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Market Insight 23-01-2026

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  • Market Insight 23-01-2026

Daily Currency Market Update – 23 January 2026

Market Overview

The US Dollar attempted to stabilise on Friday after a sharp sell‑off earlier in the week, with the USD Index fluctuating around 98.50. Risk sentiment improved modestly as US–EU tensions continued to ease following President Trump’s rollback of tariff threats and confirmation of a framework agreement with NATO regarding Greenland.

UK Retail Sales surprised to the upside, rising 0.4% m/m in December, but GBP/USD struggled to build momentum and remained below 1.3500. EUR/USD corrected lower after Thursday’s strong gains but held above 1.1730.

GBP/EUR

GBP/EUR broke above 1.15, supported by strong UK data and a softer Euro.

Key drivers:

  • UK flash PMIs showed a sharp improvement in business activity:
    • Composite PMI surged to 53.9 (from 51.4).
    • Services PMI rose to 54.3, a 21‑month high.
    • Manufacturing PMI climbed to 51.6, the strongest in 17 months.
  • UK Retail Sales beat expectations, rising 0.4% m/m and 2.5% y/y.
  • BoE’s Megan Greene warned that slowing disinflation poses a greater risk than weak demand, cooling near‑term rate‑cut expectations.
  • Eurozone PMIs were mixed, with Services slipping and Manufacturing still in contraction.

Outlook: GBP/EUR bias remains upward while UK data outperforms and BoE expectations stabilise.

GBP/USD

GBP/USD climbed toward 1.3535, its highest level in more than two weeks.

Drivers:

  • Sterling outperformed after strong PMIs and Retail Sales.
  • UK data reduced expectations of imminent BoE cuts.
  • The USD remained under pressure as markets questioned the stability of US trade policy and the Fed’s independence.
  • Trump’s rollback of tariffs and abandonment of military action over Greenland improved risk appetite but did not fully restore confidence in the Dollar.

Outlook: GBP/USD direction next week will hinge on the Fed’s policy announcement. Markets expect rates to remain unchanged.

EUR/USD

EUR/USD held near 1.1730, consolidating after Thursday’s rally.

Key factors:

  • The Dollar remains on track for its largest weekly sell‑off in months due to US–EU tensions.
  • Eurozone flash PMIs were mixed:
    • Services steady at 51.6.
    • Manufacturing improved to 49.4, still below 50.
  • German PMIs beat expectations, but the Euro saw limited follow‑through.
  • US Q3 GDP was revised up to 4.4%, and PCE inflation accelerated to 2.8% y/y, but USD sentiment remained fragile.

Outlook: EUR/USD awaits US flash PMIs for the next directional cue.

AUD/USD

AUD/USD hit a 15‑month high of 0.6854, supported by strong domestic data.

Supportive factors:

  • Australia’s PMIs surged:
    • Manufacturing PMI: 52.4
    • Services PMI: 56.0
    • Composite PMI: 55.5
  • Thursday’s labour market report showed 65.2k new jobs and unemployment falling to 4.1%.
  • RBA tightening expectations strengthened.
  • USD weakness from US–EU tensions continued to support the Aussie.

Outlook: AUD/USD remains well‑supported; Friday’s Australia–US PMIs will guide short‑term moves.

USD/CAD

USD/CAD fell to ~1.3767, marking a fifth straight daily decline.

Drivers:

  • Canadian Retail Sales beat expectations:
    • Headline: +1.3% m/m
    • Ex‑autos: +1.7% m/m
  • Oil prices held firm near $61, supporting CAD.
  • The BoC is widely expected to hold rates at 2.25% next week.
  • USD remained pressured by policy uncertainty and concerns over Fed independence.

Outlook: USD/CAD remains biased lower unless US data surprises to the upside.

USD/CHF

USD/CHF hovered near 0.7900, close to a three‑week low.

Key points:

  • USD remains fragile despite easing US–EU tensions.
  • Markets are wary ahead of Trump’s imminent announcement of the next Fed Chair.
  • SNB’s Schlegel warned of possible negative inflation prints this year but dismissed the likelihood of negative rates.
  • CHF remains supported by safe‑haven demand.

Outlook: USD/CHF likely to stay pressured unless US PMIs or sentiment data lift the Dollar.

Final Summary

Sterling outperformed on strong UK PMIs and Retail Sales, while the Euro held firm near multi‑week highs as the Dollar remained under pressure. The Australian Dollar surged to a 15‑month high on robust domestic data, and CAD strengthened on strong retail sales and firmer oil. CHF remained supported by safe‑haven flows, while USD sentiment stayed fragile despite easing geopolitical tensions. Markets now turn to US flash PMIs and next week’s Fed and BoC meetings.