In particular, market attention is focused on Germany’s December retail sales data. Forecasts suggest a monthly decline of 0.2%, which would still be an improvement compared to the previous –0.6% reading and could signal a gradual recovery in consumer sentiment, which remained subdued throughout last year. At 11:00 (GMT+2), eurozone manufacturing business activity data will be released, with markets expecting a slight uptick from 48.8 to 48.9 points. Later, at 16:45 (GMT+2), similar data from the United States will be published, likely showing no change in the manufacturing PMI at 51.9 points, while the ISM manufacturing index could rise from 47.9 to 48.3 points.
One of the key events of the week for the pair will be the European Central Bank’s monetary policy meeting. The ECB is widely expected to leave interest rates unchanged for the fourth consecutive time on Thursday, a decision already priced in by markets. However, investors will closely watch officials’ rhetoric, particularly regarding the bank’s willingness to respond to excessive euro appreciation. The current correction has somewhat eased market tension, but uncertainty surrounding the foreign policy of the Republican administration in the White House continues to pose significant risks. Should the ECB signal a full end to its current monetary easing cycle, the euro could enter a new local rally, especially as the U.S. Federal Reserve is expected to maintain a relatively dovish stance.
U.S. investors will focus this week on the January labor market report. These data will be a key indicator of the health of the U.S. economy and will shape expectations for future monetary policy, and thus the dollar’s trajectory. The Chicago Fed’s forecast, updated on January 29, points to a slight decline in the unemployment rate to 4.35% in January from 4.38%, with layoffs remaining historically low. Economists at RBC Capital Markets expect around 63,000 new jobs to be created, with unemployment easing to 4.3%, marking the third consecutive month above the estimated “equilibrium” level.
GBP/USD
The British pound is extending last week’s bearish momentum and is currently testing the 1.3670 level for a downside breakout, as investors await new drivers and closely monitor persistent geopolitical tensions in the Middle East. Analysts do not rule out a military conflict between the United States and Iran, although both President Donald Trump and Iranian officials have stated that a “nuclear deal” remains possible.
Meanwhile, the UK macroeconomic backdrop remains mixed. In December, inflation accelerated to 3.4% year-on-year, exceeding both the 3.3% forecast and November’s 3.2%. The rise was mainly driven by higher prices for alcohol, tobacco, transport services, and food. This spike temporarily supported the pound by reducing market expectations of a near-term rate cut. However, the Bank of England remains cautious, warning of a potential “false peak” in inflation. Most analysts, including economists at Goldman Sachs, expect inflation to slow to 2.1% as early as the second quarter of 2026, providing grounds for a shift in rhetoric.
At the same time, the labor market shows clear signs of cooling. The unemployment rate has stabilized at 5.1%, the highest level since early 2021, while employment has declined significantly. Goldman Sachs expects unemployment to rise further to 5.3% by March 2026 before stabilizing. Wage growth is also slowing, which, combined with high interest rates, continues to restrain consumer spending.
The next Bank of England meeting is scheduled for this week, on Thursday, February 5. Analysts are almost unanimous in expecting rates to remain unchanged at 3.75%, despite some bold statements suggesting cuts could come before inflation returns to target. Recent credit data published late last week showed a sharp slowdown in December lending growth, from £2.143 billion to £1.524 billion, well below expectations of £1.7 billion. Mortgage approvals also declined from 64.07 thousand to 61.01 thousand, despite forecasts of an increase to 64.8 thousand.
AUD/USD
The Australian dollar is posting a fairly sharp decline against the U.S. dollar during the Asian session on February 2, testing the 0.6920 level for a downside breakout. The pair is extending last week’s corrective move as investors assess data from Australia and China.
Australia’s S&P Global manufacturing PMI edged slightly lower in January, from 52.4 to 52.3 points, still indicating stable conditions in the sector. Meanwhile, China’s Caixin manufacturing PMI showed a modest increase from 50.1 to 50.3 points, in line with expectations. Market participants also focused on the Melbourne Institute’s inflation report, which showed annual inflation rising from 3.5% to 3.6%, while the monthly figure slowed sharply from 1.0% to 0.2%.
This mixed data makes it difficult to conclude that the Reserve Bank of Australia will maintain a consistently hawkish stance on interest rates. Nevertheless, recent meeting minutes were relatively clear: the RBA does not rule out a rate hike “later in 2026” if necessary. This outlook is supported by the acceleration in Australia’s official annual CPI to 3.8% in December, well above the 3.5% forecast, while the broader economy remains resilient.
Labor market data further reinforce this view. In December, employment rose by 65.2 thousand, rebounding from the previous month’s decline and far exceeding expectations. Total employment reached a record 14.68 million, supporting consumer demand and strengthening the case for potential policy tightening. Still, global political uncertainty remains a key risk factor for the Australian dollar. While Australia’s geographical distance from major conflict zones may be seen as a relative safe haven, reduced appetite for risk assets typically weighs on commodity-linked currencies.
U.S. investors are awaiting the key January jobs report later this week. Current forecasts suggest the unemployment rate will remain unchanged at 4.4%, while average hourly earnings may slow from 3.8% to 3.6% year-on-year, and nonfarm payrolls are expected to rise by 70,000 after a 50,000 increase in the previous month.
USD/JPY
During the Asian session, the U.S. dollar shows mixed dynamics against the Japanese yen, consolidating around the 155.00 level. The pair has already updated local highs from early last week, but bulls failed to hold above these levels. Nevertheless, the broader uptrend remains intact, as the fundamental backdrop and rising political uncertainty in Japan continue to limit the yen’s recovery.
The key domestic pressure factor remains monetary policy. The Bank of Japan has kept its key interest rate at 0.75%, well below U.S. levels (3.50–3.75%), creating a persistent yield differential. This gap supports carry trade strategies, in which investors borrow in low-yielding yen to invest in higher-yielding dollar assets, generating structural demand for the greenback.
Expectations of further BoJ tightening weakened after January Tokyo inflation data showed the core CPI (excluding fresh food and energy) slowing from 2.3% to 2.0%. Retail sales data were also weak: December sales fell 0.9% year-on-year after a 1.0% decline in the prior month, versus expectations of a 0.7% increase. Sales at large retailers slowed from 5.0% to 2.0%.
Some support came from construction data. New housing starts rose 1.3% year-on-year at the end of the year after an 8.5% drop in November, while total construction orders surged 20.2% annually, accelerating from 9.5% previously. Meanwhile, last week Japanese Prime Minister Sanae Takaichi announced plans to suspend the 8.0% consumption tax on food and non-alcoholic beverages for two years if her government returns to power following the dissolution of the lower house on January 23. According to official estimates, this measure would reduce annual budget revenues by around ¥5 trillion, or $31.7 billion.
XAU/USD
During the Asian session, XAU/USD prices are testing the 4670.00 level for a downside breakout after a solid decline late last week, driven largely by technical factors. However, geopolitical tensions remain the primary driver of bullish sentiment. The buildup of U.S. military forces in the Middle East, along with persistent risks of regional escalation despite occasional diplomatic signals, continues to support demand for safe-haven assets.
At the same time, gold maintains its status as a politically neutral asset amid declining trust in traditional reserve currencies and rising sanctions risks. In the current environment, neither the euro, the yen, nor the pound is viewed as an unquestioned safe haven. The euro faces risks of prolonged weak growth and structural imbalances, the yen is volatile ahead of parliamentary elections and amid policy divergence between the BoJ and the government, and the pound remains sensitive to rising protectionism from both the U.S. and the EU.
This week, investors will focus on U.S. nonfarm payrolls data for January, which will be a key catalyst for reassessing monetary expectations and, consequently, gold prices. Strong data would bolster hawkish expectations, potentially strengthening the U.S. dollar and pushing Treasury yields higher—creating double pressure on non-yielding gold. In the short term, this could trigger another wave of selling and a test of deeper support levels.
Current forecasts suggest the unemployment rate will remain at 4.4% in January, while average hourly earnings may slow from 3.8% to 3.6% year-on-year, and job creation is expected to rise by 70,000 after a 50,000 increase in the previous month.
