Forex Markets Navigate Uncertainty as Currencies and Gold React to Central Bank Signals

At 10:50 (GMT+2), market participants and FX traders will focus on a speech by European Central Bank (ECB) Vice President Luis de Guindos. However, it is unlikely to have a significant impact on price direction, as the regulator is currently maintaining a wait-and-see stance and is not expected to change monetary policy parameters in the near term. At most, experts anticipate one additional 25-basis-point rate cut sometime in 2026. At 11:30 (GMT+2), the January Sentix Investor Confidence Index will be released, reflecting the sentiment of more than 1,600 investors and analysts toward the eurozone’s economic outlook. Previously, the index showed a slight improvement from –7.4 to –6.2 points. Toward the end of the week, investor attention will be focused on November industrial production data and the revised consumer inflation report for Germany, where annual and harmonized readings previously reached 2.0% and 0.2%, respectively, broadly in line with the ECB’s targets. Nevertheless, the euro is receiving little support from generally positive retail sales data, which showed year-on-year growth accelerating from 1.9% to 2.3% in November, well above forecasts for a slowdown to 1.6%. On a monthly basis, sales eased slightly from 0.3% to 0.2%, compared with preliminary estimates of 0.1%. Meanwhile, the US dollar strengthened on Friday following a mixed labor market report: the US economy added 50,000 nonfarm jobs, below the forecast of 60,000 and revised November data of 56,000. A positive signal came from the acceleration in average hourly earnings, which rose from 3.6% to 3.8% year-on-year and from 0.1% to 0.3% month-on-month, as well as a decline in the unemployment rate from 4.6% to 4.4%, slightly above the forecast of 4.5%.

GBP/USD

During the Asian session, the GBP/USD pair is trading around 1.3429, remaining near local lows seen at the end of December 2025, as investors remain cautious about opening new positions and prefer to wait for key macroeconomic data. Tomorrow at 09:00 (GMT+2), attention will turn to the UK labor market report for November–December. Previous data showed employment declining by 17,000, while the unemployment rate remained stable at 5.1%, reflecting a weakening labor market amid slowing business activity. Wage expectations and hiring indicators are also gradually easing, pointing to cooling domestic demand. According to a Bank of England survey, most companies plan to raise employee pay by 3.7% over the next 12 months, while also increasing prices for goods and services by an average of 3.6%. Expected inflation among businesses stands at 3.4%, which could intensify pressure on policymakers and support the case for further monetary easing, despite inflation remaining above the 2.0% target. On Wednesday at 09:00 (GMT+2), GDP and industrial production data will be released. The UK economy is expected to show flat monthly growth in November after a 0.1% contraction previously, while manufacturing output is forecast to slow from 1.1% to 0.1% month-on-month and settle around 0.8% year-on-year, creating a restrained fundamental backdrop for the pound in the short term. Meanwhile, Politico reports that the UK government is preparing legislation to grant broader powers to align regulatory positions with the EU, establishing a legal framework for a “reset” in relations and a mechanism for synchronizing agreed areas into UK law, while retaining veto rights in specific cases.

AUD/USD

During the Asian session, the Australian dollar is posting solid gains, rebounding from local lows set late last week and testing the 0.6700 level on an upside breakout. Investor attention is focused on macroeconomic data on job advertisements from Australia and New Zealand Banking Group Ltd. (ANZ), which showed a further 0.5% decline in December following a –0.8% drop the previous month. However, inflation data remain the key driver for the market. In November, the weighted consumer price index stood at 3.4%, while the trimmed mean was 3.2%, both above the Reserve Bank of Australia’s (RBA) target range of 2.0–3.0%. Meanwhile, China’s inflation report showed annual CPI accelerating from 0.7% to 0.8%, slightly below forecasts of 0.9%, and monthly CPI rising by 0.2% after a –0.1% decline previously. Producer prices also showed improvement in December, with the index narrowing from –2.2% to –1.9%, better than expectations of –2.0%. Signs of recovery in the Chinese economy are supporting AUD/USD, although overall trade tensions in the Asia-Pacific region remain elevated. Markets are also wary of rising geopolitical risks around Taiwan, which could prompt new trade restrictions from the White House and subsequent retaliatory measures. At the same time, pressure on the Australian dollar comes from November trade data released on Thursday, which showed imports falling by 2.9% after a 2.8% increase previously, while exports slowed from 2.4% to 0.2%. As a result, the trade surplus narrowed to AUD 2.936 billion, well below expectations of AUD 5.140 billion. US investors are also focused on the December labor market report, which showed the economy adding 50,000 nonfarm jobs, below forecasts of 60,000 and revised November data of 56,000. Average hourly earnings accelerated from 3.6% to 3.8% year-on-year and from 0.1% to 0.3% month-on-month, signaling persistent inflationary pressure. Additional support for the dollar came from a drop in the unemployment rate from 4.6% to 4.4%, slightly above the forecast of 4.5%, reinforcing confidence in the resilience of the US labor market.

USD/JPY

The US dollar is showing mixed dynamics against the Japanese yen, extending the bullish momentum formed last Friday that drove prices to fresh highs not seen since January 2025. During the Asian session, the pair is again testing the 158.01 level on an upside breakout. The yen remains under pressure amid rising geopolitical risks, particularly those linked to the evolution of diplomatic relations between Japan and China. At the start of the year, Beijing introduced additional restrictions on exports of dual-use and military-only goods, affecting key components for electronics, sensors, shipping, and the aerospace sector. This could complicate the strategic plans of the government led by Sanae Takaichi aimed at strengthening national defense capabilities. The situation is further exacerbated by ongoing tensions around Taiwan and sharp statements from the Republican administration in the White House regarding strategic territories and economic interests in the Asia-Pacific region. US investors remain focused on key reports and comments from Federal Reserve officials. Today at 19:30 (GMT+2) and 19:45 (GMT+2), Atlanta Fed President Raphael Bostic and Richmond Fed President Thomas Barkin are scheduled to speak, sharing their views on the outlook for interest rate cuts this year, which could influence the dollar in the short term. Barkin has already commented on Friday’s labor market data, noting that the delicate balance between moderate job growth and labor supply remains intact, a positive sign indicating the effectiveness of recent monetary policy measures. As a reminder, the US economy added 50,000 nonfarm jobs, below forecasts of 60,000 and revised November figures of 56,000, while average hourly earnings accelerated and the unemployment rate declined from 4.6% to 4.4%.

XAU/USD

Gold prices are surging, with XAU/USD testing the 4,570.0 level on an upside breakout, while early in the Asian session bulls managed to push prices above 4,600.0. Market activity remains elevated at the start of the week, as investors and FX traders await new catalysts for price movement. US labor market data remain in focus: the economy added 50,000 nonfarm jobs, below the 56,000 recorded in November and forecasts of 60,000. However, average hourly earnings accelerated from 3.6% to 3.8% year-on-year and from 0.1% to 0.3% month-on-month. Additional support for the dollar came from a sharp drop in the unemployment rate from 4.6% to 4.4%, compared with expectations of a decline only to 4.5%.

Another positive factor was the solid increase in the University of Michigan consumer sentiment index in January, rising from 52.9 to 54.0 points, beating preliminary estimates of 53.5. Inflation expectations were revised slightly higher: one-year expectations stand at 4.2%, while five-year expectations increased from 3.2% to 3.4%. Higher readings could signal that the Federal Reserve may maintain its pause in a dovish policy shift, as advocated by Chair Jerome Powell. Official forecasts currently point to only one or at most two rate cuts in 2026. However, significant leadership changes at the Fed are expected as early as May, with a new chair potentially selected from candidates aligned with the Republican administration, which is pushing for a reassessment of monetary conditions. One of the leading candidates is White House economic adviser Kevin Hassett, a consistent supporter of President Donald Trump’s policy agenda.