Forex Briefing (WN4 2026): AUD Dominates and Sterling Weakness

In focus are AUD/JPY, EUR/GBP, and GBP/AUD because they expose the sharpest central bank contrasts. With the Reserve Bank of Australia threatening hikes while the Bank of England pivots to cuts, these

Saturday, 17 January 2026

In focus are AUD/JPY, EUR/GBP, and GBP/AUD because they expose the sharpest central bank contrasts. With the Reserve Bank of Australia threatening hikes while the Bank of England pivots to cuts, these pairs offer the most tradable yield differentials in the market right now.

Traders are fixated on yield hunting. Money is aggressively rotating out of the crumbling Pound into currencies backed by Australian yields or German stimulus. The mood is defined by selling economic fragility, making short-Sterling the dominant theme.

Watch the United Kingdom Consumer Price Index this Wednesday, January 21. It will dictate the Bank of England’s path. Attention then turns to the Bank of Japan’s rate decision, before shifting focus to the critical Australian inflation report on January 28.

AUD/JPY: Highly Convincing Bullish Sentiment That May Fade In The Coming Days Due To Trade War Escalation

The Aussie has shown resilience in previous weeks as the Reserve Bank of Australia pivoted hawkishly against 3.8 percent inflation, while Japan’s massive stimulus neutralized the Bank of Japan’s rate hike. This upside is likely to continue throughout the upcoming weeks as markets evaluate an RBA rate hike on February 3, and thus widening the yield gap. This bullish sentiment is robust, but watch US-China trade headlines as any escalation could spook the carry trade and trigger safe-haven flows back to the Yen.

EUR/GBP: Highly Convincing Bullish Sentiment That May Fade In The Coming Days Due To Industrial Data Weakness

The Euro found support as the ECB set a 2.00 percent rate floor, contrasting sharply with Sterling, which suffered as UK unemployment hit a four-year high of 5.1 percent. Expect this upside trend to persist over the upcoming seven weeks as Germany’s 500 billion Euro stimulus provides a cyclical boost while the Bank of England is forced to cut rates. Sentiment strongly favors the Euro as a defensive play, provided German industrial data stabilizes, validating the “cleaner shirt” thesis against the stagflationary Pound.

GBP/AUD: Highly Convincing Bearish Sentiment That May Fade In The Coming Days Due To Iron Ore Collapse

Sterling has been noticeably dragging in previous weeks as UK retail sales slumped, whereas the Aussie soared on the RBA’s lone hawkish stance and a recovery in iron ore prices. Continued downside is projected over the coming weeks as the policy divergence widens; the Bank of England must pivot to save jobs, while the RBA explicitly considers 2026 hikes. Bearish sentiment is highly convincing, but watch Chinese port inventories; if iron ore collapses below 100 USD per tonne, sentiment could flip rapidly.

Remember to include Fundamental Analysis into all your trade plans.

DISCLAIMER: The information printed here is informational only, NOT advice. Trading involves risk, and you could lose money.