At the same time, the ECB highlighted persistent uncertainty stemming from geopolitical and trade risks, which could disrupt supply chains, reduce exports, and weaken consumption. ECB President Christine Lagarde noted that future decisions will remain data-dependent, without commitments to a specific rate path. She also pointed to the development of artificial intelligence (AI) as a significant driver of private investment growth, particularly in information and communication technologies. Meanwhile, the euro’s 1.2% appreciation over the past two trading sessions is creating additional disinflationary pressure by lowering import costs and supporting purchasing power within the EU.
Previously, Governing Council members Martin Kocher and François Villeroy de Galhau warned that further currency strength could prompt the ECB to resume a more “dovish” policy cycle. For export-oriented economies such as Germany—where exports account for nearly half of GDP—a strong currency reduces price competitiveness in global markets. Nevertheless, analysts at JPMorgan Chase & Co. believe that under current volatility conditions, a “hawkish” shift in ECB rhetoric is unlikely unless the euro accelerates its gains alongside changes in macroeconomic indicators. US investors are focused on weekly initial jobless claims for the week ending January 30, which rose from 209.0K to 231.0K, well above expectations of 212.0K. Continuing claims increased from 1.819 million to 1.844 million, slightly below the forecast of 1.85 million.
GBP/USD
The British pound is attempting to break above the 1.3565 level, rebounding from the local lows of January 23 that were revisited at the opening of Friday’s session. The Bank of England kept borrowing costs unchanged at 3.75% at its latest meeting: five of the nine members of the Monetary Policy Committee voted in favor of holding rates steady, while the remaining four supported a 25-basis-point cut. The accompanying statement noted that the decision aims to balance the risks of accelerating inflation against a potential slowdown in the labor market, where unemployment remains historically low at 3.9%. Officials stressed that any further policy adjustments this year will depend on incoming macroeconomic data. For now, the pound remains under pressure from political and fiscal risks: growing criticism within the ruling party limits the government’s flexibility in economic policymaking, while record-high public spending increases the vulnerability of UK government bonds to market volatility. At 09:00 (GMT+2), UK investors will focus on the Halifax house price index, which is expected to show modest growth of 0.1% after a 0.6% decline in the previous month. Later in the day, attention will shift to US data. As previously noted, the final labor market report will not be published due to a brief government shutdown that has since ended. At 17:00 (GMT+2), markets will await updated inflation expectations from the University of Michigan and February consumer sentiment data, with the latter likely to fall from 56.4 to 55.0.
AUD/USD
The Australian dollar is showing moderate losses against the US dollar during the Asian session, extending the downward trend of the previous two trading days and once again testing the 0.6950 level on a downside break. Investors are taking profits and closing long positions, even as fundamental factors continue to support the Australian currency. The key event of the week was the Reserve Bank of Australia (RBA) meeting, at which the regulator unanimously raised the cash rate by 25 basis points to 3.85%. The decision was driven by troubling inflation data: in December, annual CPI growth reached 3.8%, exceeding the target range of 2.0–3.0%. Even more telling was the core inflation measure for the fourth quarter, which accelerated to 3.4%, its highest level since 2024, confirming the broad-based nature of current inflationary pressures. The domestic labor market presents a mixed picture: unemployment fell to 4.1%, while employment rose by 65.0K in December—more than double analysts’ forecasts—adding further pressure on wage growth. Taken together, these factors signaled the RBA’s readiness to reassess inflation dynamics as remaining elevated, pointing to a willingness to further tighten monetary conditions. As a result, market expectations have shifted significantly: the probability of another rate hike in May is now estimated at nearly 90.0%, in stark contrast to expectations for the US Federal Reserve. Despite short-term support for the US dollar following the nomination of Kevin Warsh as the next Fed chair, analysts remain confident that the Fed will adopt a “dovish” stance in May. Australian macroeconomic data also supported the local currency: exports rose by 1.0% in December after a -4.0% correction, while imports declined from -0.2% to -0.8%. As a result, the trade surplus widened from AUD 2.597 billion to AUD 3.373 billion, exceeding the forecast of AUD 3.300 billion.
USD/JPY
The US dollar is trading mixed against the Japanese yen, consolidating near the local highs of January 23 that were revisited the day before. Investors are reluctant to open new positions ahead of Japan’s parliamentary elections scheduled for February 8. The ruling Liberal Democratic Party, led by Prime Minister Sanae Takaichi, is expected to secure a convincing majority, allowing it to govern without relying on coalition partners. Markets view such an outcome as a risk factor for the yen. First, Takaichi has pledged to suspend the 8.0% consumption tax for two years, signaling a shift toward looser fiscal policy. Second, she previously suggested that a weak yen could be a “major opportunity for export industries,” raising concerns about the sustainability of Japan’s already record-high public debt, which stands at around 230.0% of GDP, and signaling greater tolerance for currency depreciation. An unusual additional source of pressure was a public statement by US President Donald Trump, who voiced support for Takaichi and her party during the campaign—an endorsement interpreted as strengthening bilateral ties. At the same time, the latest Tokyo inflation data for January showed a sharp slowdown: headline CPI eased to 1.5% year-on-year, its lowest level since February 2022, while the core index excluding fresh food prices fell to 2.0%. As a leading indicator for nationwide inflation, this data significantly reduced market expectations regarding the timing of the next rate hike. Although the Bank of Japan signaled readiness to tighten policy at its January meeting, it explicitly linked such action to incoming data. The current slowdown therefore provides a strong argument for maintaining a pause, depriving the yen of a key source of support.
XAU/USD
Gold prices are rebounding after a sharp decline the previous day and are testing the 4,890.0 level per troy ounce on a potential upside break, as traders await new market drivers. On Friday, attention will turn to the University of Michigan’s February inflation expectations, which could influence future US Federal Reserve policy decisions. For now, however, markets are assessing January employment data from Automatic Data Processing (ADP), released on Wednesday: only 30.0K new jobs were created in January, well below the late-2025 average monthly increase of around 150.0K. Still, these figures failed to convince analysts of a rapid cooling in the labor market. Disappointing data on initial jobless claims also weighed on sentiment: claims rose from 209.0K to 231.0K in the week ending January 30, far exceeding expectations of 212.0K. Meanwhile, ongoing geopolitical uncertainty continues to support gold prices, particularly developments in the Middle East, where planned talks on Iran’s nuclear program could once again become a key source of volatility. Overall, strong US economic indicators are adjusting expectations for near-term rate cuts, strengthening the dollar, while simultaneously heightening concerns about the potential persistence or resurgence of inflationary pressures over the medium term. In this environment, gold acts as a hedging instrument not so much against current high inflation, but against the risk of its reacceleration, as well as against potential fiscal and debt-related risks associated with US monetary and fiscal policy.
