GBP rallied on hawkish signals from the BoE and strong UK PMIs, climbing over 0.5% vs both USD and EUR, as markets pared BoE rate-cut bets after Megan Greene warned lower US rates could stoke UK inflation. UK PMIs surprised on the upside with Composite at 53.9 and Services 54., signalling the fastest business expansion in nearly two years.
Eurozone PMIs showed modest growth at 51.5 and US PMIs pointed to steady expansion – Composite 52.8, Manufacturing 51.9, Services ~52.5.
USD had its biggest weekly drop since June, with the USD index down 0.9%. Market jitters ahead of next week’s Fed meeting, plus concerns over central bank independence and political pressure on Powell’s successor, have all weighed on the greenback.
*Daily move - against G10 rates as of 06:00 GMT, 26.01.26
** Indicative rates - interbank rates as of 06:00 GMT, 26.01.26
USD fell broadly as speculation grew that the US may coordinate with Japan on FX intervention to support JPY, dragging the USD index to its lowest level since September. A New York Fed rate check and coordinated rhetoric from Japanese officials fuelled talk of joint action, sending USDJPY sharply lower. Risk sentiment deteriorated as gold surged above $5,000 for the first time, silver hit record highs, and US equity futures slipped amid tariff threats, shutdown risks, and geopolitical tension.
Attention now turns to a packed central bank calendar, with the FOMC front and centre: rates are expected to stay on hold, but Powell’s guidance and any clues on the medium‑term policy trajectory will be crucial, as will potential headlines from Trump regarding his preferred candidate for Fed Chair.
The Bank of Canada is widely expected to hold rates at 2.25%.
On the data front, the US docket features jobless claims, PPI, Conference Board confidence, and core capital goods orders, while Australia’s CPI release is poised to lock in expectations for an RBA hike in February.
European GDP, CPI and sentiment data are unlikely to shift ECB pricing, though modest improvements in German Ifo and Eurozone confidence are expected.
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