Australian dollar (AUD) volatile amid uneven market sentiment
The Australian dollar (AUD) initially attracted some support on Friday, as a modest pullback in the US dollar (USD) offered respite for the ‘Aussie’.
However, AUD then slumped again through the European session amid fresh risk aversion as the US and Israel intensified their attacks against Iran, amid speculation of a potential US-backed ground attack from Kurdish forces.
Turning to the start of this week, the Australian dollar may catch some bids if China’s latest CPI figures help to dispel concerns of disinflationary pressures in Australia’s largest trading partner.
New Zealand dollar (NZD) undermined by risk aversion
The New Zealand dollar (NZD) also fluctuated at the end of last week as investor risk appetite weakened.
Movement in the ‘kiwi’ will likely remain tied to market risk dynamics at the start of this week, potentially infusing further volatility into NZD exchange rates.
Pound (GBP) buoyed as investors trim BoE rate cut bets
The pound (GBP) traded with modest support on Friday as markets continued to scale back bets for Bank of England (BoE) monetary easing this year.
As inflationary risks mount, the odds of a rate cut continue to plummet, with the market no longer pricing in two 25bps interest rate cuts before the end of 2026.
In the absence of any notable UK economic releases, the pound is likely to be influenced by wider market trends through Monday’s trading session.
Euro (EUR) slides as GDP revised lower
The euro (EUR) closed last week’s session on the defensive after the Eurozone’s latest GDP estimate for the end of 2025 was revised down from 0.3% to 0.2%.
The EUR selling bias was then reinforced by fears that higher energy prices will curtail Eurozone growth at the start of 2026.
Germany is set to publish its latest factory orders and industrial production figures today, with the euro poised to fall if they report a weak start to the year for the country’s vital manufacturing sector.
US dollar (USD) firms despite payroll shock
The US dollar (USD) pressed higher again through Friday’s session as the conflict in the Middle East, and resulting rise in energy prices, continued to underpin demand for the safe-haven currency.
However, tempering these gains was the latest US non-farm payroll print, which reported the US economy unexpectedly shed 92,000 jobs last month.
As the situation in the Middle East escalates, demand for the US dollar will likely continue to strengthen through the coming week.
Canadian dollar (CAD) firms as oil price rally continues
The Canadian dollar (CAD) remained well supported at the end of last week as the continued rise in oil prices and stronger-than-expected domestic PMI figures underpinned demand for the commodity-linked currency.
Expect the ‘loonie’ to maintain its positive momentum at the start of this week if the crisis in the Middle East continues to propel oil prices even higher.
Data releases
17:00 EUR German Factory Orders (Jan)
17:00 EUR German Industrial Production (Jan)