Sample Category Title

Unlike the Federal Reserve, which opted to leave its monetary policy unchanged, the Bank of Canada cut its interest rate yesterday. According to Forex Factory, as expected by analysts, the Overnight Rate was lowered by 25 basis points from 3.25% to 3.00%.

According to Reuters:

→ The Bank of Canada reduced interest rates to support the economy ahead of anticipated US trade tariffs.

→ This weakened the Canadian dollar, as the gap between Canadian and US bond yields widened.

→ Market participants estimate a 41% probability that the Bank of Canada will cut rates again in March.

→ The depreciation of the Canadian dollar is also influenced by oil prices (one of Canada’s key export commodities), which have fallen by over 8% since their mid-January peak.

Technical analysis of the USD/CAD chart indicates that the Canadian dollar’s exchange rate against the US dollar is forming a “Megaphone” pattern, with price action demonstrating the presence of selling pressure. On 21 January, sellers sharply pushed the price down from the psychological level of 1.4500, and yesterday, the price made a bearish reversal from 1.4450.

There is a possibility that seller activity could drive USD/CAD lower towards a key trendline (marked in grey) that has been forming since the second half of 2024.

Trade over 50 forex markets 24 hours a day with FXOpen. Take advantage of low commissions, deep liquidity, and spreads from 0.0 pips. Open your FXOpen account now or learn more about trading forex with FXOpen.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

Eurozone economy stalled in Q4, posting 0.0% qoq growth, falling short of modest expectations for a 0.1% expansion. Meanwhile, EU-wide GDP grew by 0.1% qoq, indicating marginal economic activity across the bloc.

Among individual member states, Portugal led growth with a robust 1.5% increase, followed by Lithuania (+0.9%) and Spain (+0.8%).

However, the overall performance was dragged down by contractions in key economies. Ireland recorded the steepest decline at -1.3%, while Germany and France also posted negative growth of -0.2% and -0.1%, respectively.

On a year-over-year basis, GDP growth was positive for nine Eurozone countries, while three recorded annual declines.

Full Eurozone GDP release here.

Daily Pivots: (S1) 1.4383; (P) 1.4427; (R1) 1.4465; More...

USD/CAD is still bounded in range trading below 1.4516 and intraday bias stays neutral. More consolidations would be seen, but further rally is expected as long as 1.4260 support holds. On the upside, firm break of 1.4516 will resume larger up trend to 1.4667/89 key resistance zone. Nevertheless, firm break of 1.4260 will turn bias to the downside for deeper pullback through 55 D EMA (now at 1.4241).

In the bigger picture, up trend from 1.2005 (2021) is in progress for retesting 1.4667/89 key resistance zone (2020/2015 highs). Decisive break there will confirm long term up trend resumption. Next target is 100% projection of 1.2401 to 1.3976 from 1.3418 at 1.4993. Medium term outlook will remain bullish as long as 1.3976 resistance turned holds (2022 high), even in case of deep pullback.

FOMC rate decision and press conference yesterday proved to be a non-event. Dollar remained firm following the decision to keep interest rates unchanged at 4.25–4.50%. Fed Chair Jerome Powell reinforced a patient approach to policy adjustments, stating, "we do not need to be in a hurry to adjust our policy stance." He also emphasized the risks of premature easing, warning that "reducing policy restraint too fast or too much could hinder progress on inflation." His remarks reaffirmed expectations that Fed is unlikely to cut rates in the near term, with market pricing now assigning an 82% probability of another hold in March, up from 73% last week.

Meanwhile, US President Donald Trump renewed his criticism of Fed, accusing it of failing to manage inflation and misjudging bank regulations. Trump demanded last week that "interest rates drop immediately". However, markets largely ignored his remarks, as Powell’s measured tone continues to shape expectations for a prolonged hold on interest rates.

Attention now turns to ECB as it concludes this week’s round of major central bank meetings. ECB is widely expected to continue its "regular, gradual" easing path by cutting the deposit rate by 25bps to 2.75%, moving closer to the estimated neutral range of 1.75–2.25%.

Market pricing suggests a terminal rate of around 2.00% by late spring or early summer, but ECB President Christine Lagarde is unlikely to provide a clear roadmap just yet. With uncertainty surrounding US trade policy and potential tariff escalations, Lagarde is expected to maintain a data-dependent stance rather than commit to a specific easing path.

Technically, while EUR/CHF's choppy rebound from 0.9204 extended last week, momentum continue to be unconvincing. It's still more likely that not that this rebound is merely a corrective move. Firm break of 0.9242 support will be an early sign that this correction bounce has completed, and bring deeper fall to channel support (now at 0.9398) for more evidence.

Overall for the week so far, Yen is still the strongest, followed by Dollar, and then Swiss Franc. Aussie is staying at the bottom, followed by Kiwi, and then Loonie. Euro and Sterling are stuck in the middle.

Swiss KOF rises to 101.6, led by manufacturing and services

Switzerland’s KOF Economic Barometer climbed to 101.6 in January, up from 99.6 and surpassing market expectations of 100.5. This data suggests modest pickup in economic momentum, particularly in production-side sectors.

According to KOF, "the majority of the production-side indicator bundles included in the KOF Economic Barometer show positive developments."

The strongest contributions came from manufacturing, financial and insurance services, hospitality, and other service industries, signaling resilience in key sectors of the Swiss economy.

However, the outlook remains uneven. While production indicators strengthened, demand-side indicators showed signs of weakness. KOF noted that both "the indicator bundles for foreign demand as well as for private consumption indicate a downward tendency," highlighting subdued consumer activity and external trade concerns.

BoJ’s Himino reiterates further hike possible if economic forecasts hold

BoJ Deputy Governor Ryozo Himino reinforced expectations that the central bank could raise interest rates further if its economic and price projections are met.

Speaking today, Himino stated, "If our economic and price forecasts are achieved, we will raise our policy rate accordingly and adjust the degree of monetary support."

Himino also highlighted concerns about Japan’s prolonged period of negative real interest rates, describing the situation as "not normal."

He explained that an ideal economic scenario for Japan would involve rising wages and corporate profits, fueling stronger consumption and investment, which would then support moderate and stable inflation. In such a case, Japan could see real interest rates turn positive.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.4383; (P) 1.4427; (R1) 1.4465; More...

USD/CAD is still bounded in range trading below 1.4516 and intraday bias stays neutral. More consolidations would be seen, but further rally is expected as long as 1.4260 support holds. On the upside, firm break of 1.4516 will resume larger up trend to 1.4667/89 key resistance zone. Nevertheless, firm break of 1.4260 will turn bias to the downside for deeper pullback through 55 D EMA (now at 1.4241).

In the bigger picture, up trend from 1.2005 (2021) is in progress for retesting 1.4667/89 key resistance zone (2020/2015 highs). Decisive break there will confirm long term up trend resumption. Next target is 100% projection of 1.2401 to 1.3976 from 1.3418 at 1.4993. Medium term outlook will remain bullish as long as 1.3976 resistance turned holds (2022 high), even in case of deep pullback.

• The Federal Reserve held interest rates steady and signaled a “wait and see” approach as uncertainties remain.
• US Commerce Secretary Nominee Lutnick expressed support for sweeping tariffs, claiming they don’t impact inflation.
• President Trump blamed the Fed for inflation, escalating tension between him and the central bank.
• The US Dollar Index (DXY) experienced volatility following the FOMC, but struggles at key resistance level.

The FOMC meeting has officially passed and let me start by saying that there were no real surprises. Looking at Fed Chair Powell’s press conference, the Fed Chair delivered a very balanced statement, keeping all market participants interested in the Central Bank’s next moves.

Fed Chair Powell said that there would be no rush to cut rates again until inflation and jobs data made it more appropriate. No surprises here, as I have been saying in many articles of late there are too many uncertainties around the US economy moving forward. Most of this comes down to how markets will react to the implementation of tariffs as well as their potential effect.

Yesterday we heard some interesting comments from US Commerce Secretary Nominee Lutnick who is the frontrunner for the position. Lutnick stated that is in favor of sweeping tariffs saying it does not impact inflation. Lutnick was also hawkish on China which does not bode well for markets moving forward.

All of these uncertainties are the main reasons the Fed needed to adopt a more balanced and an almost ‘wait and see’ approach moving forward.

Currency Strength Chart: Strongest JPY, EUR, CHF, GBP, CAD, USD, AUD, NZD – Weakest

Source: FinancialJuice (click to enlarge)

President Trump and Fed on a Collision Course?

President Trump has never been the biggest fan of the Federal Reserve and has not directly called for lower rates yet as he promised but did blame inflation on the Fed. Yesterday the President said that If the Fed had spent less time on DEI, gender ideology, “green” energy, and fake climate change, inflation would never have been a problem.

Whether or not you agree with President Trump, there does appear to be some friction which may come to a head in the coming months. When asked yesterday about President Trump, Federal Reserve Chair Jerome Powell did not comment but said he had not been in touch with the President.

This will come to a head at some stage and is worth keeping an eye on as well over the coming weeks and months.

Key Comments from Chair Powell

A quick summary of some of the key comments from Fed Chair Powell yesterday.

• Economy has made “significant progress toward goals”
• Inflation has moved much closer to goal remains somewhat elevated
• Labor market is not a source of inflationary pressures
• Fed does “not need to be in a hurry to adjust policy”
• Fed to continue meeting-by-meeting approach
• Fed’s 2% long-term inflation goal will not change

The inflation conundrum is also something the Fed needs to consider given the recent uptick has come ahead of any proposed tariffs being implemented.

Source: LSEG (click to enlarge)

The Fed will now get a peak at their preferred inflation gauge, the PCE data due for release tomorrow. Markets are expecting consumer spending MoM to have ticked up to 0.5% from a previous 0.4% with the YoY print forecast to rise to 2.6% from a previous 2.4%.

Technical Analysis and DXY Reaction

US Dollar Index (DXY)

The US Dollar index rose briefly after the Powell presser yesterday but struggled to push on.

The US Dollar has been on a rollercoaster of late, with tariff chatter either supporting the US Dollar or dragging it lower.

This is likely to continue over the coming days until more clarity on the tariff picture is given. President Trump remains on course to implement 25% tariffs on Mexico and Canada on February 1, such a move could aid the US Dollar and provide support. However, any retaliatory tariffs may then see the Dollar face some weakness.

Looking at the DXY chart below and as you can see, the 108.00 handle has stood firm over the past two days, with yesterdays wick to the upside a sign of selling pressure. The daily candle closed as an inverted hammer which usually hints at further upside. However, the fact that the inverted hammer was printed at a resistance level means that further upside may not materialize.

Immediate resistance rests at 108.00 before the 108.49 comes into focus.

Support rests at 107.00 before the 106.13 and 105.63 handles come into focus.

US Dollar Index (DXY) Daily Chart, January 30, 2025

Source: TradingView.com (click to enlarge)

Support

• 107.00
• 106.13
• 105.63

Resistance

• 108.49
• 109.52
• 110.00

As shown on the 4-hour chart of the Nasdaq 100 (US Tech 100 mini on FXOpen), the index stood around the 21,600 level this morning, near the weekly high that formed at Monday’s open.

This suggests that the tech-stock index has almost fully recovered from the decline triggered by the launch of AI from the Chinese startup DeepSeek. According to media reports:

→ Experts have pointed to signs that the Chinese startup used a technique known as “distillation” – in simple terms, this means that DeepSeek’s model extracted knowledge from more advanced models such as ChatGPT. In other words, this is not about innovation but rather an unfair practice.

→ Nassim Taleb believes that the sharp drop in NVDA shares is only the beginning of a potential market downturn inflated by AI-driven expectations. Further declines could be more significant than what we witnessed on Monday.

Apart from news surrounding DeepSeek, traders were also focused on earnings reports from major corporations (which we will cover in detail in separate articles):

→ Tesla (TSLA) is holding above $400 in pre-market trading today, despite earnings per share falling short of expectations. Meanwhile, company executives believe that Trump’s policies could negatively impact Tesla’s operations.

→ Microsoft (MSFT) shares fell by more than 4%, Meta Platforms (META) surpassed $700 per share in post-market trading for the first time, and IBM surged by approximately 9%.

Additionally, the fundamental backdrop became even more eventful following yesterday’s Fed updates, which, however, contained no surprises:

→ As expected, interest rates remained unchanged.

→ According to The Wall Street Journal, the Fed has entered a “Wait-and-See” phase, showing less confidence that inflation will continue to decline.

The Nasdaq 100 (US Tech 100 mini on FXOpen) chart reveals that the price:

→ Tested a key support line (marked in blue) at the weekly low.

→ Remains within the red descending channel.

From a bullish perspective, the red channel can be seen as a large-scale correction within the broader uptrend on higher timeframes.

From a bearish perspective, the bearish gap that formed at Monday’s open may act as resistance. Whether bulls will be able to overcome this barrier in the near term will depend, among other factors, on the next batch of earnings reports from major tech companies.

Trade global index CFDs with zero commission and tight spreads. Open your FXOpen account now or learn more about trading index CFDs with FXOpen.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

Yesterday’s Fed meeting proceeded in line with expert forecasts. The base interest rate remained at 4.50%. Jerome Powell, who spoke after the Fed’s decision was announced, did not clarify the future direction of monetary policy. The head of the US regulator, in particular, noted that the Fed would not rush to cut rates and that, in order to change the course of monetary policy, real progress in reducing inflation needed to be seen.

GBP/USD

The GBP/USD currency pair tested key support at 1.2400 yesterday. At the moment, the price is holding above this level, and if positive news for the pound emerges, the pair could rise towards recent highs at 1.2530–1.2500.

If GBP/USD buyers manage to consolidate the price above 1.2570 in the coming trading sessions, the pair may continue to rise towards 1.2660–1.2610. A break below the 1.2400 support level could trigger a renewed decline towards 1.2320–1.2260.

Key events that could influence GBP/USD movements:

• Today at 12:30 (GMT+2): Bank of England consumer credit data
• Today at 16:30 (GMT+2): US GDP
• Today at 16:30 (GMT+2): US initial jobless claims
• Tomorrow at 16:30 (GMT+2): US core personal consumption expenditure price index

EUR/USD

The EUR/USD currency pair fell below 1.0400 yesterday following the Fed’s rate decision. However, euro buyers managed to push the price back up to 1.0440. Today is another important day for EUR/USD in terms of fundamentals. Analysts predict that the ECB may lower the base interest rate from 3.15% to 2.90%. Comments from Christine Lagarde on the regulator’s future monetary policy will also be significant.

If incoming data is perceived as positive for EUR/USD, the price could once again test key resistance at 1.0540–1.0500. A break below yesterday’s low could trigger a renewed decline towards 1.0300–1.0240.

Key events that could influence EUR/USD pricing:

• Today at 12:00 (GMT+2): Germany GDP
• Today at 16:15 (GMT+2): ECB interest rate decision
• Today at 16:45 (GMT+2): ECB press conference
• Tomorrow at 16:00 (GMT+2): Germany consumer price index (CPI)

Trade over 50 forex markets 24 hours a day with FXOpen. Take advantage of low commissions, deep liquidity, and spreads from 0.0 pips. Open your FXOpen account now or learn more about trading forex with FXOpen.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

Switzerland’s KOF Economic Barometer climbed to 101.6 in January, up from 99.6 and surpassing market expectations of 100.5. This data suggests modest pickup in economic momentum, particularly in production-side sectors.

According to KOF, "the majority of the production-side indicator bundles included in the KOF Economic Barometer show positive developments."

The strongest contributions came from manufacturing, financial and insurance services, hospitality, and other service industries, signaling resilience in key sectors of the Swiss economy.

However, the outlook remains uneven. While production indicators strengthened, demand-side indicators showed signs of weakness. KOF noted that both "the indicator bundles for foreign demand as well as for private consumption indicate a downward tendency," highlighting subdued consumer activity and external trade concerns.

Full Swiss KOF release here.

BoJ Deputy Governor Ryozo Himino reinforced expectations that the central bank could raise interest rates further if its economic and price projections are met.

Speaking today, Himino stated, "If our economic and price forecasts are achieved, we will raise our policy rate accordingly and adjust the degree of monetary support."

Himino also highlighted concerns about Japan’s prolonged period of negative real interest rates, describing the situation as "not normal."

He explained that an ideal economic scenario for Japan would involve rising wages and corporate profits, fueling stronger consumption and investment, which would then support moderate and stable inflation. In such a case, Japan could see real interest rates turn positive.

Markets

Yesterday’s Fed policy meeting was a non-event. The US central bank kept rates steady at 4.25-4.5% and suggested they would remain there for some time. A hawkist twist in the statement that left out the part saying inflation has made progress was dismissed by chair Powell as being part of a “cleaning-up exercise”. He nonetheless noted the Fed wants to see “serial [CPI] readings” that suggested things were headed in the right way. Add “We need to let those [Trump’s] policies be articulated before we can even begin to make a plausible assessment of what their implications for the economy will be” and you sense the central bank just installed a long pause that could last through June. US markets reacted accordingly. The small spike shortly after the updated statement was released, evaporated quickly, leading to marginal net daily changes varying between +1.9 (2-yr) to -0.6 bps (30-yr). Bunds slightly underperformed (+2.4 bps in the 30-yr). The dollar held a minor upper hand against most global peers. Sterling appreciated towards EUR/GBP 0.837 as UK Chancellor Reeves sought to convince investors of her growth-reviving plans in her first high-profile appearance yesterday since delivering the October budget. The Japanese yen outperformed yesterday and does so again this morning. USD/JPY eases to 154.5.

US Q4 GDP figures today should comfort the Fed in taking a long breather and keep both US yields and the dollar at least steady. Economic activity is seen to have expanded at a solid 2.6% q/q annualized pace following Q3’s 3.1%. Private consumption remains the key engine. Q4 PCE price deflators may have picked up to 2.5%. Euro area GDP growth contrasts with a meagre 0.1% q/q. France’s numbers released this morning suggest, if any, minor downside risks. From a market point of view, though, a lot of pessimism has been priced in already. Attention is likely to shift to the ECB meeting pretty quickly. Another 25 bps rate cut to 2.75% is all but certain. But the path forward is getting less and less predictable with the central bank nearing (the upper bound of) the neutral rate. President Lagarde will face but will probably walk around any related questions. Last week’s PMI’s in any case offered light at the end of the tunnel for the economy while flagging rising price pressures. We assume one more cut in March to 2.5% before the debate opens up and paves the way for a pause in the cycle. Since this is the market’s base case too, risks for the euro (and yields) are for Lagarde to keep the door ajar for cuts in April and June as well.

News & Views

The Brazilian central bank (BCB) raised its policy rate as flagged by new governor Galipolo by 100 bps to 13.25% and sticks to its commitment to implement another 100 bps rate hike at the next, March 19, policy meeting which will take the key Selic rate above its previous peak level of 13.75% (Aug 2022 – July 2023). Beyond the next meeting, the BCB reinforces that the total magnitude of the tightening cycle will be determined by the firm commitment of reaching the inflation target and will depend on inflation dynamics, on the output gap, and on the balance of risks. Domestic economic activity and the labour market remain strong while inflation remains above the 3% target and is rising again. A significant increase in inflation expectations adds to upside inflation risks together with resilient services inflation and a persistently more depreciated currency both because of internal (fiscal) policy and the external environment (Fed: higher for longer). Inflation forecasts show headline inflation declining from 5.2% Y/Y to 4% Y/Y by Q3 2026 (current policy horizon), assuming a 15% peak policy rate through year-end.

The Bank of Canada (BoC) reduced its policy rate by 25 bps to 3% yesterday. The central bank acknowledged that the cumulative reduction in the policy rate since last June is substantial (200 bps). Lower interest rates are boosting household spending and the economy is expected to strengthen gradually (from 1.4% in 2024 to 1.8% in 2025 & 2026) and inflation to stay close to the 2% target. Risks around the outlook are reasonably balanced. Dovish twists include the labelling of the labour market as being “soft” and the warning that if broad-based and significant tariffs were imposed by the US, the resilience of Canada’s economy would be tested. Canadian money markets are split on the outcome of the next, March 12, policy meeting. All else equal we’re inclined to think of a pause awaiting new updates at the April meeting. The BoC yesterday also announced its plan to end quantitative tightening. The Bank will restart asset purchases (regular term repo programme followed by treasury bill purchases) in early March, beginning gradually so that its balance sheet stabilizes and then grows modestly, in line with growth in the economy. The Canadian dollar remains weak at USD/CAD 1.4430 (1.45-1.47 resistance).