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The US Federal Reserve (Fed) mostly did what was expected when it announced its policy update yesterday: it kept rates unchanged. Fed Chair Powell didn’t comment on the latest political drama surrounding the Fed and himself, nor on whether he would leave the committee when his term as Chair ends in May. Instead, he advised the next lucky person to take the helm of the Fed to “stay out of elected politics.” Two members voted to cut rates by 25bp – guess who?

That was the expected part. The surprise came from the economic outlook.

Powell pointed to a “clear improvement” in the US outlook, said the job market shows signs of steadying, and highlighted surprisingly “strong” growth. But a good part of that growth is explained by AI investment, which for now does not create many jobs. On the contrary, there has been a wave of job cuts announced recently. Amazon, for example, is looking to cut 16’000 jobs on top of the 14’000 let go last year. Meta is laying off around 10% of its Reality Labs employees. Microsoft cut more than 9’000 jobs last year. Nvidia is cutting jobs. Banks are cutting jobs. Some of these cuts have nothing to do with AI, but some clearly do. Meanwhile, yesterday’s survey showed that people find it harder to get jobs.

So the Fed is caught between a rock and a hard place. If inflation continues cooling, the Fed’s job will be easier. But energy prices are pushing higher this January, driven by cold weather and geopolitical tensions involving oil producers. US natural gas prices jumped more than 50% in less than two weeks. US crude climbed past the $64pb mark this morning on fears of a potential US attack on Iran. Prices are now above the 200-day moving average and testing a key Fibonacci level — the 38.2% retracement of the June-to-December sell-off — while US gasoline prices are up more than 13% this month.

In the medium term, these heightened energy price pressures should ease. Weather- and geopolitically-driven price spikes don’t change longer-term fundamentals. Global oil supply remains ample and comfortably meets demand.

In the shorter run, however, this argues for the Fed to sit tight before delivering another rate cut — assuming it already cut rates over the three meetings preceding this week’s decision. The next Fed rate cut is not expected before June, and that with roughly a 60% probability. Things could change quickly — in either direction — so incoming data will matter.

For now, bets still tilt towards a less dovish Fed. The US 2-year yield, which captures Fed rate expectations, appears to be bottoming near 3.60%, while the 10-year yield has climbed above 4.20% since the start of the week. Yields are also being pressured by talk of a potential partial government shutdown if Congress fails to pass new appropriations by tomorrow midnight.

Japanese yields, meanwhile, are moving lower, which helps avoid additional upward pressure on global yields. Still, a more hawkish-than-expected Fed tone following this week’s FOMC decision, combined with political and geopolitical uncertainty, is weighing on US bonds. This theme is likely to persist unless something fundamental changes in the way the White House operates.

Equities, however, don’t seem to care. The S&P 500 hit the 7’000 mark for the first time, and futures are positive at the time of writing. Three US tech giants reported earnings after the bell yesterday. They beat expectations and announced higher AI spending, but market reactions varied sharply.

Meta was praised for its improved profit outlook. The company has manages to turn AI spending into cash via advertising revenues, showing that its core business is performing well. Investors also welcomed the reduced focus on Reality Labs, a cash-burning division that has yet to gain meaningful adoption. Microsoft, by contrast, was punished as cloud growth came in below analysts’ expectations — a major concern given that cloud is the segment meant to justify heavy AI investment. Slower cloud growth made investors unhappy about further AI spending.

As for Tesla, profits plunged 61% in Q4 year-on-year. No surprise: sales have been falling since last year, partly reflecting Elon Musk’s political positioning. What’s surprising, however, is the market’s reaction. Tesla is a case study in itself — one that will allow academics to examine how a company with profits down more than 60% can still attract investor enthusiasm for projects largely unrelated to its core business. Investors welcomed Tesla’s plans to invest more than $20 billion this year in advanced AI, robotics, autonomous vehicles and energy storage, including a $2 billion investment in Elon Musk’s xAI startup! The company’s price-to-earnings ratio is now above 350. This is pure speculation on someone entirely unpredictable — but admittedly, it’s entertaining!

In FX markets, the Fed’s optimistic tone initially helped the US dollar rebound, but gains proved short-lived. The dollar index is back under pressure this morning.

One factor weighing on the dollar was US Treasury Secretary Scott Bessent’s CNBC interview, during which he said the US is “absolutely not” intervening to support the Japanese yen. The New York Fed’s calls to traders to check yen levels were, apparently, just that — curiosity, information-gathering...

The immediate consequence for Japan is that Bessent effectively spoiled the intervention narrative. The USDJPY bounced from the 152 level, which had been reached on speculation that US and Japanese authorities might jointly step in to curb yen weakness. Japan is now on its own. With or without the US help, authorities will continue to fight against the yen shorts as they dislike the pace of depreciation as it hurts households and erodes purchasing power, but at 152, intervention looks unlikely. On that basis, yen shorts may cautiously rebuild positions at these levels — cautiously though, until intervention threats ease.

Fundamentally, the yen is likely to remain under pressure at least until the February 8 snap election, which prices the risk of Takaichi consolidating political power. She favours ample fiscal spending — pushing yields higher — alongside supportive monetary policy, which weighs on the yen. As per the the Bank of Japan, it does not suffer from independence issues and remains willing to hike rates as part of its policy-normalisation process. But even so, last year’s hawkish signals did little to provide lasting support for the yen.

In focus today

• In the US, November import and export data is set for release today. The trade deficit has narrowed significantly as imports have declined after Trump's tariff hikes, despite domestic demand remaining resilient.
• In Sweden, the Riksbank is expected to maintain its policy rate at 1.75% during its rate decision meeting, aligning with December's communication. The central bank is likely to repeat the statement that 'the rate is expected to remain at this level for some time to come', while previous rate cuts continue to support the ongoing recovery.
• Overnight Japan will release January CPI, with December CPI at 2.0% y/y and CPI excl. fresh food and fuel at 2.3% y/y. The Bank of Japan's December minutes highlighted the growing impact of a weak yen on inflation, as firms continue to pass on rising costs. The central bank maintained its hawkish inflation outlook, revising core inflation forecasts higher through to 2027, and signalled vigilance over mounting price pressures that could prompt further rate hikes.

Economic and market news

What happened yesterday

In the US, the Fed kept interest rates at 3.50-3.75%. Chair Powell struck a balanced stance, highlighting the economy's unexpected resilience and stabilisation in labour market data. Economic growth was described as "solid" rather than "moderate," and concerns about downside risks to employment were notably removed, signalling a lower likelihood of near-term rate cuts. Governor Waller's dissent over a rate cut presented a mildly dovish surprise, but the overall tone of the meeting was mixed. Despite the recent weakening of the USD, Powell avoided addressing its inflationary risks directly, leaving markets largely unmoved. For details see Fed review: Balanced and optimistic, 28 January.

In relation to the USD, Treasury Secretary Scott Bessent stated that the Trump administration is committed to a 'strong dollar policy' and that the US is "absolutely not" intervening in USD/JPY, addressing speculation about currency market interference. His comments provided some relief for the USD, lifting USD/JPY back above 153 and EUR/USD remained steady in the mid-1.19 to 1.20 range.

In Canada, the Bank of Canada left policy rates unchanged as expected, citing inflation projections close to target during the forecast period. The BoC showed no inclination to signal imminent rate cuts or hikes, pointing to uncertainties surrounding geopolitics and trade.

In geopolitics, the US has urged Iran to reach an agreement over its nuclear programme, warning of potential military action if a deal is not struck. President Trump stated that an "armada" is heading toward Iran and hinted at large-scale military intervention. Meanwhile, US forces will conduct a multi-day air exercise in the Middle East as Washington bolsters its military presence amid heightened tensions.

Equities: Equities little changed yesterday in a wait-and-see mode ahead of the tech earnings reports released after closing. Tech continued to outperform even before these numbers, with semis in particular extending recent outperformance (Intel and TXN +11%!). A slight cyclical bias in the sector preference while small caps continued to lag. US futures are slightly higher this morning.

The monetisation of AI and capex plans in focus. Meta was the positive standout with sales rising 24% y/y and AI contributing through advertising efficiency. Microsoft grew top line impressively as well at 17% y/y, but Azure revenue grew 'only' 38%, a percentage point below the rate in Q3. This drove shares in different directions in the aftermarket with Microsoft -6% and Meta +10%. Capex was bigger than expected, but the capex surprises were at least lower than in Q3. Meta updated their capex outlook to around USD 115-135bn for 2026, which would imply almost a doubling from its 2025 capex spend, but not miles from consensus expectations at 110bn. As for actual spend, capex came in at 22,1bn which was 5% more than expected. Microsoft's spend rose to 37,5bn and 9% more than expected. However, Microsoft beat capex spend with 15% and Meta 6%, so in this sense it was a more moderate quarter this time.

FI and FX: The USD slide took a breather yesterday and Treasury Secretary Bessent's comment that the US is "absolutely not" intervening in USD/JPY helped push USD/JPY back above 153. Despite the tentative USD stabilization, we saw AUD/USD continuing moving higher as markets are positioning themselves for an RBA hike next week. Scandies continue to be supported in the current sentiment, with further SEK and NOK strength and EUR/DKK hitting the lowest levels since September. Despite the elevated FX volatility of late, we have not yet seen the corresponding pick-up in bond volatility. Yesterday was no exception, with relatively muted moves in rates both before and after Fed.

GBPUSD continues to demonstrate a constructive bullish sequence from the November 5, 2026 low, favoring further upside potential. The rally from that low is unfolding in the form of an impulse Elliott Wave structure, which provides clarity on the ongoing trend. From November 5, wave ((i)) concluded at 1.3568, followed by a corrective pullback in wave ((ii)) that ended at 1.334. The internal subdivision of wave ((ii)) developed as a zigzag formation, with wave (a) finishing at 1.339, wave (b) rallying to 1.3495, and wave (c) declining to 1.334. This sequence completed wave ((ii)) at a higher degree and set the stage for renewed strength.

The pair has since resumed its advance in wave ((iii)), which is unfolding as another impulse of lesser degree. From the termination of wave ((ii)), wave (i) ended at 1.3491, while wave (ii) corrected to 1.34. The subsequent rally in wave (iii) reached 1.3869, and the pullback in wave (iv) settled at 1.3749. The structure suggests that the pair is poised to extend higher in wave (v), thereby completing wave ((iii)). Once this occurs, a corrective phase in wave ((iv)) should follow, addressing the cycle from the January 19 low before the broader rally resumes.

In the near term, as long as the pivot at 1.334 remains intact, dips are expected to attract buyers. These retracements are likely to unfold in 3, 7, or 11 swings, offering opportunities for continuation of the bullish sequence. The overall outlook remains constructive, with the technical framework supporting further appreciation in GBPUSD.

GBPUSD 60 minute chart

GBPUSD Elliott Wave video:

https://www.youtube.com/watch?v=j2N2jCuBCbk

Key Highlights

• Gold started a fresh surge and traded to a new all-time high above $5,590.
• A connecting bullish trend line is forming with support at $5,280 on the 4-hour chart.
• WTI Crude Oil prices climbed higher above $62.00 and $63.00.
• USD/JPY and USD/CHF saw an increase in selling pressure.

Gold Price Technical Analysis

Gold prices started a fresh rally above $4,880 and $5,000 against the US Dollar. It settled above $5,250 and gained momentum for a new uptrend.

The 4-hour chart of XAU/USD indicates that the price extended gains above $5,500 and traded to a new all-time high above $5,590. The bulls seem unstoppable, and they could soon aim for more upside in the coming sessions.

On the upside, immediate resistance is near the $5,600 level. The next major resistance sits near the $5,625 level. A clear move above $5,625 could open the doors for more upside. In the stated case, the bulls could aim for a move toward $5,700. The main target for the bulls could be $5,800.

If there is a pullback, Gold might find bids near the $5,450 level. The first major support sits at $5,280. There is also a connecting bullish trend line forming with support at $5,280, below which the price might slide to $5,000.

The main support sits at $5,000. Any more losses might call for a test of the 100 Simple Moving Average (red, 4 hours) at $4,700 or even the 200 Simple Moving Average (green, 4 hours) at $4,550.

Looking at WTI Crude Oil, the price started a recovery wave, and the bulls pushed the price above the key hurdle at $62.00.

Economic Releases to Watch Today

• US Initial Jobless Claims - Forecast 212K, versus 198K previous.
• US Factory Orders for Nov 2025 (MoM) - Forecast +1.6%, versus -1.3% previous.

Summary

As was widely expected, the FOMC held the fed funds rate steady at its January meeting. The statement and Chair Powell's press conference suggested that the Committee is finely balanced between worries about a gradually deteriorating labor market and still above-target inflation. Our main takeaway from today's meeting is that the hurdle to additional cuts has been raised under Chair Powell's watch.

Governors Miran and Waller dissented in favor of a 25 bps cut. Interestingly, Michelle Bowman voted in favor of holding rates unchanged, and Miran's dissent was for 25 bps, not 50 bps. Even the Committee's doves appear to have become relatively less dovish recently.

January's hold follows 25 bps cuts at each of the FOMC's three previous meetings that have left the policy rate modestly above most participants' estimates of neutral (chart). The post-meeting statement struck us as slightly hawkish. References to downside risks to the labor market were removed, with new language saying that the unemployment rate has "shown some signs of stabilization."

Like the labor market characterization, the language around inflation was cautiously more optimistic. While the statement maintained that "inflation remains somewhat elevated," it removed the reference to inflation moving up since early last year.

The more balanced risks to the Fed's dual mandate came through in Chair Powell's press conference. According to Powell, "We still have some tension between employment and inflation, but it's less than it was. I think the upside risks to inflation and the down risks [to employment] are probably both diminished a bit."

Powell also seemed more upbeat on the economic outlook, saying that it's "overall a stronger forecast" compared to the December meeting. That said, he was not ready to sound the all clear: he stressed that the Committee has not made any decisions about future meetings, and on the labor market he stated that "we saw data coming in which suggests some signs of stabilization. I wouldn't go too far with that, but some signs of stabilization."

Against this backdrop, Powell stressed that the current policy rate is well-positioned after the three cuts to "let the data speak to us."

Powell refrained from commenting on the Department of Justice investigation into the Federal Reserve as well as his plans to leave or stay on the Board of Governors after his term as Chair expires. When asked about his attendance of Lisa Cook's case at the Supreme Court, he noted that the case is "perhaps the most important legal case in the Fed's 113-year history. And as I thought about it, I thought it might be hard to explain why I didn't attend."

While the statement and Chair Powell's press conference suggested the Committee is not in a hurry to resume policy easing, both were careful to preserve flexibility for the months ahead, including keeping the door cracked to another rate cut in March should the labor market weaken and/or inflation slow further. Our forecast remains for two additional 25 bps cuts at the March and June meeting this year. Yet, as we have stressed recently, the risks to this call look increasingly skewed toward later and less easing as our expectations for solid GDP growth and a stabilizing labor market later this year leave a narrow window to cut.

Gold’s record-breaking rally resumed today after only a brief consolidation, with buyers stepping back in once the Fed decision passed without surprise. The clearing of event risk proved enough to reignite upside momentum.

The Fed left rates unchanged as widely expected. While two governors—Stephen Miran and Christopher Waller—dissented in favor of a cut, the broader statement offered no clear signal of imminent easing, keeping policy guidance broadly intact.

Chair Jerome Powell’s press conference reinforced that message. His tone remained balanced and non-committal, emphasizing data dependence rather than preparing markets for near-term action. As a result, expectations shifted further toward another hold in March.

Market pricing now assigns roughly 88% odds to a March hold, up from about 82% a day earlier. Yet that repricing has failed to generate meaningful support for Dollar, which continues to struggle to attract buyers.

Gold, by contrast, benefited from the reduced uncertainty. With the Fed outcome largely neutral and no hawkish surprise, investors were quick to re-engage on the long side, extending the broader uptrend.

Technically, Gold is still in upside acceleration as seen in both 4H and D MACD. The next target of 138.2% projection of 3,267.90 to 4,381.22 from 3,997.73 at 5,536.33 will likely be taken out without any problem.

Gold could indeed head to 161.8% projection at 5,799.08 before taking a breather. Meanwhile, below 5,235.53 minor support will likely bring some brief consolidations before staging another rise.

Fed Chair Jerome Powell said in the post meeting press conference that the US economy expanded at a solid pace last year and is entering 2026 on "firm footing". He added that monetary policy is "not on a preset course", reiterating that future rate adjustments will depend on incoming data, the evolving outlook, and the balance of risks. He said the Fed is “well positioned” to determine the extent and timing of any additional moves, emphasizing a meeting-by-meeting approach rather than signaling near-term action.

The press conference turned more pointed when Powell was asked about the implications for American households if the Fed were to lose its independence. He argued that independence is not about protecting policymakers, but about safeguarding credibility, noting that every advanced democracy has converged on the practice of insulating monetary policy from direct political control.

Powell warned that losing independence would make it difficult to restore institutional credibility, stressing that central banks serve the public best when allowed to operate free from political interference. He said he remains confident that the Fed can maintain that independence, adding that both he and his colleagues are firmly committed to preserving it.

The Fed is keeping rates unchanged at the 3.50% to 3.75% range – Slightly hawkish tone and the US Dollar is strengthening.

Changes to the previous statement include a more robust outlook on employment and the economy – This could take out future cuts but for now participants are awaiting for Powell.

The votes for the pause are at 10-2 – Fed's Waller and Miran dissented.

The pause was 98% priced so not surprising to observe the quiet atmosphere in Markets.

You can get access to the detailed report and Fed Statement right here.

Nothing surprising is appearing in the Statement – Except for a continued rebound in the US Dollar, volatility is low for now.

Traders will be awaiting closely for Powell's Press Conference – Log in to his Live speech (at 14:30 E.T.) right here.

Notable quotes from the Statement – Source: Federal Reserve

Pre-Conference Market Pricing

Market Pricing for the March meeting (14:20) – Source: FedWatch Tool

Pre-Conference Asset Board – Courtesy of Finviz

Market Reactions

Dollar rallies

US Dollar (DXY) 1H Chart – Source: TradingView – January 28, 2026

The Federal Open Market Committee (FOMC) held the policy rate fixed at the target range of 3.5%-3.75%. The move comes after three consecutive quarter-point "risk management" cuts at the past three meetings.

The FOMC's press release struck a relatively balanced tone. Importantly, the prior reference to "the downside risks to employment having increased" was removed – suggesting the Committee no longer feels the need for further risk management cuts. The characterization of the labor market largely reflects a "mark-to-market" with job gains now described as "remaining low" (as opposed to "having slowed") and the unemployment as "showing some signs of stabilizing" (as opposed to "has moved up since earlier this year").

Inflation is still viewed as "somewhat elevated", but the Committee dropped the prior reference of "has moved up since earlier in the year", reflecting more recent readings, which came in on the cooler side.

The Committee also upgraded its assessment of recent economic activity to "solid" from "moderate".

Ten of the twelve Committee members voted in favor of today's decision. Stephen Miran and Christopher Waller both dissented in favor of another quarter-point cut.

Key Implications

Today's decision was widely expected. With the risk management cuts now in the rearview mirror and the policy rate nearing a more neutral setting, the FOMC is content to take a pause and better assess how last year's easing filters through to the broader economy.

The changes in today's statement suggest there's now a higher bar for further rate cuts – and rightfully so. Not only has the labor market shown some signs of stabilizing in recent months, but economic activity also appears to have ended last year on a more solid footing. This suggests a stronger growth impulse coming into 2026, which is likely to be further amplified by fiscal stimulus included in the One Big Beautiful Bill. Absent an unexpected deterioration in the labor market, we think that the FOMC will remain on the sidelines until there's more visible progress towards the Fed's 2% inflation target, which is unlikely to come until later this year.