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Market Insight 28-01-2026

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  • Market Insight 28-01-2026

Daily Currency Market Update – 28 January 2026

Market Overview

The US Dollar staged a recovery on Wednesday, rebounding from a four‑year low to trade above 96.00 as markets turned cautious ahead of the Federal Reserve and Bank of Canada policy decisions later today. No rate changes are expected, but traders will scrutinise Chair Powell’s press conference for signals on the policy path and any hints regarding the Fed’s independence amid ongoing political pressure.

President Trump reiterated that the USD’s value is “great” and confirmed he will soon announce his pick for the next Fed Chair, adding that interest rates will be lower under new leadership. These remarks kept the Dollar volatile.

Australia’s CPI surprised sharply to the upside, lifting AUD/USD above 0.7000 to a three‑year high.

GBP/EUR

GBP/EUR trades around 1.1500, with both currencies consolidating ahead of key data releases.

Key drivers:

  • ECB officials struck a cautious tone, warning that further Euro appreciation could weigh on inflation.
  • Eurozone money markets increased the probability of a July ECB rate cut to 25%.
  • ECB policymakers emphasised flexibility and data‑dependence, limiting EUR upside.
  • Sterling remains supported by strong UK PMIs and Retail Sales, with markets expecting the BoE to hold rates next week.

Outlook: GBP/EUR likely to remain range‑bound until Eurozone sentiment data and UK BoE expectations shift.

GBP/USD

GBP/USD retreats to ~1.3780, pulling back from four‑year highs.

Drivers:

  • The Dollar trimmed losses as traders reduced USD shorts ahead of the Fed decision.
  • Trump’s praise of the Dollar’s depreciation added to volatility.
  • US consumer confidence fell to an 11‑year low, while ADP data showed slowing job creation.
  • Sterling remains underpinned by strong UK Shop Prices Index data and last week’s upbeat PMIs.

Outlook: GBP/USD direction hinges on the Fed’s tone. A cautious Powell could reignite USD selling.

EUR/USD

EUR/USD softens to ~1.1985, retreating from multi‑year highs at 1.2082.

Key factors:

  • Renewed USD demand as intervention fears eased slightly.
  • ECB’s Kocher signalled that a July rate cut is possible if EUR strength undermines inflation.
  • Eurozone money markets raised the probability of easing, capping EUR gains.
  • Markets remain wary of US political pressure on the Fed and potential US–Japan FX intervention.

Outlook: EUR/USD remains vulnerable to Fed communication and any shift in ECB expectations.

AUD/USD

AUD/USD holds near 0.7000, easing slightly after Tuesday’s surge.

Supportive factors:

  • Australia’s CPI rose to 3.8% y/y, above expectations of 3.6%.
  • Monthly CPI jumped 1.0%, reinforcing RBA tightening expectations.
  • RBA Trimmed Mean inflation rose to 3.3% y/y, above target.
  • Strong PMIs and labour market data continue to support the Aussie.

Outlook: AUD/USD remains highly sensitive to Fed policy signals. A hawkish Fed could cap gains.

USD/CAD

USD/CAD trades around 1.3575, staying defensive ahead of the BoC decision.

Drivers:

  • Higher oil prices support CAD, with WTI holding firm.
  • The BoC is widely expected to keep rates at 2.25%, maintaining its cautious stance.
  • Inflation remains within target, but core measures are still elevated.
  • Markets expect only ~10 bps of BoC tightening this year.

Outlook: USD/CAD direction will hinge on BoC guidance and Fed communication later today.

USD/CHF

USD/CHF rebounds to ~0.7680, recovering from 15‑year lows near 0.7600.

Key points:

  • Traders trimmed USD shorts ahead of the Fed decision.
  • Swiss ZEW expectations deteriorated sharply to –4.7, adding mild pressure to CHF.
  • Political pressure on the Fed and uncertainty around Powell’s future continue to weigh on the Dollar.
  • US consumer sentiment and ADP data remain weak, limiting USD upside.

Outlook: USD/CHF remains fragile. A dovish Fed or renewed intervention fears could push the pair lower again.

Final Summary

The Dollar stabilised ahead of a pivotal Fed meeting. Sterling eased from multi‑year highs but remains supported by strong domestic data. The Euro softened as ECB officials signalled caution, while the Australian Dollar held near three‑year highs after a hot CPI print. CAD stayed firm ahead of the BoC decision, and CHF remained strong despite a modest USD rebound. Markets now await the Fed and BoC for the next major directional cues.