USD firms on commodity sell off

Yesterday's currency recap

USD rebounded on Friday following a sharp sell off in precious metals, especially silver and gold. Earlier in the day, USD demand firmed up after a a pick-up in PPI prices and Trump's nomination of Kevin Warsh for Fed chair – a hawkish-leaning pick.

USDJPY jumped by 1% as Japan data confirmed no FX intervention took place over January and Tokyo inflation cooled. The EUR fell on the day despite stronger euro-area growth, while CAD underperformed after flat Canadian GDP reinforced growth concerns.

Today's GBP rates

Key data points

What we think

The coming week is dominated by US job data, though heavy seasonal and methodological adjustments are likely to blur the signal from January’s jobs report. US manufacturing activity and Canadian employment are also in focus, while Europe looks set for a quieter policy week with rate holds from both the ECB and BOE. Euro-area inflation is expected to slip further below target, reinforcing a broadly dovish backdrop.

USD:
US job demand remains soft enough to ease inflation concerns. December JOLTS openings are expected to rebound modestly after November’s decline, but hiring signals remain mixed. January payrolls will be hard to interpret due to survey adjustments, with nonfarm payroll growth to be 65,000 and the unemployment rate seen holding at 4.4%. ISM manufacturing may tick slightly higher today but should still point to contraction, with fading price pressures and uneven employment dynamics.

CAD:
Canada’s January jobs report is expected to show only modest employment growth, reflecting softer job security, weaker business sentiment, and rising trade-policy uncertainty tied to US-Canada relations.

EUR:
Euro-area inflation is forecast to dip further below the ECB’s 2% target in January, driven mainly by energy base effects, while core inflation is expected to remain sticky. The ECB is likely to hold rates and maintain a neutral tone but we will be looking out for any references to current EURUSD levels following on from comments last week.

GBP:
The Bank of England is expected to keep rates unchanged at 3.75% with a split vote. Updated forecasts should show inflation nearing target by mid-2026, helped by government measures, but uncertainty around the durability of disinflation and a cooling jobs market argues for caution. The base case remains for the next cut to be in June with a 50% of another cut in November/December.

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