies like Daimler Truck Holdings are creating downward pressure. However, companies benefiting from the energy transition and AI, such as Siemens Energy and RWE, are seeing increased demand. Additionally, defense stocks are also performing well. Overall, the index is showing a slight weekly gain, indicating a generally positive but somewhat fragile market sentiment.

    NIKKEI experienced a decline as investors exercised caution in anticipation of the upcoming Bank of Japan policy meeting, where no changes are expected, though a rate hike is anticipated around June. Political developments, including potential plans for a lower house dissolution, further dampened market enthusiasm. A stronger yen, spurred by intervention concerns, added pressure on export-oriented stocks. Declines were observed in key companies like Tokyo Electron, SoftBank Group, Mitsubishi Heavy Industries, Hitachi, and Toyota Motor. However, despite the day’s losses, both the Nikkei and Topix recorded gains for the week overall.

    GOLD is currently experiencing a corrective move, retreating to the $4,600 level as geopolitical tensions ease and risk sentiment improves. Stronger-than-expected US economic data, particularly in jobless claims and retail sales, has diminished expectations of near-term interest rate cuts by the Federal Reserve, reducing gold’s appeal as a safe-haven asset. The expectation for the first rate cut has been pushed back to June. Despite this pullback, gold has maintained gains for the week and remains near record levels, supported by a slightly weaker US Dollar. This suggests that while some factors are currently weighing on gold prices, underlying strength persists due to inflation concerns and resilient economic activity.

    OIL’s price currently reflects a tug-of-war between geopolitical anxieties and easing tensions in the Middle East. Recent price volatility stems from uncertainty surrounding potential military action against Iran, balanced against reports suggesting de-escalation. The market reacted strongly to indications that conflict might be averted, leading to a significant price drop. While the immediate threat seems to have diminished, the underlying risk of disruption to Iranian oil production or shipping lanes remains, preventing a substantial price decline. Overall, the market is sensitive to news flow related to Iran, leading to short-term price fluctuations with an underlying cautious sentiment.

  • Australian Dollar Gains Momentum on Rate Hike Expectations – Friday, 16 January

    Market conditions for the Australian dollar are currently positive, with the currency edging higher due to increased expectations of a potential rate hike by the Reserve Bank of Australia (RBA). This sentiment is fueled by recent mortgage rate increases by major Australian banks, signaling a higher-for-longer interest rate environment. The Australian dollar is also benefiting from a rise in global stocks, including Australian shares.

    • The Australian dollar is trading around $0.67 and is on track for weekly gains.
    • Commonwealth Bank of Australia and Macquarie Bank have increased mortgage rates.
    • Markets are pricing in a 27% chance of a rate hike at the RBA’s February meeting, rising to 76% by May.
    • Australian shares have rallied for a fifth consecutive session, reaching a more than two-month high.
    • Australia’s Consumer Inflation Expectations eased slightly in January to 4.6%, but remain above the RBA’s target.
    • The market is starting to price in a rate hike by the RBA, which is expected to support the Aussie Dollar.

    The information suggests a strengthening outlook for the Australian dollar. The potential for increased interest rates compared to the US, coupled with positive performance in the Australian stock market, could lead to further appreciation of the currency. Inflation data, while still above target, is being closely watched for indications of future monetary policy decisions. Overall, the factors point toward continued support for the currency in the near term, particularly leading up to the RBA’s next meeting.

  • Canadian Dollar: A Balancing Act – Friday, 16 January

    The Canadian dollar is experiencing mixed influences, hovering near recent lows against the US dollar. Renewed US dollar strength and falling oil prices are weighing on the CAD, offsetting supportive domestic factors. While improved fundamentals offer some floor, softer labor dynamics and a neutral Bank of Canada stance are limiting upside potential.

    • The Canadian dollar softened toward 1.39 per US dollar.
    • Renewed US dollar support and weaker oil prices are weighing on the CAD.
    • US jobless claims fell sharply, reinforcing confidence in the US labor market.
    • President Trump’s calmer tone on Iran pared the geopolitical premium in crude.
    • Unemployment holding near 6.8% reinforces the Bank of Canada’s neutral stance.
    • Broader fundamentals have improved modestly, providing a floor.
    • USD/CAD inches lower after three days of gains, trading around 1.3890.
    • USD/CAD remains within an ascending channel pattern, suggesting a persistent bullish bias.
    • RSI above the 50 midline keeps dips shallow.

    Overall, the Canadian dollar’s performance is being pulled in different directions. External factors, such as fluctuations in the US dollar and oil prices, significantly impact its value. Domestically, while underlying economic conditions have somewhat improved, limitations remain, creating a complex environment for the currency. Technical analysis suggests a potential for continued strength against the US dollar, although dips may be limited.

  • Yen Gains Ground Amid Intervention Talk – Friday, 16 January

    The Japanese Yen has strengthened recently, driven by verbal warnings of intervention from Japanese authorities concerned about rapid currency depreciation. Investors are also anticipating the Bank of Japan’s upcoming policy meeting, searching for signals regarding future rate hikes. While a rate hike is not expected next week, markets anticipate one around June. However, the broader outlook for the Yen remains uncertain, influenced by speculation of looser fiscal policy in Japan to stimulate economic growth and the US Federal Reserve’s expected hold on interest rates.

    • The Japanese Yen rose toward 158 per dollar.
    • Markets are pricing in the next BOJ rate increase around June.
    • BOJ Governor Kazuo Ueda reiterated that the bank stands ready to raise rates if economic and price developments align with projections.
    • Concerns over potential official intervention have supported the Yen.
    • Finance Minister Satsuki Katayama floated the idea of joint intervention with the US to defend the yen.
    • Speculation that Prime Minister Sanae Takaichi may call a snap election next month to advance more aggressive fiscal spending continued to weigh on the yen.
    • USD/JPY pair trades lower due to Yen strength on intervention warnings.
    • All options, including direct currency intervention, are available for dealing with recent JPY weakness.
    • Investors expect Japan to follow looser fiscal policy this year to stimulate economic growth.
    • The US Dollar is broadly firm as the Federal Reserve is expected to hold interest rates steady.

    The current environment suggests a tug-of-war for the asset’s value. On one hand, potential intervention and hints of future monetary tightening are providing support. On the other, expected fiscal stimulus and a steady US Federal Reserve policy are creating downward pressure. This implies continued volatility and sensitivity to both domestic Japanese policy announcements and broader global economic conditions.

  • Pound Gains Ground Amid Economic Data – Friday, 16 January

    The British Pound is showing resilience, rebounding against the US Dollar after better-than-expected UK economic growth data. Market expectations are shifting towards potential monetary easing by the Bank of England, with rate cuts priced in for the near future. The Pound Sterling experienced a modest increase due to the decline of the US Dollar.

    • UK GDP rose 0.3% in November, exceeding forecasts.
    • Over the three months to November, GDP expanded 0.1%, defying expectations of a contraction.
    • Market expectations for monetary easing have increased, with traders pricing in rate cuts.
    • The UK Office for National Statistics (ONS) is expected to show that the economy expanded 0.1% in November.
    • BoE policymaker Alan Taylor expects interest rates to fall to their neutral levels soon.
    • The GBP/USD pair rises amid Sterling’s outperformance.

    This data suggests that the British economy is showing signs of recovery, albeit modest. The upward revision of growth figures reduces the immediate pressure on the Bank of England to enact aggressive monetary easing. However, the market anticipates future rate cuts. This implies that the currency’s value could be influenced by economic data releases and any indication about the Bank of England’s monetary policy intentions.

  • Euro Under Pressure Amid Diverging Policies – Friday, 16 January

    The euro is currently experiencing downward pressure against the US dollar, trading at a multi-week low. Economic data from the Eurozone reveals fragile growth in Germany and inflation at the ECB’s target, leading to expectations of steady interest rates. Meanwhile, stronger US retail sales are boosting the dollar, even with slower-than-anticipated US inflation. Diverging central bank policies contribute to the euro’s weakness.

    • The euro fell to its weakest level in over a month against the US dollar, trading at $1.163.
    • Germany’s economy grew 0.2% in 2025, ending a two-year contraction, but manufacturing weakness persists.
    • Eurozone inflation slowed to 2.0% in December, meeting the ECB’s target.
    • ECB member François Villeroy de Galhau considers expectations of a rate hike in 2026 as “fanciful.”
    • Stronger-than-expected US retail sales boosted the US dollar.
    • The EUR/USD pair is regaining upside impulse, extending its bounce to the 1.1630 region, on the back of renewed selling pressure on the US Dollar.
    • Markets are pricing just over 4 basis points of easing this year, consistent with an ECB that sees little urgency to act.
    • Speculative positioning continues to favor the Euro (EUR), with momentum starting to rebuild.
    • Attention turns to Friday’s batch of US hard data, which should offer a clearer snapshot of the economy’s underlying health.
    • If US yields go up again or the Fed’s outlook becomes more hawkish, new sellers could quickly join the pair.

    Overall, the asset faces challenges due to a combination of factors. Economic recovery in the Eurozone is tentative, and the central bank is expected to maintain its current monetary policy. Conversely, the US dollar is gaining strength from positive economic data and expectations surrounding the Federal Reserve’s future actions. This divergence in economic conditions and central bank policies suggests that the euro may continue to experience downward pressure in the near term, particularly if US economic data remains strong and the Federal Reserve adopts a more hawkish stance.