The Reserve Bank of Australia raised its interest rate by 25 basis points to 3.85%. More increases are expected as inflation pressures continue. In Tehran, there are hopes of restarting nuclear talks with the US, which could ease regional tensions. In the US, a partial government shutdown has delayed the January jobs report. This has led to a focus on private-sector data, such as the ADP Employment Change report. The US Dollar Index is holding steady around 97.40 during the shutdown.

Currency Movements

The US Dollar has softened slightly against the Euro and Yen but gained against the British Pound. The EUR/USD is near 1.1820, while GBP/USD is around 1.3690, adjusting as the USD weakens. The Canadian Dollar is trading at 1.3650 against the USD, and AUD/USD is at 0.7000 after the RBA’s decision. USD/JPY is approaching weekly highs of 155.80, and gold prices have bounced back to about $4,910. Upcoming data includes Eurozone inflation, retail sales, US employment changes, and monetary policy decisions from the ECB and BoE. Gold continues to be a safe investment during uncertain times and is inversely related to the US Dollar and Treasuries. Its price is impacted by geopolitical risks and interest rates. The Reserve Bank of Australia is hinting at more rate hikes, which should bolster the Aussie dollar. It may be wise to buy AUD/USD call options to take advantage of potential gains, especially as the pair tests the important 0.7000 level. This strategy is backed by persistent inflation seen in late 2025, which was at 4.5%, pushing the RBA to act.

US Jobs Report Uncertainty

The delay in the US jobs report due to the government shutdown brings notable uncertainty. When the official numbers are released, we may see increased volatility in the US Dollar Index (DXY). Buying straddles or strangles on major USD pairs could be an effective strategy to handle this expected price change, regardless of direction. With the official jobs report postponed, today’s ADP employment data will have a significant impact on the market. In recent months, like December 2025, the ADP numbers influenced market sentiment even when they later differed from the official BLS figures. Traders might make short-term bets based on this information, so we should prepare for intraday volatility around its release. The possibility of renewed nuclear discussions between the US and Iran could lessen geopolitical risks, potentially stabilizing oil prices and easing some inflation pressures. This might slightly reduce the US dollar’s appeal as a safe haven in the short term. A similar effect was observed in mid-2025 when initial talks caused a brief 1% drop in the DXY over two trading sessions. Gold is gaining from the US government shutdown and the uncertainty surrounding the dollar. Given its high price close to $4,910, using strategies like bull call spreads can provide a cost-effective way to gain bullish exposure while managing risk. This is strongly supported by the ongoing aggressive gold purchases from central banks throughout 2025, which totaled over 1,000 tonnes. The strength of USD/JPY, nearing 155.80, shows a clear divergence despite widespread dollar uncertainty. The significant interest rate gap of more than 400 basis points is fueling the carry trade, making it lucrative to hold this pair. We should keep an eye on this trend as recent data from late 2025 indicated a drop in Japanese household spending, giving the Bank of Japan little reason to change its policy. As we approach the end of the week, the decisions from both the Bank of England and the European Central Bank on Thursday create event risk for GBP and EUR pairs. Implied volatility for one-week options on EUR/USD and GBP/USD has already increased by 15% this week. We can expect significant movements, especially if their statements on future rate paths differ from current market expectations. Create your live VT Markets account and start trading now.

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