Australian dollar (AUD) retreats as risk appetite softens
The Australian dollar (AUD) slipped at the end of last week, as investors reassessed their exposure to risk-sensitive assets amid a rebound in the US dollar (USD).
Adding to the pressure on the ‘Aussie’ was a slump in commodity prices, led by a notable correction in precious metals.
Turning to the start of this week, China’s latest manufacturing PMI could drag on the ‘Aussie’ if they report factory activity remained weak in January.
New Zealand dollar (NZD) slides in cautious trade
The New Zealand dollar (NZD) was also undermined on Friday by the deterioration in market risk appetite.
The ‘kiwi’ may remain on the defensive today if this caution persisted over the weekend.
Pound (GBP) flat as focus turns to BoE
The pound (GBP) traded in a narrow range on Friday as the continued lull in UK data saw GBP investors turn their attention to the Bank of England’s (BoE) interest rate decision later this week.
While the BoE is expected to leave rates on hold this month, GBP investors are wary of the bank’s forward guidance and whether it could signal a rate cut in March.
In the meantime, confirmation that growth in the UK manufacturing sector accelerated in January could lend support to Sterling at the start of this week.
Euro (EUR) undermined by USD demand
The euro (EUR) ticked lower on Friday, undermined by its strong negative correlation with the US dollar.
This offset the release of the Eurozone’s latest GDP figures, which reported the bloc’s economy continued to expand at 0.3% in the last quarter of 2025, rather than slowing to 0.2% as forecast.
The start of this week sees the release of Germany’s latest retail sales data. Consensus estimates predict a rebound in sales growth in December, which may lift the euro today.
US dollar (USD) bolstered by positive reception to Trump’s Fed pick
The US dollar closed last week’s session on the front foot as President Donald Trump confirmed the nomination of Kevin Warsh as the next Chair of the Federal Reserve.
As a former Fed Governor, Warsh is seen as the most credible and least dovish of the candidates who remained on Trump’s shortlist, and it’s hoped that his appointment will also help underpin the US central bank’s independence.
Coming up, the release of the latest ISM manufacturing PMI may extend the US dollar’s recovery through the start of this week if reports an improvement in US factory sector activity last month.
Canadian dollar (CAD) muted as GDP Stalls
The Canadian dollar (CAD) was subdued on Friday as data showed that Canadian GDP stalled in November.
Turning to today’s session, movement in the ‘Loonie’ may be driven primarily by oil price dynamics, potentially leading the ‘loonie’ to rebound if prices push to new multi-month highs.
Data Releases
17:00 EUR German Retail Sales (Dec)
19:00 EUR Manufacturing PMI (Jan)
19:30 GBP Manufacturing PMI (Jan)
01:00 USD ISM Manufacturing PMI (Jan)