Forex Today: Mood sours as investors gear up for big central bank week
Here is what you need to know on Monday, January 27:
Markets adopt a cautious stance to begin the week that will feature key central bank meetings and macroeconomic data releases. The European economic calendar will feature IFO sentiment data from Germany on Monday. Later in the day, Chicago Fed National Activity Index and New Home Sales data from the US will be looked upon for fresh impetus.
The US Dollar (USD) benefits from the risk-averse market atmosphere early Monday. After losing more than 1.5% in the previous week, the USD Index stays in positive territory above 107.50 in the European morning. The Wall Street Journal reported that US President Donald Trump's advisers were not willing to negotiate or hold any talks with either Canada or Mexico and go ahead with 25% tariffs as soon as February 1.
US Dollar PRICE Last 7 days
The table below shows the percentage change of US Dollar (USD) against listed major currencies last 7 days. US Dollar was the weakest against the British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.80% | -2.27% | -0.23% | -0.60% | -1.51% | -1.65% | -0.67% | |
| EUR | 1.80% | -0.54% | 1.48% | 1.11% | 0.35% | 0.04% | 1.02% | |
| GBP | 2.27% | 0.54% | 1.98% | 1.66% | 0.91% | 0.58% | 1.57% | |
| JPY | 0.23% | -1.48% | -1.98% | -0.36% | -1.23% | -1.52% | -0.61% | |
| CAD | 0.60% | -1.11% | -1.66% | 0.36% | -0.86% | -1.06% | -0.09% | |
| AUD | 1.51% | -0.35% | -0.91% | 1.23% | 0.86% | -0.40% | 0.59% | |
| NZD | 1.65% | -0.04% | -0.58% | 1.52% | 1.06% | 0.40% | 0.80% | |
| CHF | 0.67% | -1.02% | -1.57% | 0.61% | 0.09% | -0.59% | -0.80% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Meanwhile, technology stocks remain under heavy pressure in premarket trading on Monday on reports of China's DeepSeek AI model outperforming Meta’s Llama 3.1, OpenAI’s GPT-4o and Anthropic’s Claude Sonnet 3.5. At the time of press, Nasdaq Futures were down nearly 2.5% on the day and S&P Futures were losing 1.4%. On Wednesday, the Federal Reserve will announce monetary policy decisions.
EUR/USD rose more than 2% and closed in positive territory for the second consecutive time last week. The pair corrects lower early Monday and trades slightly above 1.0450.
GBP/USD registered impressive gains on Friday and rose about 2.5% in the previous week. The pair stays under modest bearish pressure in the European morning and fluctuates near 1.2450.
USD/JPY stays relatively quiet at around 156.00 on Monday. Following the Bank of Japan's (BoJ) decision to raise the policy rate by 25 basis points, the Japanese Yen struggled to gather strength against its major rivals as BoJ Governor Kazuo Ueda refrained from committing to further policy tightening in the post-meeting press conference.
Gold climbed above $2,780 on Friday and came within a touching distance of a new record-high. XAU/USD edges lower to start the week but manages to hold above $2,750.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
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