In January, the Dallas Fed Manufacturing Business Index in the U.S. increased to -1.2.
The US Dollar is facing pressure, hitting a four-month low as everyone watches the Federal Reserve’s upcoming decision. Meanwhile, the EUR/USD pair has reached new highs for the year, peaking just above 1.1900, largely due to the weaker Dollar.
The GBP/USD pair went above 1.3700 before giving back some gains. Gold prices also climbed, surpassing $5,100 per ounce, thanks to geopolitical tensions and lower US Treasury yields. The Dallas Fed Manufacturing Business Index showed a big improvement, rising to -1.2 in January from -10.9.
USD/JPY starts the week at 157.57, rises to around 158 on investor interest and rising yields
The USD/JPY started this week at 157.57, affected by rising tensions between the US and Europe. This led the value to drop to 157.44, but it bounced back to about 158 due to international interest and increasing yields.
On January 21, the USD/JPY climbed to approximately 158.50 after yields spiked due to political changes in Japan. It briefly fell to around 157.50 when US and Japanese officials urged calm, but then stabilized at 158.
The Bank Of Japan’s Decision
The Bank of Japan decided to keep interest rates steady while updating its inflation forecast. This led to selling of the yen, pushing the USD/JPY over 159. After Governor Ueda’s press conference, the pair quickly dropped to 157.50 before recovering to just under 158.50. The FXStreet Insights Team has shared various market notes. The information is meant for educational use only and should not be taken as financial advice. Individuals are responsible for their own investment decisions. Investing in open markets comes with risks, including the potential loss of all capital. The author’s views do not represent FXStreet, and there is no liability for mistakes or losses. Last week, the USD/JPY demonstrated significant volatility, fluctuating between 157 and 159. This erratic movement highlights uncertainty in the market. Now, all eyes are on the upcoming Federal Reserve meeting, which will influence the market’s direction for the coming weeks.Future Strategies After The Fed Meeting
In this kind of market, simply buying or selling futures could be risky. Instead, we should consider options strategies that can benefit from large price movements, regardless of which way they go. Buying straddles or strangles might be a wise strategy to take advantage of the expected volatility following the Fed’s announcement. The Cboe’s yen volatility index (JYVIX) spiked to a 12-month high of 13.5 last week, reflecting market anxiety. Currently, the CME FedWatch tool shows a 90% chance that the Fed will maintain rates. The true risk—and opportunity—lies in the Fed’s guidance on future policies. The Bank of Japan’s recent hawkish inflation update wasn’t unexpected, especially since Japan’s national core CPI for December 2025 was 2.8%, staying above the 2% target for over a year and a half. This difference in policy between Japan and the Fed puts us in a situation similar to what we observed in 2023 and 2024. Back then, warnings often preceded direct market actions when the yen dropped too quickly. We should be alert for any moves back toward the 159 level that was broken last week. If a dovish statement from the Fed causes the dollar to rise sharply, we can anticipate more urgent pleas for calm from Japanese officials. These verbal interventions led to sharp reversals last week and indicate critical entry or exit points for short-term trading. Create your live VT Markets account and start trading now.As Kazakhstan’s Tengiz field restarts, WTI prices drop amid oversupply and geopolitical tensions.
West Texas Intermediate (WTI) Crude Oil fell to $60.70 due to worries about oversupply. This follows the restart of production at Kazakhstan’s Tengiz oil field after previous shutdowns. Additionally, geopolitical tensions are rising because of a US aircraft carrier near Iran, raising fears of possible conflict.
US-Canada Trade Tensions
US-Canada trade tensions are adding more uncertainty to the oil market. Possible tariffs could affect supply since Canada is the largest foreign supplier of crude oil to the US. Traders are closely watching the upcoming OPEC+ meeting, where major producers will evaluate demand and supply for 2026. WTI Oil, known for its high quality and low sulfur content, is affected by supply and demand, political stability, the value of the US Dollar, and OPEC’s production decisions. Weekly inventory reports from the American Petroleum Institute (API) and the Energy Information Administration (EIA) also play a significant role in its pricing, highlighting market trends. OPEC, which includes oil-producing nations, influences WTI prices by setting production limits. The addition of Russia and other non-OPEC countries in OPEC+ further impacts market behavior and pricing. Currently, West Texas Intermediate oil is retreating from recent highs as oversupply concerns resurface. News about Kazakhstan’s Tengiz field resuming production is pressuring prices. This indicates that the previous rise above $61 was not robust and was more related to temporary disruptions than to a major shift.Energy Information Administration Data
The market seems to be stabilizing in a range, around $58 to $63 over the past month. Last week’s data from the Energy Information Administration (EIA) supports this cautious outlook, showing an unexpected increase in U.S. crude inventories of 2.1 million barrels when a slight decline was anticipated. This indicates there is plenty of supply in the market right now. For derivative traders, this situation favors strategies that capitalize on stable prices and time decay. We suggest selling out-of-the-money options, potentially through an iron condor strategy with strike prices set outside the current $58-$63 range. This approach can be profitable if WTI stays steady leading up to the next major event. However, we must consider the geopolitical risks that are providing some support for prices. Tensions with Iran and renewed US-Canada trade disputes prevent us from becoming overly pessimistic. The CBOE Crude Oil Volatility Index (OVX), a key measure of expected price fluctuations, has decreased to 34, but it remains higher than the lower levels we saw for most of 2025, showing that the market remains cautious about sudden changes. Everyone is now focused on the OPEC+ meeting scheduled for February 1st. The general expectation is that the group will keep its current production pause, but we are being careful. In 2025, a surprising announcement from their July meeting caused a 7% price jump in just one day, highlighting the risks of holding positions through this event. Create your live VT Markets account and start trading now.Despite ongoing uncertainty, ING forecasts a recovery in Germany’s economy due to rising industrial orders.
The January Ifo index shows continued uncertainty in Germany’s economy, impacted by geopolitical tensions and tariff threats. However, recent data, like a rise in industrial orders, indicates a chance for recovery. There are still structural problems that require government reforms for lasting growth.
Economic Uncertainty
The Ifo index stayed the same in January, reflecting ongoing economic uncertainty from geopolitical issues and tariffs. Even though the index reading is negative, there is optimism due to signs of improvement in the industry toward the end of last year. While economic indicators hint at a possible rebound, the uncertainty from geopolitical factors means caution is needed. ING remains hopeful for recovery despite the Ifo index showing ongoing uncertainties. The steady Ifo index at 85.5 confirms that the German economy is facing significant uncertainty. Geopolitical risks and trade tariff discussions are affecting business confidence. Still, there are reasons for cautious optimism as we move into February. We believe the economy began to turn around at the end of last year. December 2025 data showed a 8.9% increase in industrial orders compared to the previous month, suggesting the industrial sector, vital to the economy, is gaining momentum. For traders, this mixed outlook indicates a chance to position for a potential, but fragile, rise in German stocks. Buying call options on the DAX index that expire in the second quarter might capture this expected upturn. There could be further gains if the index breaks and holds above the 17,500 resistance level seen late in 2025.Market Strategies
However, the steady Ifo index serves as a strong warning that there are serious downside risks. New tariffs could quickly wipe out any gains and lower market values. Thus, hedging any long positions is not just wise but essential in this situation. A cost-effective strategy would be to buy out-of-the-money put options on the DAX to guard against a sudden drop. Alternatively, the high uncertainty makes strategies that profit from volatility, like long straddles, appealing. These strategies would benefit from significant market movements in either direction. This economic uncertainty is also weighing on the Euro. The currency had trouble maintaining stability after failing to break past the 1.1900 mark against the dollar last week. Continued weak data from Germany may put more pressure on the EUR/USD pair in the coming weeks. Create your live VT Markets account and start trading now.New Zealand dollar gains strength from economic recovery and favorable fiscal policies ahead of elections
The New Zealand Dollar is expected to get stronger due to economic recovery and government spending ahead of the general election in November 2026. HSBC believes there’s good potential for the NZD, even if interest rate increases by the Reserve Bank of New Zealand face delays.
The FXStreet Insights Team, which tracks market movements, highlights that New Zealand’s economic growth could positively impact the NZD. The article points out that supportive fiscal policies are key to this recovery.
Investment Considerations
FXStreet emphasizes the need for thorough research before making investment choices. It clarifies that the content is meant for informational purposes only and should not be seen as financial advice. The document discusses several market topics, including silver price predictions and forex movements like those of the US Dollar. Additionally, it reviews the best brokers for 2026 in various categories, providing insights for traders seeking the best platforms. FXStreet notes that the information provided is forward-looking and carries risks. It stresses that there might be errors and disclaims any responsibility for the accuracy or completeness of the content. Recent signs show a strengthening New Zealand Dollar due to a solid economic recovery. The latest data reveals that GDP growth for Q4 2025 was higher than expected at 0.8%, and the unemployment rate has dropped to a multi-year low of 3.5%. This strong foundation suggests that holding bullish positions may be advantageous in the near future.Election Impact on Currency
Increased government spending before the November election is also giving a boost to the currency. We saw a similar trend before the 2023 election when fiscal promises helped support the NZD. Traders should note that this political cycle may contribute to upward momentum. Given these positive trends, buying NZD call options seems like a simple way to prepare for a potential rally while limiting downside risk to the premium paid. Since the Reserve Bank of New Zealand is likely to hold rates steady for now, a long call strategy could help capture gains from a rising price. Selling out-of-the-money puts is another option for expressing this bullish outlook while collecting premium. It’s also beneficial to compare the NZD against other currencies, especially the Australian dollar. As New Zealand’s recovery progresses, we might see the NZD/AUD cross rise, making long NZD and short AUD futures or options spreads an appealing trading strategy. This approach could also serve as a hedge against broader market movements influenced by the upcoming US Fed decision. Create your live VT Markets account and start trading now.New Zealand dollar gains strength from economic recovery and favorable fiscal policies ahead of elections
The New Zealand Dollar is expected to get stronger due to economic recovery and government spending ahead of the general election in November 2026. HSBC believes there’s good potential for the NZD, even if interest rate increases by the Reserve Bank of New Zealand face delays.
The FXStreet Insights Team, which tracks market movements, highlights that New Zealand’s economic growth could positively impact the NZD. The article points out that supportive fiscal policies are key to this recovery.
Investment Considerations
FXStreet emphasizes the need for thorough research before making investment choices. It clarifies that the content is meant for informational purposes only and should not be seen as financial advice. The document discusses several market topics, including silver price predictions and forex movements like those of the US Dollar. Additionally, it reviews the best brokers for 2026 in various categories, providing insights for traders seeking the best platforms. FXStreet notes that the information provided is forward-looking and carries risks. It stresses that there might be errors and disclaims any responsibility for the accuracy or completeness of the content. Recent signs show a strengthening New Zealand Dollar due to a solid economic recovery. The latest data reveals that GDP growth for Q4 2025 was higher than expected at 0.8%, and the unemployment rate has dropped to a multi-year low of 3.5%. This strong foundation suggests that holding bullish positions may be advantageous in the near future.Election Impact on Currency
Increased government spending before the November election is also giving a boost to the currency. We saw a similar trend before the 2023 election when fiscal promises helped support the NZD. Traders should note that this political cycle may contribute to upward momentum. Given these positive trends, buying NZD call options seems like a simple way to prepare for a potential rally while limiting downside risk to the premium paid. Since the Reserve Bank of New Zealand is likely to hold rates steady for now, a long call strategy could help capture gains from a rising price. Selling out-of-the-money puts is another option for expressing this bullish outlook while collecting premium. It’s also beneficial to compare the NZD against other currencies, especially the Australian dollar. As New Zealand’s recovery progresses, we might see the NZD/AUD cross rise, making long NZD and short AUD futures or options spreads an appealing trading strategy. This approach could also serve as a hedge against broader market movements influenced by the upcoming US Fed decision. Create your live VT Markets account and start trading now.MUFG analysts say intervention risk for the JPY has impacted the USD’s rise and investor confidence.
The USD is losing its strength due to confusion surrounding U.S. policy. Recent threats have shaken confidence, leading to increased FX hedging of U.S. assets. The USD/JPY exchange rate has gone down, and there are talks about possible U.S.-Japan interventions.
The dollar has experienced selling pressure, resulting in a lower dollar index that ended a three-week winning streak. Joint U.S.-Japan intervention may suggest that the Trump administration prefers a weaker dollar.
Yen’s Rebound
The drop in the dollar is reinforced by the yen’s rise, which has seen USD/JPY decrease from 159.23 to 153.40. If the yen continues to strengthen, it might cause worries about the unwinding of JPY-funded trades, similar to what happened in mid-2024. Trump’s decision to cut higher tariffs on NATO members has lowered global growth risks. This action reduces the chances of a trade conflict between the U.S. and the EU, providing some economic relief. The U.S. dollar has lost its upward momentum from earlier this year, ending last week with its first weekly loss of 2026. The Dollar Index (DXY) has dropped to around 101.50 due to uncertainty over U.S. policy affecting investor confidence. This change means that hedging U.S. asset exposure is becoming a priority. The dollar’s decrease was driven by a significant rebound in the Japanese yen, which saw the USD/JPY pair fall from over 159 to below 154. This situation reminds us of the interventions from late 2024, raising the possibility of a joint U.S.-Japan effort to weaken the dollar. For derivative traders, this indicates that buying put options on USD/JPY or investing in options to bet on increased currency volatility are good strategies.Market Risk and Defensive Strategies
We need to keep an eye on the potential unwinding of JPY-funded carry trades, which caused major market stress in the summer of 2024. A rapidly strengthening yen could force investors to sell global assets to repay the yen they borrowed, increasing overall market risk. The VIX, a key measure of stock market fear, has already risen from its lows earlier this month, reflecting rising concerns. Given this risk, purchasing protective put options on major U.S. stock indices like the S&P 500 is a wise move. Such strategies could profit from the broad market sell-off that could occur if carry trades unwind. This is a defensive approach to protect against unexpected volatility. Simultaneously, the administration’s recent change in stance on tariff threats against key European allies has removed a significant obstacle to global growth. This improvement enhances the outlook for European stocks compared to U.S. stocks. Therefore, it may be worthwhile to consider call options on European indices like Germany’s DAX to take advantage of this positive development. Create your live VT Markets account and start trading now.Silver rises impressively to around $109.50, driven by macroeconomic uncertainty and demand
Silver has soared to around $109.50, rising 6.90% in a single day. It recently hit a record of $110.90, driven by global uncertainty that makes safe-haven assets more appealing.
Political risks in the US, trade tensions, and concerns about the Federal Reserve have increased interest in precious metals like silver as a safe investment. Additionally, weakness in the US Dollar—due to interest rate expectations and political uncertainty—enhances Silver’s attractiveness.
Silver is not just a safe-haven asset; it also has strong industrial demand, especially in sectors focused on energy transition, such as solar power and electrification. Limited mine supply adds pressure to the market as well.
US monetary policy plays a critical role. Lower real interest rates make non-yielding assets like Silver more appealing. The current economic situation, including a weak US Dollar, supports ongoing demand for Silver as both a safe-haven and essential metal.
Investors looking for diversification and protection against inflation are drawn to Silver. Prices are affected by geopolitical instability, interest rates, and the strength of the US Dollar. Industrial needs, particularly in electronics and solar energy, also impact prices.
Silver often follows Gold’s trends due to their shared status as safe-havens. The Gold/Silver ratio is useful for evaluating their relative value and influences investment choices.
We’re seeing a remarkable surge in silver, which has just surpassed $110 an ounce for the first time. This strong upward momentum is driven by safe-haven demand rooted in US political uncertainty and a persistently weak dollar. Derivative strategies should focus on capturing further gains in the coming weeks.
This situation resembles the market tensions during the budget standoff in late 2025, but the current momentum is significantly stronger. The Silver Institute now forecasts a fifth straight year of a structural supply deficit for 2026, providing a solid foundation for this price surge. The combination of investor fear and industrial demand is a unique and potent force for silver.
Due to the high volatility associated with this record move, outright call options can be costly. A better approach may be to use bull call spreads to lower initial expenses. This allows us to profit from a steady rise while managing risk. This strategy is wiser than chasing the rally with highly leveraged futures at these peak levels.
It’s important to highlight the significant drop in the gold/silver ratio, which has decreased from over 85:1 in mid-2025 to nearly 60:1 today. Historical trends indicate that silver is quickly closing its valuation gap with gold, which could lead to further advantages. As long as this ratio continues to decrease, silver is likely to outperform gold on a percentage basis.
TD Securities expects better GDP growth for the US due to increased consumer spending and tax refunds.
TD Securities has updated its GDP growth forecasts for the US economy. They point to strong personal spending and expected tax refunds in early 2026 as key factors. Economic activity is expected to stay strong, with a gradual easing of monetary policy likely.
The unemployment rate is projected to stabilize at 4.3% by the fourth quarter of 2026. The report indicates that tax refunds might boost economic growth and consumption at the year’s start, contributing to a 2.3% increase in output for 2026.
Updated US GDP Growth Projections
We have increased our US GDP growth forecasts because of the strong personal spending observed at the end of 2025, paired with anticipated tax refunds this year. With growth now set at an optimistic 2.3% for 2026, there is a significant chance that the Federal Reserve will keep interest rates steady for a while. Additionally, the unemployment rate is expected to hold firm at around 4.3% by year-end. This outlook is supported by recent data showing Q4 2025 GDP grew at a healthy 2.9% annualized rate. The December 2025 inflation report indicated that the Consumer Price Index remained steady at 3.4%, giving officials little incentive to rush into rate cuts. Last week, Fed Governor Waller advised against easing policy too soon, reinforcing this cautious perspective.Market Impact and Strategies
For interest rate derivatives, this indicates reduced chances of a rate cut at the March FOMC meeting. The yield on the 2-year Treasury note has already risen toward 4.50%, reflecting this strong economic climate. This environment benefits strategies that anticipate rates will stay high, such as selling SOFR futures contracts or buying put options on Treasury bond ETFs. In the equity markets, this creates a mixed scenario that could lead to increased volatility. Stronger growth is good for corporate earnings, but the possibility of delayed rate cuts could limit stock market price-to-earnings ratios, a trend we often saw in 2023. Therefore, traders might consider purchasing VIX call options or employing options straddles on the S&P 500 to prepare for larger price movements in either direction. The combination of a strong US economy and a cautious Fed should continue to support the US dollar. The Dollar Index (DXY) has already climbed above 104 in January, reaching its highest level since November of last year. Positioning for ongoing dollar strength against currencies from more dovish central banks, like the euro, seems like a solid strategy for the upcoming weeks. Create your live VT Markets account and start trading now.Molly Schwartz from Rabobank expects the Bank of Canada to maintain the rate at 2.25%
Rabobank’s RaboResearch Cross-asset Macro Strategist, Molly Schwartz, predicts that the Bank of Canada will keep the policy rate at 2.25% on January 28. Analysts surveyed by Bloomberg all agree with this forecast, as current economic indicators show inflation is cooling and there is little new GDP data.
The Q4 business outlook indicates improved sentiment, but hiring is slowing, which may lead to layoffs. Despite these factors and the cooling inflation, no rate cuts are expected until 2026 due to ongoing trade disputes with the US.
