Markets digested a surprise rate hike from Australia’s central bank while technology stocks tumbled sharply on fears that AI automation tools could disrupt traditional software business models. Geopolitical tensions in the Middle East lifted oil prices even as equity markets rotated from growth to value.
Check out the forex news and economic updates you may have missed in the latest trading session!
Forex News Headlines & Data:
- New Zealand Building Permits for December 2025: -4.6% m/m (1.0% m/m forecast; 2.8% m/m previous)
- Japan Monetary Base for January 31, 2026: -9.5% y/y (-10.0% y/y forecast; -9.8% y/y previous)
- Australia Building Permits Prel for December 2025: -14.9% m/m (-4.0% m/m forecast; 15.2% m/m previous); 0.4% y/y (9.8% y/y forecast; 20.2% y/y previous)
- Australia RBA Interest Rate Decision for February 3, 2026: 3.85% (3.85% forecast; 3.6% previous)
- Australia RBA Press Conference: emphasized that today’s 25-basis-point hike to a 3.85% cash rate was driven by a “too strong” inflation pulse and evidence that demand and capacity pressures are tighter than previously assessed. The RBA signaled a data-dependent but cautious stance going forward, with the Board prepared to tighten further if incoming data do not show clear progress on bringing inflation back to target over a reasonable timeframe.
- France CPI Growth Rate Prel for January 2026: -0.3% m/m (0.1% m/m forecast; 0.1% m/m previous); 0.3% y/y (0.7% y/y forecast; 0.8% y/y previous)
- Richmond Fed President Thomas Barkin said that rate cuts to date have “taken out some insurance” for the labor market while the Fed works through the “last mile” of getting inflation back to 2%, noting inflation is still above target and stressing that today’s inflation readings heavily shape tomorrow’s pricing decisions.
- U.S. Navy shot down an Iranian drone approaching the USS Abraham Lincoln
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New Zealand Employment Change for December 31, 2025: 0.5% q/q (0.2% q/q forecast; 0.0% q/q previous)
- New Zealand Unemployment Rate for December 31, 2025: 5.4% (5.3% forecast; 5.3% previous)
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay – Chart Faster With TradingView
Tuesday’s session reflected a dramatic shift in market leadership as technology stocks came under heavy selling pressure while cyclical sectors attracted capital flows, underscoring concerns about AI-driven disruption to traditional software business models.
The S&P 500 declined 0.8% to close around 6,918, extending losses from near-record levels reached earlier in the week. The index experienced a notable rotation beneath the surface, with an equal-weighted version of the benchmark declining only mildly while the cap-weighted index fell more sharply. Software stocks bore the brunt of the selloff, with the iShares Expanded Tech-Software Sector ETF tumbling almost 4% on the day. The plunge appeared to correlate with Anthropic’s announcement of an AI automation tool designed to automate legal and corporate workflows, heightening concerns that traditional software business models built on sticky subscriptions and predictable renewals could face disruption. Shares of legal software and data service companies including Experian Plc, London Stock Exchange Group Plc, and Thomson Reuters Corp declined sharply, while companies like ServiceNow and Salesforce both dropped close to 7%.
Despite the headline index decline, most shares in the S&P 500 actually rose, reflecting rotation into economically sensitive industries. FedEx Corp extended a record-breaking rally as the economic barometer benefited from improved growth expectations, while Walmart Inc topped $1 trillion in market capitalization. The Russell 2000 of small firms added 0.3%, suggesting risk appetite remained intact for companies more closely tied to the business cycle.
WTI crude oil surged 2.5% to close near $63.48 per barrel, marking the session’s strongest performer among major assets. The rally may be related to escalating geopolitical tensions in the Middle East after the U.S. Navy shot down an Iranian drone that approached the USS Abraham Lincoln aircraft carrier in the Arabian Sea. Hours later, Iranian Revolutionary Guard forces harassed a U.S.-flagged oil tanker in the Strait of Hormuz before U.S. naval forces escorted the vessel to safety. The incidents underscored heightened risks to energy transit routes through critical chokepoints, though White House officials indicated that diplomatic talks between the U.S. and Iran remain scheduled for later this week.
Gold advanced 3.6% to trade around $4,946, recovering from a historic selloff that had pushed the precious metal to multi-month lows. With no specific gold-related catalysts, the rebound likely reflected safe-haven demand amid Middle East tensions and software sector weakness on the day, and possibly a technical rebound after the metals crash this past week.
Bitcoin fell 3.2% to approximately $75,679, hitting its lowest level since President Donald Trump’s election victory in November. The cryptocurrency extended recent weakness with no apparent direct crypto-specific catalysts, possibly reflecting broader risk-off sentiment in speculative assets and concerns that traditional financial markets may be entering a period of increased volatility. The decline came despite equity markets showing resilience in economically sensitive sectors, suggesting Bitcoin continues to trade more as a risk asset than as an inflation hedge or safe haven.
Treasury yields declined modestly, with the 10-year yield dipping 0.3% to around 4.27%. The bond market move appeared disconnected from the equity market rotation, possibly reflecting positioning ahead of Wednesday’s heavy calendar of central bank decisions from both the Bank of England and European Central Bank. The modest decline suggested traders were parsing mixed signals from Federal Reserve officials about the path of future rate cuts against persistent inflation readings that remain above the Fed’s 2% target.
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FX Market Behavior: U.S. Dollar vs. Majors
Overlay of USD vs. Majors – Chart Faster with TradingView
The U.S. dollar traded choppy throughout Tuesday’s session, ultimately posting a net negative performance against major currencies as traders digested a surprise rate hike from the Reserve Bank of Australia and positioned ahead of key central bank decisions scheduled for later in the week.
During the Asian session, the U.S. dollar traded net negative against the major currencies. The early weakness appeared to reflect overnight positioning as traders awaited the Reserve Bank of Australia’s policy decision at 3:30 am GMT. When the RBA delivered its widely anticipated 25-basis-point rate hike to 3.85%, the Australian dollar surged against the greenback. The unanimous decision by the RBA board and Governor Michele Bullock’s hawkish commentary about inflation remaining “too strong” provided a stark contrast to the global easing trend, with the RBA becoming the first major central bank to reverse course and hike rates in 2026. The Aussie’s strength appeared to weigh on broader dollar sentiment during Asian hours.
The London session saw the U.S. dollar dip initially before rebounding against the major currencies, then pulling back slightly going into the U.S. session. The choppy price action likely reflected mixed signals from European economic data and positioning adjustments ahead of the U.S. afternoon. France’s preliminary January CPI came in softer than expected at 0.3% year-over-year versus 0.7% forecast, adding to the dovish European backdrop. However, the dollar failed to capitalize meaningfully on European weakness, suggesting broader dollar softness remained the dominant force. The RBA’s surprise hike appeared to remind currency traders that central bank policy divergence remains a powerful driver of exchange rates.
During the U.S. session, the dollar saw increased volatility with a bounce followed by a pullback around the 10 o’clock ET hour. The intraday swings appeared to correlate with the release of the U.S. RCM/TIPP Economic Optimism Index at 10:00 am ET, which came in at 48.8 versus 47.0 expected, suggesting consumer sentiment remains depressed despite recent Federal Reserve rate cuts. Richmond Fed President Thomas Barkin’s comments that rate cuts have “taken out some insurance” for the labor market while emphasizing that inflation remains above target likely contributed to the dollar’s choppy behavior. Traders appeared uncertain whether to focus on the Fed’s easing bias or the persistent inflation readings that continue to exceed the 2% target.
The escalation of geopolitical tensions in the Middle East during U.S. hours added another layer of complexity to dollar trading. News that the U.S. Navy shot down an Iranian drone approaching the USS Abraham Lincoln, followed by Iranian forces harassing a U.S.-flagged oil tanker, typically would support safe-haven dollar demand. However, the greenback’s muted response to these developments suggested currency markets were more focused on central bank policy divergence and the rotation occurring within equity markets.
At Tuesday’s close, the U.S. dollar was a net loser against the major currencies, only seeing a gain on the day against the Japanese yen. The dollar’s underperformance came despite technology stock weakness that would typically support safe-haven currencies, suggesting the RBA’s hawkish surprise and ongoing uncertainty about Federal Reserve policy direction dominated trading.
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Upcoming Potential Catalysts on the Economic Calendar
- Australia AIG Manufacturing Index for January 2026 at 10:00 pm GMT
- Australia S&P Global Services PMI Final for January 2026 at 10:00 pm GMT
- Japan S&P Global Services PMI Final for January 2026 at 12:30 am GMT
- China RatingDog Services PMI for January 2026 at 1:45 am GMT
- Australia RBA Jones Speech at 5:00 am GMT
- Euro area HCOB Services PMI Final for January 2026 at 9:00 am GMT
- U.K. S&P Global Services PMI Final for January 2026 at 9:30 am GMT
- Euro area Inflation Rate Flash for January 2026 at 10:00 am GMT
- Euro area PPI for December 2025 at 10:00 am GMT
- U.S. MBA Mortgage Applications & Rate for January 30, 2026 at 12:00 pm GMT
- U.S. ADP National Employment Report for January 2026 at 1:15 pm GMT
- Canada S&P Global Services PMI for January 2026 at 2:30 pm GMT
- U.S. S&P Global Services PMI Final for January 2026 at 2:45 pm GMT
- U.S. ISM Services PMI for January 2026 at 3:00 pm GMT
- U.S. Total Vehicle Sales for January 2026
- EIA Crude Oil Stocks Change for January 30, 2026 at 3:30 pm GMT
Wednesday’s calendar features the euro area’s flash inflation reading for January at 10:00 am GMT, which could influence European Central Bank policy expectations following Tuesday’s softer-than-expected French CPI data. RBA board member Jones is scheduled to speak at 5:00 am GMT and may provide additional color on the central bank’s hawkish pivot and the conditions under which further rate hikes might be warranted.
During the U.S. session, the ADP National Employment Report at 1:15 pm GMT and ISM Services PMI at 3:00 pm GMT will provide crucial insights into labor market strength and service sector momentum heading into February. These readings will be closely watched for any signs that the economy is cooling enough to support additional Federal Reserve rate cuts, or conversely, showing sufficient resilience to keep the central bank on hold for an extended period.
Markets remain sensitive to any fresh commentary on central bank policy divergence, particularly following the RBA’s surprise rate hike that broke with the global easing consensus. The rotation from technology stocks into cyclical sectors suggests investors are repositioning for a potential broadening of economic growth beyond the AI theme that dominated 2024 and early 2025.
Stay frosty out there, forex friends!
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