Forex Major Currencies Outlook (Jan 26 – Jan 30)
Fed and BoC meetings followed by inflation data from Australia and preliminary Q4 GDP print from Eurozone will highlight the week ahead of us. Additionally, more than 100 companies will be reporting earnings with big tech names leading the way and there is a possibility that new Fed Chair will be named.
USD
President Trump has ramped up his rhetoric on Greenland claiming that US has to have Greenland and emphasizing its strategic importance. He spoke in Davos and asked for immediate negotiations to acquire Greenland stating that only US can secure Greenland. He want into barrage stating that he does not and will not use force and covertly threatened by saying that most likely nothing will be done unless he decides to use excessive force, which would make US unstoppable, but he would not do that. On the talk of stock market he bragged that stock market will double as he used Davos platform for one of his mid-term election speeches. Later on, he has cancelled additional 10% Greenland-related tariffs on European countries stating that framework for future deal has been reached. Chances of a new Government shutdown on Polymarket surged over the weekend to almost 80%.
The yield on a 10y Treasury started the week at 4.18%, rose to 4.30% and finished the week at around 4.24%. The yield on 2y Treasury started the week at 3.54%, rose to 3.63% and finished the week at around 3.60%. Spread between 2y and 10y Treasuries started the week at 63bp and finished the week at 64bp. FedWatchTool sees the probability of a 25bp rate cut at January meeting at around 3% while probability of no change is at around 97%. Silver crossed $100 and settled north of $103 for almost a 44% gain YTD while gold got dangerously close to $5000.
This week we will have Fed meeting. No change to rate is expected, but it will be interesting to see if Powell will sound more hawkish due to recent attacks by Trump.
Important news for USD:
Wednesday:
Fed and BoC meetings followed by inflation data from Australia and preliminary Q4 GDP print from Eurozone will highlight the week ahead of us. Additionally, more than 100 companies will be reporting earnings with big tech names leading the way and there is a possibility that new Fed Chair will be named.
USD
President Trump has ramped up his rhetoric on Greenland claiming that US has to have Greenland and emphasizing its strategic importance. He spoke in Davos and asked for immediate negotiations to acquire Greenland stating that only US can secure Greenland. He want into barrage stating that he does not and will not use force and covertly threatened by saying that most likely nothing will be done unless he decides to use excessive force, which would make US unstoppable, but he would not do that. On the talk of stock market he bragged that stock market will double as he used Davos platform for one of his mid-term election speeches. Later on, he has cancelled additional 10% Greenland-related tariffs on European countries stating that framework for future deal has been reached. Chances of a new Government shutdown on Polymarket surged over the weekend to almost 80%.
The yield on a 10y Treasury started the week at 4.18%, rose to 4.30% and finished the week at around 4.24%. The yield on 2y Treasury started the week at 3.54%, rose to 3.63% and finished the week at around 3.60%. Spread between 2y and 10y Treasuries started the week at 63bp and finished the week at 64bp. FedWatchTool sees the probability of a 25bp rate cut at January meeting at around 3% while probability of no change is at around 97%. Silver crossed $100 and settled north of $103 for almost a 44% gain YTD while gold got dangerously close to $5000.
This week we will have Fed meeting. No change to rate is expected, but it will be interesting to see if Powell will sound more hawkish due to recent attacks by Trump.
Important news for USD:
Wednesday:
- Fed Interest Rate Decision
EUR
Final CPI reading for the month of December saw both headline and core prints come in unchanged at 1.9% y/y and 2.3% y/y respectively as was to be expected after last week’s readings from major countries. Services inflation stays very elevated at 3.4% while food inflation also prints above the target with a 2.5% reading.
Preliminary January PMI numbers showed solid growth but growing disparity between German and French economies. Manufacturing for the Eurozone improved to 49.4 from 49.2 in December with both countries showing improvements and with France moving further into expansion. Services declined to 51.9 from 52.4 the previous month. German reading strengthened and moved deeper into expansion while French print plunged back into contraction. The report notes growing inflation pressures in the sector as both input costs and output prices rose at a faster pace. Additionally, there is a weakness in the employment index indicating potential rise in the unemployment rate in the coming months. Composite was unchanged at 51.5.
This week we will have preliminary Q4 GDP reading.
Important news for EUR:
Friday:
Final CPI reading for the month of December saw both headline and core prints come in unchanged at 1.9% y/y and 2.3% y/y respectively as was to be expected after last week’s readings from major countries. Services inflation stays very elevated at 3.4% while food inflation also prints above the target with a 2.5% reading.
Preliminary January PMI numbers showed solid growth but growing disparity between German and French economies. Manufacturing for the Eurozone improved to 49.4 from 49.2 in December with both countries showing improvements and with France moving further into expansion. Services declined to 51.9 from 52.4 the previous month. German reading strengthened and moved deeper into expansion while French print plunged back into contraction. The report notes growing inflation pressures in the sector as both input costs and output prices rose at a faster pace. Additionally, there is a weakness in the employment index indicating potential rise in the unemployment rate in the coming months. Composite was unchanged at 51.5.
This week we will have preliminary Q4 GDP reading.
Important news for EUR:
Friday:
- GDP
GBP
December payrolls change showed economy shed another 43k jobs after losing 33k jobs the previous month as weakness in the labor market continues. November ILO unemployment rate stayed at 5.1% as expected. Wages saw continuation of declines as they came in at 4.7% 3m/y vs 4.8% 3m/y in November while ex bonus printed 4.5% 3m/y vs 4.6% 3m/y the previous month. Private sector pay eased to 3.6% y/y and between 2.5-3% 3m/y indicating that inflation pressures will not come from the demand side.
CPI data showed unexpected rise in December as it printed 3.4% y/y after 3.2% y/y in November. Core was unchanged at 3.2% y/y. Food inflation proves to be very stubborn as it rose to 4.5% from 4.2% the previous month. Services inflation also stands at a very elevated 4.5%. BoE was not planning to cut rates in February and this will deter them further from that and leave them on hold. March seems to be the appropriate time to deliver a rate cut.
Preliminary PMI for the month of January smashed expectations with manufacturing printing 51.6 vs 50.6 as expected and as in December. New export orders rose for the first time in almost four years. Services are where all the shine is. They rose to 54.3 from 51.4 while expectations were for a 51.7 print. Business activity has surged the most since April of 2024 and both domestic and foreign demand are strong. One weakness is in the employment index which showed companies laying off workers in order to reduce costs. Composite was lifted to 53.9. Another strong start of the year for UK. In recent years H1 was much better than H2 so it is left to be seen whether economy will be able to carry this momentum further down the year.
AUD
Employment report for the month of December smashed expectations as it showed economy add 65.2k jobs vs 30k as expected and rebounding from losing 28.7k jobs in November. The unemployment rate dropped to 4.1% from 4.3% the previous month while markets were expecting a tick up to 4.4%. Participation rate ticked up to 66.7%. Composition of jobs adds another big positive to the report as great majority of jobs added (54.8k) were much more stable full-time jobs while part-time added 10.2k jobs. This jobs report allows RBA to hike rates at their February meeting. Next week’s inflation data will be crucial for RBA’s decision.
China’s Q4 GDP came in at 4.5% y/y vs 4.4% y/y as expected but down from 4.8% y/y in Q3. Quarterly it showed a 1.2% growth up from 1.1% in the previous quarter. GDP was carried on the back of strong exports while weak domestic demand, seen in struggling domestic consumption and investment, dragged it down. Economy expanded by planned 5% in 2025. December data points show industrial production improve to 5.2% y/y from 4.8% y/y in November while retail sales grew by 0.9% y/y after a 1.3% y/y growth the previous month. Retail sales have been expanding at a slower pace every month since April thus highlighting China’s struggle to lift its economy through domestic consumption.
This week we will have December CPI print. This print will decide whether RBA will hike in February or stay on hold.
Important news for AUD:
Wednesday:
December payrolls change showed economy shed another 43k jobs after losing 33k jobs the previous month as weakness in the labor market continues. November ILO unemployment rate stayed at 5.1% as expected. Wages saw continuation of declines as they came in at 4.7% 3m/y vs 4.8% 3m/y in November while ex bonus printed 4.5% 3m/y vs 4.6% 3m/y the previous month. Private sector pay eased to 3.6% y/y and between 2.5-3% 3m/y indicating that inflation pressures will not come from the demand side.
CPI data showed unexpected rise in December as it printed 3.4% y/y after 3.2% y/y in November. Core was unchanged at 3.2% y/y. Food inflation proves to be very stubborn as it rose to 4.5% from 4.2% the previous month. Services inflation also stands at a very elevated 4.5%. BoE was not planning to cut rates in February and this will deter them further from that and leave them on hold. March seems to be the appropriate time to deliver a rate cut.
Preliminary PMI for the month of January smashed expectations with manufacturing printing 51.6 vs 50.6 as expected and as in December. New export orders rose for the first time in almost four years. Services are where all the shine is. They rose to 54.3 from 51.4 while expectations were for a 51.7 print. Business activity has surged the most since April of 2024 and both domestic and foreign demand are strong. One weakness is in the employment index which showed companies laying off workers in order to reduce costs. Composite was lifted to 53.9. Another strong start of the year for UK. In recent years H1 was much better than H2 so it is left to be seen whether economy will be able to carry this momentum further down the year.
AUD
Employment report for the month of December smashed expectations as it showed economy add 65.2k jobs vs 30k as expected and rebounding from losing 28.7k jobs in November. The unemployment rate dropped to 4.1% from 4.3% the previous month while markets were expecting a tick up to 4.4%. Participation rate ticked up to 66.7%. Composition of jobs adds another big positive to the report as great majority of jobs added (54.8k) were much more stable full-time jobs while part-time added 10.2k jobs. This jobs report allows RBA to hike rates at their February meeting. Next week’s inflation data will be crucial for RBA’s decision.
China’s Q4 GDP came in at 4.5% y/y vs 4.4% y/y as expected but down from 4.8% y/y in Q3. Quarterly it showed a 1.2% growth up from 1.1% in the previous quarter. GDP was carried on the back of strong exports while weak domestic demand, seen in struggling domestic consumption and investment, dragged it down. Economy expanded by planned 5% in 2025. December data points show industrial production improve to 5.2% y/y from 4.8% y/y in November while retail sales grew by 0.9% y/y after a 1.3% y/y growth the previous month. Retail sales have been expanding at a slower pace every month since April thus highlighting China’s struggle to lift its economy through domestic consumption.
This week we will have December CPI print. This print will decide whether RBA will hike in February or stay on hold.
Important news for AUD:
Wednesday:
- CPI
NZD
Electronic card retail sales, making almost 70% of total retail sales, showed declines in December of 0.1% m/m and 1% y/y. Q4 CPI data reported 0.6% q/q and 3.1% y/y increase in prices, higher than both markets and RBNZ expected. Non-tradeable inflation, measure of domestic price pressures, showed price increases of 0.6% q/q and 3.5% y/y. Electricity prices, housing rents and local authority charges, all domestic cost pressures, were the main reasons inflation accelerated in fourth quarter. Inflation is moving outside RBNZ’s targeted band which signals that no further cuts are coming and that bank will stay on pause with chances for a rate hike increasing. RBNZ governor Breman reiterated bank’s commitment to returning inflation back to the middle of their 1-3% targeted range. All of this is NZD positive.
CAD
December CPI report saw headline number rise to 2.4% y/y from 2.2% y/y in November with markets expecting it to stay unchanged at 2.2% y/y. The report shows telephone services, meat and food from restaurants as main culprits for increase in inflation. On the other hand, natural gas and gasoline saw biggest drops in prices. Core measures saw trim and median decline to 2.7% and 2.5% respectively from 2.8% in November while common stayed at 2.8%. Unexpected increase in inflation led to repricing of future rate hikes up.
This week we will have BoC meeting. No change to rate is expected.
Important news for CAD:
Wednesday:
Electronic card retail sales, making almost 70% of total retail sales, showed declines in December of 0.1% m/m and 1% y/y. Q4 CPI data reported 0.6% q/q and 3.1% y/y increase in prices, higher than both markets and RBNZ expected. Non-tradeable inflation, measure of domestic price pressures, showed price increases of 0.6% q/q and 3.5% y/y. Electricity prices, housing rents and local authority charges, all domestic cost pressures, were the main reasons inflation accelerated in fourth quarter. Inflation is moving outside RBNZ’s targeted band which signals that no further cuts are coming and that bank will stay on pause with chances for a rate hike increasing. RBNZ governor Breman reiterated bank’s commitment to returning inflation back to the middle of their 1-3% targeted range. All of this is NZD positive.
CAD
December CPI report saw headline number rise to 2.4% y/y from 2.2% y/y in November with markets expecting it to stay unchanged at 2.2% y/y. The report shows telephone services, meat and food from restaurants as main culprits for increase in inflation. On the other hand, natural gas and gasoline saw biggest drops in prices. Core measures saw trim and median decline to 2.7% and 2.5% respectively from 2.8% in November while common stayed at 2.8%. Unexpected increase in inflation led to repricing of future rate hikes up.
This week we will have BoC meeting. No change to rate is expected.
Important news for CAD:
Wednesday:
- BoC Interest Rate Decision
JPY
Prime Minister Takaichi called snap elections on January 23 at the Diet session and dissolved the Lower House. The elections will be held on February 8. The main reason for this move is for her to take advantage of her high polling results and thus consolidate her power. She ramped up intervention talk and promised a two-year removal of the 8% food tax. Yields on JGBs continued their steady climb with 10y reaching 2.35% and 30y reaching 3.91% and then easing a bit before the week ended.
BoJ held rate short-term rate unchanged at 0.75% as was widely expected. Vote was 8-1 with Takata dissenting and voting for a rate hike to 1% citing that inflation risks are skewed to the upside. The bank has lifted both inflation and growth forecasts stating that risks surrounding them are broadly balanced. Median core inflation for 2026 is now seen at 1.9% from 1.8% previously while 2027 is still seen at 2%. Median core-core inflation for 2026 is now seen at 2.2% from 2% previously and 2027 is seen at 2.1%, also up from 2% previously. GDP for 2026 is lifted to 1% from 0.7% while GDP for 2027 is seen slowing down to 0.8% from 1% previously.
BoJ governor Ueda stated that underlying inflation will continue to rise moderately with rate of increase in core inflation expected to speed up. It is expected that underlying inflation will reach bank’s target in the second half of the projected period. He reiterated willingness to raise rates if economy and prices move as forecast. He emphasized paying more focus on inflation when making decisions on monetary policy. After the press conference was over there was a significant strengthening of JPY. Ministry of Finance declined to comment whether it was an intervention but all signs point that it was.
December inflation report for the entire Japan saw headline number plunge to 2.1% y/y from 2.9% y/y in November. Ex fresh food, core, dropped to 2.4% y/y from 3% y/y the previous month while ex fresh food, energy, core-core, ticked down to 2.9% y/y from 3% y/y in November. Main culprit for declines were base effects from energy prices. Inflation is still above the target. On Friday Fed called major banks and dealers to do a rate check on USDJPY. Since Fed has no mandate to influence USD this move was done in cooperation with MoF and is intended to strengthen JPY.
Preliminary January PMI data showed economy improving and starting 2026 on a strong note. Manufacturing surged back to expansion with a 51.5 print, up from 50 in December. Output also returned to expansion and lifted the whole print while new export orders reported first increase in almost four years. Services jumped to 53.4 from 51.6 the previous month reflecting much stronger demand. Inflation pressures are persisting and even intensifying in the manufacturing sector while somewhat moderating in the services sector. Composite was lifted to 52.8 from 51.1 in December thus making it highest reading since August of 2024.
CHF
SNB total sight deposits for the week ending January 16 came in at CHF456.2bn vs CHF459.8bn the previous week. Another move down as money is leaving Swissy to look for places with a better yield. SNB Chairman Schlegel warned that negative inflation prints are possible in 2026, but that it will not be enough to push rates into negative territory.
Prime Minister Takaichi called snap elections on January 23 at the Diet session and dissolved the Lower House. The elections will be held on February 8. The main reason for this move is for her to take advantage of her high polling results and thus consolidate her power. She ramped up intervention talk and promised a two-year removal of the 8% food tax. Yields on JGBs continued their steady climb with 10y reaching 2.35% and 30y reaching 3.91% and then easing a bit before the week ended.
BoJ held rate short-term rate unchanged at 0.75% as was widely expected. Vote was 8-1 with Takata dissenting and voting for a rate hike to 1% citing that inflation risks are skewed to the upside. The bank has lifted both inflation and growth forecasts stating that risks surrounding them are broadly balanced. Median core inflation for 2026 is now seen at 1.9% from 1.8% previously while 2027 is still seen at 2%. Median core-core inflation for 2026 is now seen at 2.2% from 2% previously and 2027 is seen at 2.1%, also up from 2% previously. GDP for 2026 is lifted to 1% from 0.7% while GDP for 2027 is seen slowing down to 0.8% from 1% previously.
BoJ governor Ueda stated that underlying inflation will continue to rise moderately with rate of increase in core inflation expected to speed up. It is expected that underlying inflation will reach bank’s target in the second half of the projected period. He reiterated willingness to raise rates if economy and prices move as forecast. He emphasized paying more focus on inflation when making decisions on monetary policy. After the press conference was over there was a significant strengthening of JPY. Ministry of Finance declined to comment whether it was an intervention but all signs point that it was.
December inflation report for the entire Japan saw headline number plunge to 2.1% y/y from 2.9% y/y in November. Ex fresh food, core, dropped to 2.4% y/y from 3% y/y the previous month while ex fresh food, energy, core-core, ticked down to 2.9% y/y from 3% y/y in November. Main culprit for declines were base effects from energy prices. Inflation is still above the target. On Friday Fed called major banks and dealers to do a rate check on USDJPY. Since Fed has no mandate to influence USD this move was done in cooperation with MoF and is intended to strengthen JPY.
Preliminary January PMI data showed economy improving and starting 2026 on a strong note. Manufacturing surged back to expansion with a 51.5 print, up from 50 in December. Output also returned to expansion and lifted the whole print while new export orders reported first increase in almost four years. Services jumped to 53.4 from 51.6 the previous month reflecting much stronger demand. Inflation pressures are persisting and even intensifying in the manufacturing sector while somewhat moderating in the services sector. Composite was lifted to 52.8 from 51.1 in December thus making it highest reading since August of 2024.
CHF
SNB total sight deposits for the week ending January 16 came in at CHF456.2bn vs CHF459.8bn the previous week. Another move down as money is leaving Swissy to look for places with a better yield. SNB Chairman Schlegel warned that negative inflation prints are possible in 2026, but that it will not be enough to push rates into negative territory.
