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Market Insight 07-01-2026

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  • Market Insight 07-01-2026

Daily Currency Market Update – 7 January 2026

Market Overview

Markets brace for a potentially volatile session as investors await Eurozone inflation, US ADP employment, JOLTS job openings, and the ISM Services PMI.

The US Dollar recovered on Tuesday, supported by firmer risk appetite and mixed US data, with the USD Index holding near 98.50 early Wednesday. Wall Street extended gains, while European markets opened cautiously ahead of key macro releases.

German CPI softened sharply to 1.8% y/y in December from 2.3%, weighing on the Euro. Meanwhile, Australia’s November CPI eased to 3.4% y/y, below expectations, but AUD/USD continued to climb toward multi‑month highs.

GBP/EUR

GBP/EUR holds near 1.1550, supported by:

  • Weak German Retail Sales (-0.6% m/m in November vs +0.2% expected).
  • Expectations that the BoE will follow a gradual easing path 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 before year‑end.
  • Ongoing Russia–Ukraine tensions weighing on the Euro, given the Eurozone’s energy sensitivities.

Traders now await the Eurozone HICP flash estimate, expected to rise 2.0% y/y. A hotter print could limit EUR downside.

Outlook: GBP/EUR bias remains upward unless Eurozone inflation surprises to the upside.

GBP/USD

GBP/USD trades near 1.3490, easing slightly after Tuesday’s rally to 1.3570.

Key drivers:

  • USD firming ahead of US employment and services data.
  • Markets awaiting ADP (+45k expected), JOLTS (7.64m expected), and ISM Services (52.3 expected).
  • BoE unlikely to ease aggressively given inflation still above target and labour market weakness (UK unemployment at 5.1%).
  • UK data calendar is light, leaving GBP driven by global sentiment.

Outlook: GBP/USD likely to consolidate ahead of Friday’s NFP. BoE–Fed divergence continues to offer medium‑term GBP support.

EUR/USD

EUR/USD trades around 1.1685, with bearish momentum intact.

Pressure stems from:

  • Softer German inflation (HICP 2.0% y/y vs 2.2% expected).
  • Weak German Retail Sales and downward revisions to Eurozone PMIs.
  • Markets awaiting US labour data to refine expectations for the Fed’s easing cycle.

Despite geopolitical tensions, markets remain calm, with focus squarely on US macro releases.

Outlook: EUR/USD likely range‑bound until US data hits. A soft ADP/JOLTS print could trigger a corrective bounce.

AUD/USD

AUD/USD strengthens to ~0.6750, extending a four‑day rally.

Supportive factors:

  • Australia’s CPI eased to 3.4% y/y, below expectations but still above the RBA’s target.
  • AFR economist poll suggests at least two more RBA hikes may be needed due to sticky inflation.
  • Building permits surged 15.2% m/m, hitting a near four‑year high.
  • USD softens ahead of US data.

Outlook: AUD/USD remains constructive. A strong Q4 CPI later this month could cement expectations for a February RBA hike.

USD/CAD

USD/CAD posts mild gains near 1.3810, supported by:

  • Lower crude oil prices weighing on CAD.
  • Concerns that Venezuelan oil could replace some Canadian supply in the US.
  • Dovish Fed commentary (Miran calling for aggressive cuts) limiting USD upside.

Markets await US ISM Services today and Friday’s NFP for clearer direction.

Outlook: USD/CAD likely to remain range‑bound. Oil dynamics remain the key CAD driver.

USD/CHF

USD/CHF softens to ~0.7950, pressured by:

  • Safe‑haven demand for CHF amid Venezuela turmoil and Russia–Venezuela naval activity.
  • Dovish Fed commentary, with Miran calling for aggressive cuts and Kashkari warning unemployment could “pop” higher.
  • Markets awaiting Swiss CPI on Thursday.

Outlook: USD/CHF may drift lower if geopolitical tensions escalate or US data disappoints.

Final Summary

The US Dollar steadies ahead of a heavy US data slate, while risk appetite improves. Sterling consolidates near recent highs, supported by BoE caution. The Euro remains pressured by weak German data, while the Australian Dollar extends gains on resilient domestic fundamentals. CAD and CHF trade in line with oil and geopolitical flows. All eyes now turn to Eurozone inflation and US employment indicators for the next directional cues.