Intro
It was quite a volatile week, especially with the USD pairs. Aussie shone through as the most bullish currency amid recent positive Australian jobs data. This fundamental event certainly pushed up Aussie pairs like AUD/USD (and, by extension, boosted other USD pairs), indicating somewhat bearish sentiment toward the dollar.
We have two high-impact data releases this week on the same day (Wednesday). Holds are expected for both events, but it’s key to be cautious around these times as volatility is unpredictable.
Nonetheless, let’s go through our latest sentiment report for all currencies.
Market Overview
Here is a brief sentiment report for all major currencies.
US Dollar (USD): Bearish
The Fed is anticipated to hold at 3.50%–3.75% at the Jan 27–28 meeting, with most economists now leaning to “no change for a while,” which gives the USD some near-term stability.
Still, the broader backdrop is that the Fed cut to 3.50%–3.75% in Dec 2025, and the market continues to price additional easing later in 2026, so the dollar’s yield advantage is no longer expanding the way it did in prior years.
Key news to watch: interest rate decision on Wednesday
Euro (EUR): Bullish
Eurozone PMIs presented mixed signals with manufacturing gains offset by services contraction in France, while Germany showed improvements in both sectors, reflecting uneven regional recovery patterns.
The ECB is not in a hurry to change rates, with December meeting accounts showing policymakers comfortable with inflation hovering near target and markets pricing a long hold through 2026. On balance, that “steady ECB vs previously-cut Fed” dynamic supports EUR on dips, even if the euro’s upside can still be capped by slow growth and broader risk/trade headlines.
British Pound (GBP): Neutral
Quid is vulnerable due to political uncertainty, noting a possible negative impact if Andy Burnham emerges as a leadership candidate challenging Starmer.
Burnham’s vocal criticism of government borrowing and reliance on the bond market could weigh on the pound if he gains influence.
A key BoE policymaker (Taylor) recently reinforced that rates should continue to fall as inflation looks set to settle around target sooner than previously projected. This can weigh on GBP’s rate support.
Japanese Yen (JPY): Neutral
Japan’s headline CPI dropped to 2.1% from 2.9%, with core inflation easing to 2.4% from 3%, supporting the Bank of Japan’s cautious stance on tightening in the short term. The latter aligns with the Bank of Japan’s decision to hold the interest rate last week.
Australian dollar (AUD): Bullish
Australia’s latest employment data showed a strong increase of 65,200 jobs against an expected 28,300, with the unemployment rate falling to 4.1% from an expected 4.4%. The market currently prices a 60% chance of an RBA rate hike at the February 4th meeting based on this data.
Still, the CPI report before the meeting will heavily influence RBA decisions. Hence, the central bank may not immediately hike despite the strong jobs data
New Zealand dollar (NZD): Bullish
New Zealand’s quarterly CPI surprised hotter at 0.6% (vs. 0.5% expected) with year-on-year inflation at 3.1%, slightly above the target band of 1-3%. Still, the RBNZ remained cautious on rate hikes, signaling mixed economic signals.
Governor commentary has also pushed back against markets pricing quick hikes, reiterating rates are likely to stay low through 2026, which keeps NZD’s rate support softer than many peers.
Canadian dollar (CAD): Bearish
The BoC held the overnight rate at 2.25% last month, reinforcing the idea that cuts may be slowing or pausing if inflation stays contained and activity proves resilient enough.
For CAD, this ‘pause potential’ can be supportive, but the currency is still dominated by oil and the broad risk tone. So, it often trades as a macro/commodity proxy rather than on Canada-only fundamentals.
Key news to watch: interest rate decision on Wednesday
Swiss Franc (CHF): Neutral
The SNB is holding the policy rate at 0% and minutes indicate rates are likely to stay on hold, while the Bank also keeps FX intervention “on the table” if moves become excessive. With recurring risk headlines (including recent tariff threats that boosted haven demand), CHF retains a structural bid, but the SNB can ‘manage’ strength at the margins.
