Foreign Exchange Market Update

January 28, 2026

Fed Holds Rates Steady, Nod to Stabilization in Jobless Rate

Federal Reserve officials left interest rates unchanged and pointed to improvements in the United States (U.S.) economy as they signaled a more cautious approach to potential future adjustments.

The Federal Open Market Committee (FOMC) voted 10-2 on Wednesday to hold the benchmark federal funds rate in a range of 3.5%-3.75%. Governors Christopher Waller and Stephen Miran dissented in favor of a quarter-point reduction.

In a post-meeting statement, policymakers said “job gains have remained low, and the unemployment rate has shown some signs of stabilization.” Officials also dropped language pointing to increased downside risks to employment that had appeared in the three previous statements.

The upgraded assessment of the labor market is likely to hold expectations for a near-term rate cut at bay, despite escalating pressure from the Trump administration. Heading into the meeting, investors saw another cut as unlikely until at least June. The S&P 500 and Treasuries remained lower while the dollar strengthened.

Wednesday’s decision was widely anticipated after policymakers lowered interest rates at three consecutive meetings in the closing months of 2025. According to the rate projections issued in December, most officials expect the Federal Reserve to make further cuts later this year. However, due to ongoing concerns about elevated inflation and signs of stability in the labor market, several policymakers have recently indicated that they see no immediate need for an additional reduction.

In their statement, policymakers upgraded their assessment of the economy, describing the pace of growth as “solid.” Previously, since October, they had characterized the economy as expanding at a “moderate pace.” They also removed a reference to inflation rising.
Chair of the Federal Reserve, Jerome Powell, is scheduled to hold a press conference at 2:30 p.m. in Washington. Investors will watch for guidance on how long the Fed may hold rates steady, and what economic conditions might prompt the resumption of cuts. Powell will likely also face questions about the extraordinary political backdrop following the revelation that the Department of Justice (DOJ) has opened a criminal investigation into the Fed chief.

The DOJ earlier this month issued subpoenas to the Fed, prompting Powell to issue an unusually forceful response, accusing the administration of using the investigation as a form of intimidation.

Powell’s press conference also follows his decision to attend a Supreme Court hearing last week over President Donald Trump’s attempt to fire Fed Governor Lisa Cook. The move took on heightened significance amid the DOJ probe. During the hearing, justices appeared wary of Trump’s attempt to remove Cook and its potential implications for the central bank’s independence. 2026-01-28 19:05:44 GMT (Bloomberg)

Eurozone

Euro traded at 1.1937 against USD at 9:00 AM PST

German consumer confidence is set to improve in February, driven by strong rebounds in income expectations and willingness to buy. The forward-looking consumer climate indicator rose to -24.1 from -26.9 in January.

Economic and income expectations as well as the willingness to buy improved, while the willingness to save was mostly stable in January. The willingness to save remained at a very high level in January and had no significant influence on the monthly confidence indicator. The corresponding index dropped to 17.9 from 18.7.

Although the consumer confidence index recovered notably from the strong losses, the indicator remained low. The increase in the minimum wage and reduced inflation concerns helped boost income prospects. However, it remains to be seen whether the positive trend can be sustained in the coming months, NIM Head of Consumer Climate Rolf Burkl said.

The income expectations index advanced 12 points to 5.1 in January from -6.9 a month ago. In turn, the willingness to buy sub-index rose 3.5 points to -4.0 in January, which was the highest since March 2022.

Consumers were more positive about the economic outlook for the coming twelve months. The corresponding index climbed 5.4 points to 6.6 in January. Consumers assess that the German economy is returning to a moderate growth path after three years of recession or stagnation. 01/28/2026 - 04:46:00 (RTTNews)

Italy's consumer confidence improved somewhat for the second straight month in January, while composite business confidence strengthened to the strongest level in two years. Consumer sentiment rose to 96.8 in January from 96.6 in the previous month. 
There was a slight improvement in households' opinions on the national economic situation and the future, while assessments of current and personal life were marked by greater caution. The economic climate index increased to 97.4 in January from 97.0 in December, and the future climate rose to 92.3 from 91.6. Similarly, the index measuring the personal climate improved to 96.6 from 96.4, while the current climate index eased marginally from 100.2 to 100.1.

The composite business confidence index climbed to 97.6 in January from 96.6 in December. Moreover, a similar reading was last seen in January 2024. The rise in the index is driven mainly by the market services sector, with the corresponding indicator rising to 103.4 from 100.2.

The manufacturing index also rose to 89.2 from 88.5, while the morale for the construction sector dropped to 99.8 from 101.0. The confidence index for the retail sector declined to 102.5 from 106.9. 01/28/2026 - 04:33:00 (RTTNews)

Bank Of Canada (BoC) Leaves Interest Rates Unchanged for Second Straight Meeting

In a widely expected move, the Bank of Canada announced on Wednesday that it has decided to leave interest rates unchanged for the second consecutive meeting. BoC decided to maintain its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%.

The decision to leave rates unchanged comes as the Canadian central bank said its Governing Council determined the current policy rate remains appropriate, conditional on the economy evolving broadly in line with its outlook.

However, the BoC noted uncertainty is heightened and stressed they are prepared to respond if the outlook changes. The BoC reiterated that it remains committed to ensuring that Canadians continue to have confidence in price stability through this period of global upheaval.
Regarding economic outlook, the BoC said growth is projected to be modest in the near term as population growth slows and Canada adjusts to U.S. protectionism. The bank projects growth of 1.1% in 2026 and 1.5% in 2027, broadly in line with its October projections. "A key source of uncertainty is the upcoming review of the Canada-US-Mexico Agreement," the Canadian central bank said. 01/28/2026 - 10:03:00 (RTTNews)

Australia Inflation Rises to 3.8%

Australia's consumer price inflation accelerated in December on housing and food prices. The consumer price index (CPI) logged an annual growth of 3.8% in December, following November's 3.4% rise. However, trimmed mean inflation slowed to 3.3% from 3.2% in November. The largest contributors to annual inflation were housing, food, non-alcoholic beverages, and recreation and culture.

Driven by the surge in electricity prices, annual goods inflation rose slightly to 3.4% from 3.3% in November. At the same time, services inflation accelerated to 4.1% from 3.6% a month ago. The main contributors were domestic holiday travel, accommodation, and rents. Monthly, consumer prices rose at a pace of 1.0% in December after remaining flat in November.

At the December meeting, the Reserve Bank of Australia (RBA) had retained the rate for the third straight month. At 3.6%, the key cash rate remains the lowest since March 2023. 01/28/2026 - 01:54:00 (RTTNews)