Good morning traders from a bright but chilly IntelliTrade desk. The sky is mostly sunny, the pavements are frosty, and the only thing moving faster than the steam off your coffee is this week’s macro news flow.
Overall Market Sentiment
Markets are in a cautiously risk-on mood after the White House formally backed away from new tariffs on Europe over Greenland, which has taken some tail risk out of the system and sparked a sharp rebound in equities. The dollar index is stabilising around 98.8 after this week’s slide, 10-year Treasury yields have eased back to about 4.25 percent, and the VIX has drifted lower toward the mid-teens, all consistent with a shift from panic to guarded relief.
Gold is still hovering above 4,800 dollars an ounce after hitting fresh records, while Brent crude is grinding higher around 65 dollars as both tariff and energy supply fears fade just a touch.
Geopolitics
The weekend’s tariff shock has morphed into a partial truce: President Trump has stepped back from both military language around Greenland and plans for new tariffs on European goods, instead talking up a “framework” deal. That pivot has removed a significant tail risk for European exporters and global sentiment, helping push the S&P 500 back toward the 6,850 area after Tuesday’s sharp drop.
For FX and commodities, the transmission channel is clear: fewer trade barriers mean less immediate pressure on European growth and corporate earnings, which in turn supports equities, caps some of the extreme safe-haven bid in gold, and gives cyclical currencies like AUD and NZD more room to breathe. Oil has responded with a modest rise, with Brent near 65 dollars and WTI around 60.5, as markets mark down the odds of an outright transatlantic trade war while still watching Middle East risks.
At the same time, political risk is alive and well in the US and Japan: the criminal investigation into Fed Chair Powell and the Supreme Court case over Fed Governor Lisa Cook are both keeping central bank independence in focus, while Japan heads into a snap election with a controversial fiscal agenda and a very delicate bond market.
Markets are watching:
- Gold spot: reactions around 4,800–4,900 dollars as the key crisis barometer.
- USDJPY: the 160 zone as a psychological line in the sand into Friday’s Bank of Japan meeting.
Today and the rest of the week: key macro risk events
Today (Thursday)
- US: Q4 GDP and weekly jobless claims, setting the tone for growth and the labour market going into next week’s Fed meeting.
- Japan: December national CPI later in the day, expected to remain just under 3 percent year-on-year on the headline, with core easing toward the mid-2s.
Friday and beyond
- Global: Flash PMIs for the US, Eurozone and UK, crucial for gauging how much momentum survived the tariff scare.
- Japan: Bank of Japan decision on Friday, where markets look for a hold at 0.75 percent but will scrutinise guidance and forecasts for any hint of further gradual hikes.
- UK & Canada: Retail sales, important for the BoE and BoC debates on how restrictive policy still needs to be.
- New Zealand: Q4 CPI on Friday, with consensus around 3.0 percent year-on-year, right at the top of the RBNZ target band.
Currency outlooks
⚖️ USD
The dollar index sits just under 99 after a volatile week, caught between softer safe-haven demand as tariff risks ebb and firm domestic data that still point to above-trend US growth. Futures and options markets imply roughly a 95 percent chance that the Fed holds rates at 3.5–3.75 percent next week, with only about a one-in-five chance of a cut by March, which keeps the front end of the curve well supported and limits scope for a sustained dollar slide.
The 10-year Treasury yield around 4.25 percent versus about 2.9 percent for German Bunds maintains a wide rate differential that historically tends to underpin the dollar against low-yielding peers, especially the yen and franc.
At the same time, the Powell subpoenas and the high-profile court battle over Lisa Cook inject an unusual layer of political risk into the Fed story, which could weigh on the dollar if investors start to question central bank independence. For now, near-term risks look reasonably balanced: stronger-than-expected GDP today would keep the dollar supported, but any dovish shift in Fed messaging next week or renewed equity strength could pull DXY back toward the 98 area again.
Key reference areas: DXY 98.0 as near support and 99.5 as resistance that markets are watching into the Fed meeting and BoJ decision.
⚖️ EUR
EURUSD is edging around 1.17, having briefly poked higher when tariff fears were at their peak, then giving back some ground as Washington pivoted away from new levies on Europe.
With Germany’s 10-year yield near 2.9 percent and the US equivalent closer to 4.25 percent, rate differentials still favour the dollar, and futures markets continue to assume the ECB will move later and less aggressively than the Fed over the next couple of years.
This week’s focus for the euro is less about the Greenland noise and more about Friday’s Eurozone PMIs and ongoing signs of manufacturing stagnation versus still-resilient services. A soft PMI run could nudge EURUSD back toward the lower part of its recent 1.16–1.18 band, while any upside surprise that hints at a broader recovery would help stabilise the currency despite modest dollar strength.
Overall, risks for the euro look mixed: the tariff truce is a clear relief, but growth underperformance and a cautious ECB limit the scope for a decisive move higher against the dollar in the very near term.
Key reference areas: EURUSD 1.16 as immediate downside focus, with 1.18–1.19 still acting as a key resistance zone from the 52-week range.
🔺 GBP
Sterling is holding around 1.34 against the dollar, still supported by stickier UK inflation and wage dynamics that have kept the Bank of England in “wait and see” mode rather than clearly signalling rate cuts.
Market pricing suggests the BoE may lag the Fed in easing, which keeps UK front-end yields relatively elevated and provides some cushion for GBP, particularly while risk sentiment remains constructive. Friday’s UK retail sales will be important: resilient spending would reinforce that story, while a downside surprise would revive concerns about pressure on households from higher mortgage costs.
Near-term risks appear slightly tilted toward continued GBP resilience versus the dollar, as long as global risk assets stay supported and data do not fall off a cliff.
Key reference areas: GBPUSD 1.33–1.35 is the immediate trading band markets are watching, with a sustained break below 1.33 seen as a sign that growth worries are reasserting themselves.
⚖️ CAD
USDCAD is trading near 1.38, reflecting a tug of war between a steady, slightly firmer oil price and a Bank of Canada that remains more dovish than the Fed.
Canadian inflation has drifted back toward 2.4 percent, not far above the midpoint of the BoC’s target, and the policy rate at 2.25 percent leaves more room for easing than in the US if growth slows.
Friday’s retail sales data will matter for the narrative: solid consumption plus firm oil could see CAD outperform some other cyclicals, whereas a weak print would justify the market’s current view that the BoC will eventually cut more than the Fed. For now, CAD risks look fairly balanced against the USD, with oil and US data providing the main nudges day to day.
Key reference areas: USDCAD 1.37 as near support and 1.40 as the broader resistance area participants are watching.
⚖️ CHF
The Swiss franc has eased off its strongest levels but remains firm on a multi-month view, with USDCHF around 0.79 and EURCHF near 0.93.
With the SNB policy rate at roughly zero after last year’s cuts and Swiss inflation still very low, the central bank is comfortable with a currency that is strong in real terms but not racing higher.
Some of the extreme safe-haven bid is fading as the Greenland tariff scare recedes, yet continuing political noise around the Fed and ongoing concerns about global fiscal paths mean CHF likely keeps a modest safety premium. Overall, risks for CHF look neutral in the near term: scope for mild weakness versus the dollar if risk appetite holds, but a quick resurgence if volatility flares up again.
Key reference areas: EURCHF 0.92–0.94 is the de facto “comfort zone” markets perceive for now.
🔻 JPY
The yen remains under pressure, with USDJPY around 158.5–159 and only a short hop from the psychologically important 160 level.
The BoJ’s policy rate at 0.75 percent is still far below US levels, and the recent rise in Japanese government bond yields reflects both gradual BoJ tightening and market unease over Japan’s fiscal plans rather than a full normalisation.
Friday’s BoJ meeting is crucial: markets widely expect no move, but a hawkish tone, upgraded inflation forecasts or hints of further rate hikes later in the year could trigger a sharp yen squeeze, especially if positioned traders are leaning heavily into the carry trade. Conversely, a very cautious BoJ message alongside calm global risk could see USDJPY take a run at 160. Near-term risks therefore still lean toward yen weakness, but with elevated two-sided volatility around the meeting.
Key reference areas: USDJPY 158 as immediate support and the 160 handle as the upside level intervention-watchers are focused on.
🔺 AUD
The Australian dollar is today’s standout, trading near 0.68 against the USD after a much stronger-than-expected jobs report showed unemployment dropping to 4.1 percent and over 65,000 jobs added in December.
Markets have responded by lifting the probability of an RBA rate hike at the early-February meeting, which sharply narrows the rate gap versus the Fed and supports AUD, especially with risk sentiment stabilising and metals prices still elevated.
With AUDUSD testing the top of its recent range and now near its highest level in about 15 months, the near-term risk tilt remains toward further strength if global data stay solid and the tariff story continues to de-escalate.
Key reference areas: AUDUSD 0.6720–0.6745 as now-turned support, with markets eyeing 0.6850–0.6900 as the next resistance band.
🔻 NZD
The kiwi is trading just under 0.59, lagging its Australian cousin despite benefiting from slightly better risk appetite.
Friday’s Q4 CPI is the main event: consensus looks for around 3.0 percent year-on-year inflation, still at the top of the RBNZ’s target band, though some private forecasts run slightly lower. If the print is firmer, it reinforces the idea that the RBNZ will stay on hold for longer, which can support NZD on the crosses even if NZ growth is subdued. A softer CPI would revive expectations of rate cuts later this year and could see NZD underperform, especially against AUD.
Given NZ’s weaker growth outlook and the currency’s failure to break decisively above resistance around 0.585–0.59, the near-term risk tilt remains slightly bearish versus the USD and particularly versus AUD.
Key reference areas: NZDUSD 0.58 as near support and 0.60 as an important resistance zone that would need to break to change the broader tone.
Cross-asset wrap
- 🪙 Gold: After briefly spiking near 4,900 dollars, gold has slipped back but remains well above 4,800, reflecting a partial unwind of extreme safe-haven hedging as the tariff scare cools but continued concern about political pressure on central banks and high sovereign debt. If US real yields stay anchored around current levels and the Fed avoids sounding too hawkish next week, gold is likely to retain a solid premium as portfolio insurance.
- 🛢 Oil: Brent is trading close to 65 dollars and WTI around 60.5, supported by the tariff truce, an improved outlook for 2026 demand and some temporary supply disruptions in Kazakhstan. Rising US crude and gasoline inventories are a counterweight, which means the market is neither in full bull nor full bear mode, but for now the balance of risks leans slightly to the upside as long as global growth data hold up.
- 📈 Stocks: US indices staged a V-shaped rebound yesterday, with the S&P 500 jumping about 1.2 percent back toward 6,875 after Tuesday’s 2 percent slide, and Asian and European equities are following with moderate gains. The tariff de-escalation story is the main driver, though stretched valuations and political noise around the Fed mean investors are still quick to add hedges on any sign that good news is fading.
- ₿ Crypto: Digital assets are stabilising after a sharp shake-out, with Bitcoin hovering near the 90,000 dollar mark and Ethereum fluctuating around 3,000. ETF flow data show net outflows from US Bitcoin and ETH products earlier in the week, which helps explain why crypto has lagged the rebound in equities, yet the overall market cap remains above 3 trillion dollars. In the near term, crypto remains highly sensitive to shifts in US real yields, Fed expectations and any renewed trade or regulatory shocks.
This is general, educational macro and FX commentary. It is not investment advice and not a trading signal.
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