Currency Market Update - Week ending 2026-01-03
Weekly currency market update—practical actions for SMBs, expats and travellers across AUD, CAD, GBP, NZD, SGD, USD, EUR and JPY
A concise, plain-English FX brief: pay/split/wait guidance, central-bank stance, key levels, and the next two weeks of dates that matter—built for invoices, remittances and travel.
Market Summary & Cross-Market Themes
Year-end, holiday-thin trading kept FX ranges tight. The US dollar was broadly sideways-to-softer against majors as US yields drifted modestly lower, equities held firm, and data surprises were limited. Policy divergence narratives persist into January: potential Fed easing later in 2026 versus a cautious ECB/BoE, while the BoJ’s gradual normalization remains the wild card for USD/JPY. The US Dollar Index (DXY) stayed range-bound.
- USD/yields: Long-end yields eased slightly; USD edged lower in quiet flows.
- Risk tone: Equities resilient; carry supported; no major risk shocks.
- China impulse: Mixed activity signals; commodities stable; limited FX spillover.
- Policy divergence: Markets still price Fed cuts in 2026; BoJ normalization risk keeps JPY two-way.
What this means for you (Week ending 2026-01-03)
- Expats: Split conversions; add on EUR/USD dips near 1.08; wait toward 1.10.
- Travelers: Japan trips—buy JPY if [USD/JPY] above 150; split 145–150.
Week-in-Review (price moves & drivers)
- USD: Range-bound; softer on lower yields and benign risk tone.
- EUR: Firmed modestly; stable gas, steady PMIs; range 1.06–1.10 held.
- GBP: Edged up; calm gilts; data light; supported into 1.26–1.29 band.
- JPY: Two-way; BoJ ambiguity meets US yield drift; 145–150 pivotal in USD/JPY.
- AUD: Supported by steady iron ore and risk-on; 0.66–0.68 contained AUD/USD.
- NZD: Tracked AUD; dairy firmer; NZD/USD capped near 0.62.
- CAD: Little changed; oil stable; USD/CAD stuck 1.35–1.38.
- SGD: Quiet; MAS corridor steady; USD/SGD 1.35–1.37.
Central-Bank Path Updates
- Fed: Data-dependent; markets lean to gradual 2026 easing, timing uncertain.
- ECB: Slower easing bias than Fed; watch wages and services inflation.
- BoE: Cautious; sticky services inflation tempers early cuts narrative.
- BoJ: Gradual normalization risk; pace tied to wages/inflation durability.
- RBA: On hold; housing/services inflation key for any tightening bias.
- RBNZ: Restrictive stance; vigilant on domestic inflation persistence.
- BoC: Balanced; core inflation progress needed before easing.
- MAS: Neutral-to-slightly tight slope maintained; watch imported inflation.
Data Recap vs Consensus
- US: Limited releases; data broadly in line; yields eased.
- Eurozone/UK: Holiday-affected prints; no major surprises.
- Japan: Mixed activity; BoJ tone unchanged.
- China: PMIs mixed; stabilization signals but uneven demand.
- Australia/NZ: Quiet week; commodities supportive.
Large FI Forecasts (Snapshot; next 1–2 quarters)
| Pair | Large-FI consensus direction | 1–2q range | Rationale |
|---|---|---|---|
| EUR/USD | Mildly higher | 1.06–1.14 | Fed easing before ECB; modest euro recovery |
| USD/JPY | Lower | 138–150 | BoJ normalization + softer US yields |
| GBP/USD | Mildly higher | 1.24–1.32 | Stable UK growth; gradual BoE path |
| AUD/USD | Higher | 0.65–0.71 | China stabilization, carry and commodities |
| NZD/USD | Mixed/unclear | 0.59–0.63 | Split on RBNZ path and China demand |
| USD/CAD | Lower | 1.33–1.40 | Oil support; BoC gradually follows Fed |
| USD/SGD | Lower | 1.34–1.38 | MAS firmness; softer USD backdrop |
(Consensus synthesized across several large FIs: Goldman Sachs, JPMorgan, Citi, UBS, HSBC, Barclays, BNP Paribas, Deutsche Bank.)
Positioning in the Market
- Crowd leaning toward USD over JPY and EUR; conviction moderate after year-end rebalancing.
- Fast squeeze lower in USD possible if US inflation softens materially.
- Options show more protection demand for JPY strength and EUR upside.
Commodities & China/Middle-East Linkages
- Iron ore steady; supports AUD if China construction stabilizes further.
- Dairy prices firmer; modest tailwind for NZD if sustained.
- Oil capped by supply growth; Middle East tensions remain an upside risk for CAD.
Per-currency: What it means for you
USD
- SMBs: Hedge/pay if [USD/JPY] above 145; split below 142.
- Expats/Travelers: Wait for dips toward 142 on [USD/JPY]; avoid chasing above 150.
EUR
- SMBs: Pay EUR near [EUR/USD] 1.08; split within 1.06–1.10.
- Expats/Travelers: Wait toward 1.10 on [EUR/USD]; pay now below 1.08.
GBP
- SMBs: Pay near [GBP/USD] 1.26; split between 1.26–1.29.
- Expats/Travelers: Wait for 1.29 test; pay if slips to 1.26.
JPY
- SMBs: Add yen cover near [USD/JPY] 150; wait if below 145.
- Expats/Travelers: Buy JPY if [USD/JPY] above 150; split 145–150.
AUD
- SMBs: Pay AUD near [AUD/USD] 0.66; wait if 0.68–0.70 caps.
- Expats/Travelers: Split at 0.66–0.68; wait for stretch to 0.70.
NZD
- SMBs: Pay near [NZD/USD] 0.60; split 0.60–0.62.
- Expats/Travelers: Wait for 0.62; pay now below 0.60.
CAD
- SMBs: Pay CAD near [USD/CAD] 1.38; split 1.35–1.38.
- Expats/Travelers: Wait for 1.34; convert if above 1.38.
SGD
- SMBs: Pay SGD near [USD/SGD] 1.37; split 1.35–1.37.
- Expats/Travelers: Wait for 1.35; pay now above 1.37.
Scenario → Action Matrix (1-week)
| SMBs | Expats | Travelers | |
|---|---|---|---|
| Base | Split hedges; add on pullbacks to noted levels | Convert in tranches on dips | Book 50% now; top-up at levels |
| Risk-On | Wait for stronger AUD/GBP; hedge USD invoices later | Delay if home FX strengthens | Hold; better tourist rates likely |
| Risk-Off | Pay now on USD strength spikes | Accelerate transfers before USD jumps | Secure rates; avoid last-minute peaks |
Next 2 Weeks — Key Data & Events
| Date | Event | Primary FX |
|---|---|---|
| 2026-01-07 | US ISM Services PMI | USD |
| 2026-01-09 | US Nonfarm Payrolls | USD, risk |
| 2026-01-10 | China CPI/PPI | AUD, NZD |
| 2026-01-14 | US CPI | USD, risk |
| 2026-01-15 | ECB Meeting Account (minutes) | EUR |
| 2026-01-16 | Australia Labour Force Survey | AUD |
| 2026-01-17 | China GDP and activity data | AUD, NZD |
Sources: Federal Reserve, European Central Bank, Bank of England, Bank of Japan, Reserve Bank of Australia, Reserve Bank of New Zealand, Bank of Canada, Monetary Authority of Singapore, US Bureau of Labor Statistics, Eurostat, UK ONS, Statistics Canada, Singapore MTI, Bloomberg, Reuters, Financial Times.
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💡 Tip: Late-year volatility can spike with thin liquidity—set BER rate alerts to catch quick reversals.
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Disclaimer: Please note any provider recommendations, currency forecasts or any opinions of our authors should not be taken as a reference to buy or sell any financial product.
