At 15:30 (GMT+2), market focus will shift to the January U.S. labor market report. According to the consensus forecast, nonfarm payrolls are expected to rise from 50K to 70K, while annual average hourly earnings growth may slow from 3.8% to 3.6%. Such dynamics would signal easing inflationary pressure and reduce the likelihood of a faster Fed rate-cut cycle this year. The Federal Reserve’s official projections still imply only one 25-basis-point cut from the current 3.50–3.75% range, whereas markets are pricing in at least two moves of the same magnitude. The unemployment rate is likely to remain unchanged at 4.4%. In December, it declined from a revised 4.5%, with the number of unemployed standing at around 7.5 million. Later in the session, at 21:00 (GMT+2), the monthly U.S. budget statement will be released. Although the balance remains in deficit, January’s figure is expected to narrow from –$145.0 billion to –$92.3 billion.
Meanwhile, European investors continue to assess inflation data, which showed the annual rate slowing to 1.7%, the lowest level since September 2024 and below the ECB’s 2.0% target, largely due to a 4.1% year-over-year decline in energy prices. The core indicator, excluding food and energy, also eased to 2.2%, marking its lowest level since October 2021. Some analysts argue that the slowdown partly reflects weak domestic demand, which remains a concern for the euro area economy.
ECB Governing Council member Peter Kazimir stated that any revision of monetary policy would require significant deviations from current economic trends and inflation dynamics. Traditionally hawkish, he emphasized that under the baseline scenario no changes to current policy settings are expected. Inflation risks remain balanced and largely dependent on energy price movements. The ECB has kept key rates unchanged since June, when it paused its dovish cycle: the main refinancing rate stands at 2.15%, the marginal lending facility at 2.40%, and the deposit rate at 2.00%.
GBP/USD
The pound is testing 1.3630 to the upside, while overall activity remains subdued ahead of the U.S. labor report. The data were initially scheduled for release late last week but were delayed due to a brief federal government shutdown linked to delays in approving the long-term 2026 budget. Forecasts suggest payroll growth from 50K to 70K and a slowdown in wage growth from 3.8% to 3.6%, reinforcing expectations of moderate inflation pressures.
At the same time, sterling remains under pressure due to expectations of a more active Bank of England policy response amid elevated inflation. Annual CPI stood at 3.4% in January, the highest among G7 economies, though well below the 2022–2023 peaks above 6.0%. The BoE expects inflation to gradually approach the 2.0% target this year, potentially paving the way for a shift back to a dovish stance. However, macroeconomic indicators point to mounting weakness in the real economy: GDP growth nearly stalled in Q3, 2026 forecasts remain subdued with recession risks rising, unemployment has climbed to a five-year high of 5.1%, and wage growth has slowed, weighing on consumer demand.
AUD/USD
The Australian dollar is posting moderate gains, building on the previous session’s strong bullish momentum after rebounding from January 23 lows. The pair is currently testing 0.7030 to the upside as investors assess data from Australia and China. Mortgage lending rose 10.6% year-over-year in Q4 after a prior 4.7% decline, while investment housing loans slowed from 17.6% to 7.9%, partly reflecting surging precious metal prices, particularly gold. Chinese inflation data showed a sharp slowdown, with annual CPI falling from 0.8% to 0.2% and monthly inflation remaining at 0.2%, below the expected 0.3%, underscoring weak domestic consumption.
Trade tensions remain a concern as U.S. President Donald Trump continues to use tariff policy as leverage. A key driver of the Australian dollar’s bullish momentum was the Reserve Bank of Australia’s decision to raise rates from 3.65% to 3.85% for the first time since 2022. RBA Governor Michele Bullock described the move as necessary to curb inflation, pushing rates above U.S. borrowing costs for the first time since 2017. Deputy Governor Andrew Hauser reaffirmed the bank’s readiness to act decisively to return inflation to the 2.0–3.0% target range. Markets price in a roughly 74% probability of another hike to 4.10% in May, implying 38–40 basis points of further tightening by year-end. This hawkish stance contrasts with expectations of a more dovish Fed, supporting interest rate differentials in favor of the AUD.
USD/JPY
USD/JPY is testing 153.10 to the downside, updating local lows from January 30 as traders close long positions ahead of U.S. labor data. Payroll growth is expected to rise from 50K to 70K, while wage growth slows to 3.6%, suggesting moderating inflation pressures.
A major constraint on further upside remains the rising risk of currency intervention by Japanese authorities. The 160.00 yen per dollar level has historically triggered action from the Ministry of Finance. Finance Minister Satsuki Katayama confirmed close coordination with U.S. counterparts, signaling possible joint efforts to curb excessive yen weakness. Political developments also weigh on sentiment: Prime Minister Sanae Takaichi’s coalition secured a constitutional majority (316 of 465 seats), granting a mandate for expansionary fiscal policies, including a two-year suspension of the 8.0% food tax. Analysts warn this could increase public debt by 5 trillion yen annually and complicate the Bank of Japan’s gradual hawkish normalization path.
XAU/USD
Gold prices are attempting to extend a modest bearish correction, testing the psychological 5000.00 level as traders await U.S. labor data at 15:30 (GMT+2). Last week’s release was postponed due to a short-lived government shutdown. Recent data showed retail sales slowing sharply from 3.3% to 2.4% year-over-year and from 0.6% to 0.0% month-over-month, below expectations of 0.4%. Excluding autos, sales also fell to 0.0%, confirming that November’s rebound was temporary and holiday-driven.
Geopolitical uncertainty continues to support gold. Negotiations between Iran, Israel, and the U.S. have failed to produce a breakthrough, while the U.S. administration maintains sanctions pressure and demands a complete halt to Iran’s nuclear and missile programs. Investors are increasing safe-haven exposure, and central banks are diversifying reserves. According to the World Gold Council, central bank gold purchases reached a record 863 tons last year, with the trend continuing. The People’s Bank of China remains focused on reducing dollar dependence amid U.S.–China tensions.
At the same time, the nomination of Kevin Warsh as the next Fed Chair has been interpreted as a signal of a potentially firmer monetary stance, strengthening the dollar and pushing Treasury yields higher. As a result, gold prices are caught between safe-haven demand and the headwinds from higher U.S. rates, shaping short-term volatility in the precious metals market.
