Market Insight 06-01-2026

• Written by: Ian Morley
• 06/01/2026

Daily Currency Market Update – 6 January 2026

Market Overview

The US Dollar retreated on Monday after touching a near one‑month high above 98.80. Risk appetite improved sharply as Wall Street opened higher, with the Dow Jones up more than 1% and the Nasdaq gaining 0.8%. Weak US ISM Manufacturing PMI data added further pressure to the Dollar, with the index slipping toward 98.00 early Tuesday.

Geopolitical concerns following the US military action in Venezuela eased somewhat, allowing risk‑positive sentiment to dominate. US equity futures point higher again this morning.

GBP/EUR

GBP/EUR broke higher to 1.1550, supported by:

• Expectations that the BoE will follow a gradual easing cycle in 2026 after December’s cut to 3.75%.
• Markets pricing at least one BoE cut in H1 and a ~50% chance of a second by year‑end.
• Rising Russia–Ukraine tensions weighing on the Euro, given the Eurozone’s historical reliance on Russian energy.

Traders now await Germany’s preliminary CPI inflation later today. A hotter‑than‑expected print could offer near‑term support to the Euro.

Outlook: GBP/EUR bias remains upward unless German CPI surprises to the upside.

GBP/USD

GBP/USD eased slightly to the 1.3530–1.3535 region, after Monday’s strong rally to multi‑month highs.

Drivers:

• A modest USD uptick on safe‑haven flows linked to geopolitical tensions.
• Mixed US PMI data: S&P Global Manufacturing held at 51.8, but ISM Manufacturing fell to 47.9, signalling deeper contraction.
• BoE expectations remain supportive, with the narrow 5–4 vote in December highlighting reluctance for aggressive easing.
• UK shop price inflation rose to 0.7% y/y in December, with food inflation accelerating to 3.3%, reducing the likelihood of rapid BoE cuts.

Outlook: GBP/USD remains supported by BoE–Fed divergence. Focus shifts to UK and US Services PMIs today and Friday’s NFP.

EUR/USD

EUR/USD rebounded to ~1.1735, recovering from four‑week lows near 1.1650.

Key drivers:

• Weak US ISM Manufacturing PMI and dovish comments from Fed’s Kashkari boosted expectations of further Fed easing.
• Easing concerns over the US–Venezuela situation helped unwind safe‑haven USD flows.
• Eurozone focus today: German HICP flash inflation and final Services PMI.

Outlook: EUR/USD momentum hinges on German CPI and Eurozone Services PMI. US labour data later this week remains the main driver.

AUD/USD

AUD/USD climbed above 0.6730, its highest level since October 2024.

Support came from:

• Growing expectations of further RBA tightening, with AFR’s economist poll pointing to at least two more rate hikes due to sticky inflation.
• Easing geopolitical concerns reducing USD demand.
• Markets awaiting Australia’s November CPI early Wednesday.

Outlook: AUD/USD remains constructive ahead of Australian CPI. A strong print could reinforce February RBA hike expectations.

USD/CAD

USD/CAD held above the mid‑1.3700s, trading near 1.3750.

Mixed drivers:

• USD softness on Fed cut expectations and weaker US PMIs.
• CAD supported by the BoC’s hawkish tone.
• But softer oil prices—due to expectations that US control of Venezuelan supply could increase global output—capped CAD gains.

Outlook: USD/CAD likely range‑bound until Friday’s US and Canadian employment data.

USD/CHF

USD/CHF dipped to ~0.7910, extending Monday’s pullback.

Drivers:

• USD correction following weak ISM Manufacturing PMI.
• Markets awaiting key US labour data (ADP, ISM Services, JOLTS, NFP).
• CHF steady ahead of Thursday’s Swiss CPI release.

Outlook: USD/CHF may remain under pressure unless US data surprises to the upside.

Final Summary

The US Dollar softened as risk appetite improved and weak ISM Manufacturing data weighed on the currency. Sterling advanced strongly, with GBP/EUR breaking to 1.1550 and GBP/USD holding near multi‑month highs. The Euro recovered as USD demand faded, while the Australian Dollar surged on renewed RBA tightening expectations. CAD and CHF traded in tight ranges ahead of key data later this week.