The euro rose in the European market on Thursday against a basket of global currencies, resuming gains that were briefly interrupted yesterday against the US dollar, and moving closer once again to its highest level in five years. This advance comes amid tense conditions dominating global foreign exchange markets, despite remarks from US Treasury Secretary Scott Bessent aimed at supporting exchange rate stability.

The euro’s gains are also being supported by the historic trade agreement between Europe and India, which has strengthened positive expectations for growth in the euro area. Beyond securing supply chains, the agreement opens access to the world’s largest consumer market for European mid-sized companies and the services sector, providing the European economy with additional protection against global trade shocks.

Price overview

• Euro exchange rate today: The euro rose 0.35% against the dollar to 1.1994, from an opening level of 1.1954, while recording a session low at 1.1950.

• The euro ended Wednesday’s session down 0.7% against the dollar, marking its first loss in five days, due to correction and profit-taking activity, after hitting a five-year high of 1.2083 the previous day.

US dollar

The US dollar index fell 0.3% on Thursday, resuming losses that had paused in the previous session, and approaching a four-year low at 95.55 points, reflecting renewed weakness in the US currency against a basket of major and minor currencies.

The dollar remains under sustained pressure, as comments from Treasury Secretary Scott Bessent failed to ease growing concerns over US economic policies and geopolitical moves.

On Wednesday, Bessent denied reports suggesting possible US intervention in currency markets, at a time when markets are watching closely for potential intervention in the Japanese yen and with the dollar trading near multi-year lows.

Bessent said: The United States has always pursued a strong dollar policy, but that policy means putting sound fundamentals in place. He added: If we have sound policies, capital will flow. We are working to reduce our trade deficit, and that will naturally strengthen the dollar over time.

On the monetary policy front, the Federal Reserve adopted a more optimistic stance on the US labor market and inflation risks on Wednesday, which investors interpreted as a signal that interest rates could remain unchanged for a longer period.

European economy

Thanks to the trade agreement with India, markets have become more optimistic about the outlook for the European economy. This strategic partnership helps diversify supply chains and expand the share of the services sector within a massive consumer market, supporting sustainable economic growth in Europe and reducing vulnerability to global trade disputes.

The European Union and India reached the historic trade agreement earlier this week after nearly 20 years of difficult negotiations. European Commission President Ursula von der Leyen described it as “the mother of all deals.”

European interest rates

• Money markets currently price a roughly 25% probability that the European Central Bank will cut interest rates by 25 basis points in February.

• Traders have recently adjusted expectations from rates remaining unchanged throughout the year to at least one rate cut of 25 basis points.

• To reassess these expectations, investors are awaiting further economic data from the euro area on inflation, unemployment, and wages.

Views and analysis

Ray Attrill, head of foreign exchange strategy at National Australia Bank, said Bessent’s comments came at an opportune time, and some might assume they were carefully planned, so to speak.

Attrill added that he believes the European Central Bank’s remarks are independent, but noted that the 1.20 level in EUR/USD appears to have acted as a trigger point.

He explained that the recent movement in the euro-dollar pair, which had not been particularly strong until recently, somewhat masks broader strength in the euro — a development that is likely to feed into the ECB’s inflation outlook.

The Australian dollar rose in the Asian market on Thursday against a basket of global currencies, extending its gains for a ninth consecutive session against its US counterpart and hitting a three-year high, amid a broad and sustained rally in global metals and commodities prices.

The advance was also supported by rising inflationary pressures on policymakers at the Reserve Bank of Australia, which strengthened expectations of a 25-basis-point interest rate hike in February.

Price overview

• Australian dollar today: The Australian dollar climbed 0.75% against the US dollar to 0.7091, its highest level since February 2023, from an opening level of 0.7038, while the session low was recorded at 0.7021.

• The Australian dollar ended Wednesday’s session up around 0.4% against the US dollar, marking its eighth consecutive daily gain and the longest winning streak since February 2024, following the release of hotter-than-expected inflation data in Australia.

Global metals prices

Global metals and commodities prices continue to post strong gains, with gold and silver extending their record-breaking rallies, driven by rising demand from major economies, led by China and the United States, in addition to escalating geopolitical tensions that have pushed investors toward base metals as safe-haven assets.

This surge is feeding positively into the Australian economy, which is one of the world’s leading exporters of iron ore, coal, and gold, as it supports the trade surplus and boosts revenues for mining companies.

It also provides solid backing for the government budget through higher royalty and tax revenues, giving the Australian economy greater flexibility to absorb global inflationary pressures while maintaining growth stability.

Australian interest rates

• Data released on Tuesday in Sydney showed that Australian inflation rose more than expected in the final quarter of last year, intensifying inflationary pressures on policymakers at the Reserve Bank of Australia.

• Following the data, market pricing for a 25-basis-point rate hike by the Reserve Bank of Australia in February increased from 60% to 75%.

• To reassess these expectations, investors are awaiting further economic data from Australia.

• All four major Australian banks now expect the Reserve Bank of Australia to raise interest rates by a quarter point at its meeting next week.

• Goldman Sachs and Deutsche Bank remain among the few banks still calling for interest rates in Australia to be left unchanged.

Gold prices rose sharply during Wednesday’s trading, hitting fresh record highs amid a broad-based decline in the US dollar against most major currencies ahead of the interest rate decision, as markets also digested the Federal Reserve’s policy outcome.

The move came alongside a renewed escalation in geopolitical tensions after US President Donald Trump ordered an additional naval fleet toward Iran, urging Tehran to reach a nuclear agreement with Washington and warning that any forthcoming military strike would be far more severe than the previous one.

In line with market expectations, the Federal Open Market Committee voted to keep the benchmark interest rate unchanged within a range of 3.5% to 3.75%. The decision marked a pause after three consecutive quarter-point rate cuts, which had previously been described as precautionary steps aimed at insulating the economy from a potential deterioration in the labor market.

Alongside the rate decision, the committee upgraded its assessment of economic growth and expressed less concern about labor market risks relative to inflation risks. In its post-meeting statement, the Fed said that available indicators suggest economic activity continues to expand at a solid pace. Job gains remain subdued, while the unemployment rate has shown signs of stabilization. Inflation, however, remains somewhat elevated.

A notable shift in the statement was the removal of language that had previously indicated risks to the labor market outweighed risks from inflation. This change signaled a more patient stance on monetary policy, reflecting a view that the Federal Reserve’s dual objectives of price stability and maximum employment are now more balanced.

Federal Reserve Chair Jerome Powell said there was no evidence to support the notion that global investors are hedging against dollar-related risks, and he dismissed speculation about the possibility of rate hikes instead of cuts in the near term.

Powell added that current interest rate levels are appropriate to support progress toward the Fed’s goals of full employment and lower inflation, while acknowledging that inflation remains elevated and that demand for labor has cooled noticeably.

Separately, the US dollar index rose by 0.2% by 20:53 GMT to 96.3 points, after touching a high of 96.7 and a low of 95.8 earlier in the session.

The dollar rebounded from earlier losses following comments from US Treasury Secretary Bessent, who said the United States does not intend to intervene in the yen’s exchange rate.

In trading, spot gold surged by 5.6% at 20:55 GMT to $5,368.4 per ounce.

The Canadian dollar rose against most major currencies during Wednesday’s trading, supported by the central bank’s monetary policy statement.

The Bank of Canada decided today to keep the overnight interest rate unchanged at 2.25%, while maintaining the lending rate at 2.5% and the deposit rate at 2.20%, in a move reflecting its continued cautious stance amid a globally uncertain economic environment.

The bank said that the outlook for the global and Canadian economies has not changed materially from the projections in the October Monetary Policy Report, though risks remain elevated due to unpredictable US trade policies and ongoing geopolitical developments.

The bank noted that economic growth in the United States continues to exceed expectations and is likely to remain strong, driven by AI-related investment and consumer spending. While tariffs are contributing to higher US inflation, their impact is expected to fade gradually later in the year. In the euro area, growth has been supported by activity in the services sector, with additional fiscal support expected, while China’s GDP growth is projected to slow gradually as domestic demand weakens, despite strong exports. Overall, the bank expects global growth to average around 3% over the forecast horizon.

On financial markets, the bank said global financial conditions remain broadly accommodative. Recent weakness in the US dollar has helped lift the Canadian dollar above 72 US cents, close to the level seen around the October report. Oil prices have also been volatile due to geopolitical events and are expected to be slightly lower in the period ahead compared with the assumptions in the previous report.

Domestically, US trade restrictions and elevated uncertainty continue to weigh on growth. After a strong performance in the third quarter, GDP growth is likely to have stalled in the fourth quarter. Exports remain under pressure from US tariffs, while domestic demand is showing signs of improvement. Although employment has increased in recent months, the unemployment rate remains elevated at 6.8%, with only a small share of firms indicating plans to hire additional workers.

The bank expects economic growth to remain modest in the near term as population growth slows and Canada adjusts to US protectionist policies. Consumer spending is likely to remain resilient, while business investment is expected to improve gradually, partly supported by fiscal policy. The economy is forecast to grow by 1.1% in 2026 and 1.5% in 2027, broadly in line with the October projections. The review of the Canada–US–Mexico Agreement remains a key source of uncertainty.

On inflation, the consumer price index rose to 2.4% in December, driven by base effects related to the GST/HST tax holiday last winter. Excluding tax-related changes, inflation has continued to slow since September. The bank’s preferred core inflation measures declined from 3% in October to around 2.25% in December. Inflation averaged 2.1% in 2025, and the bank expects it to remain close to the 2% target over the projection period, with trade-related cost pressures offset by excess supply.

The Bank of Canada reiterated that monetary policy remains focused on keeping inflation close to 2% while supporting the economy through this period of structural adjustment. The Governing Council sees the current policy rate as appropriate, provided the economy evolves broadly in line with today’s projections. However, the bank stressed that uncertainty remains high and that it is closely monitoring risks, reaffirming its readiness to act if the economic outlook changes and its commitment to maintaining Canadians’ confidence in price stability amid ongoing global disruptions.

In trading, the Canadian dollar rose against the US dollar at 20:51 GMT, gaining 1% to 0.7367.