Tech takes a tumble. A sharp drop in US tech — from software to semis to anything AI‑adjacent — highlighted anxiety over whether the huge capital poured into AI can justify its valuations. The Nasdaq is about 4% down week-to-date. No silver lining, yet. Precious metals and crypto falling together underscores just how fragile sentiment has become. Moves in silver and Bitcoin are running adjacent to pandemic‑era volatility. Bitcoin’s 26% year‑to‑date decline marks its third‑worst start to a year on record. Silver remains more than 40% off its peak. Down under, rates go up. The RBA hiked rates by 25bps to 3.85%, becoming on of the first major central banks to pivot back toward tightening after the post‑COVID easing cycle. The AUD marched to its strongest level in three years. ECB on cruise control. The ECB delivered a textbook no‑surprise meeting, holding the deposit rate at 2% and offering no shift in tone. The euro and German two‑year yields barely budged. Dovish BoE hold. The BoE kept rates at 3.75%, but the dovish vote split told the real story. With a March cut now around 60% priced, gilts and the pound softened as markets shifted toward earlier easing. Starmer storm clouds. UK PM Starmer is facing intensifying scrutiny about Peter Mandelson’s Epstein links. Fears of a more expansionary fiscal tilt under a potential successor have pushed the 2s–10s gilt spread to its widest since 2018. 
Global Macro
Driven by divergence
Against the grain. The Reserve Bank of Australia (RBA) hiked rates as expected, joining the Bank of Japan as the only G10 central banks to tighten policy in recent months. This monetary divergence has propelled the Aussie to the top of the G10 leaderboard year-to-date, as policymakers move to curb mounting domestic inflation.
Dovish surprise. The Bank of England (BoE) kept the rate unchanged at 3.75%, but the real story was the vote split: four MPC members backed a 25bp cut to 3.5%, a far more dovish outcome than markets expected. This is the largest pro cut bloc since the easing cycle began and signals a clear shift in the committee’s center of gravity.
ECB holds steady. The European Central Bank (ECB) maintained its deposit rate at 2.00% to prioritize economic strength, yet this stance faces growing pressure as euro area inflation cooled sharply to 1.7% in January, with risks now heavily skewed toward additional monetary easing.
Heavy week. Although the NFP was pushed for next week, this was a heavy week for labor market data, clearly confirming the cooling trend in the US economy, headlined by a weak ADP report, a 117.8% surge in Challenger Job Cuts and a sharp decline in JOLTS Job Openings to 6.54 million. While rising jobless claims suggest accelerating layoffs and receding hiring demand, the broader macro landscape is decoupling; steady growth and rebounding ISM figures indicate that labor tension is currently being offset by significant productivity gains. However, this shift, compounded by rising PPI and inflation breakevens, threaten a “reflation” narrative, moving the outlook away from a soft landing toward a stickier economy driven by fiscal dominance and the AI impulse.
Week ahead
US macro highly anticipated
Jobs report sets the tone. The next key focus will be the US jobs report. Rescheduled for 11 February – initially due on 5 February – because the partial US government shutdown forced the Bureau of Labor Statistics to halt non‑essential operations. With the shutdown now over, the report will be crucial in setting the path ahead for the dollar’s price action. The currency has just emerged from a tumultuous first half of the year that weakened it on softer sentiment, and investors remain eager to see whether the macro story re‑asserts itself as the dominant driver. Inflation checkpoint. Then comes the US inflation print on 13 February. While cooling is expected, the broader resilience in economic activity should limit the scope for more aggressive easing bets in the near term. That said, a softer labour market combined with easing inflation pressures may hint at an underpriced easing setup, keeping a layer of bearish pressure on the dollar further out. Europe’s growth pulse. A raft of hardline data – including eurozone and UK Q4 growth – will also be released. Both economies exit 2025 with unimpressive growth paths, but in better shape than many had predicted, having fended off tariff headwinds more effectively than expected. 
FX Views
Jobs risk looms over dollar bounce
USD Dollar rebounds, sentiment steadies. This week saw the dollar stage a steady rebound after two weeks of heavy selling. The dollar index heads into the week’s end almost 1% higher, leaving it about 0.5% lower on a year‑to‑date basis. While the move higher largely reflects an unwinding of technical bearishness – after the index touched levels last seen in 2022 – its resilience nonetheless underscores the market’s still-sanguine tone. Investors appear far more confident about the state of the US economy today than they were in 2025 and wish to cling onto that narrative as the dollar’s dominant driver. This shift appears to be feeding into sentiment, ultimately easing downward pressure on the currency. That said, the macro picture this week was overall unimpressive, and investors may face disappointment if expectations for a more upbeat labour market outlook do not hold up. In the past few days, despite short‑term rates edging lower on soft labour market data, the dollar still moved higher, mostly on technical grounds. However, the bar is now set higher, and next week’s jobs report, particularly the unemployment rate, will be crucial in shaping the short‑term dollar outlook and determining whether a return above the 1.18 level for EUR/USD is justified.
EUR Gravity wins near 1.18. EUR/USD heads toward the week’s end 0.5% lower, correcting sentiment‑inflated bullishness after the past few weeks of heavy USD selling. The pair now appears much closer to fair value, which now sits in the upper band of the 1.17 handle. EUR/USD’s macro-warranted anchor edged higher from lower 1.17 levels as the week progressed, due to a US data cadence that failed to impress. The picture was in fact mixed, with labour market indicators pointing to continued softening. EUR/USD therefore appears reluctant to break free from the gravitational pull of the 1.18 mark for now, at least until next week’s US jobs and inflation report. Meanwhile, the ECB left rates unchanged as expected, highlighting the resilience of the eurozone economy in navigating turbulent conditions while showing little concern about the disinflationary impact of a stronger euro. The common currency barely reacted to Lagarde’s neutral messaging.
GBP Sterling’s double hit. Political uncertainty and rising expectations for lower interest rates are forming an uncomfortable mix for sterling, threatening to stall its multi‑month rebound. A UK political risk premium is quietly re‑emerging as Prime Minister Starmer comes under pressure, with Polymarket odds assigning a 60% chance of him stepping down before year‑end. That unease has filtered into markets: long‑end gilt yields have pushed higher, while the pound has slipped. The dovish Bank of England hold then added to the pressure. Front‑end gilts fell as rate‑cut expectations were pulled forward, erasing what had been a supportive rate cushion for the currency. Money‑market pricing now implies 50bp of cuts by year‑end — up from 35bp earlier in the week. Sterling has reacted sharply. GBP/EUR has sliced through €1.15, an extraordinary reversal for a pair that had set a four‑month high earlier this week. GBP/USD has shed more than 2% from last week’s peak, with the 200‑day moving average at $1.3430 emerging as a natural next downside marker. Traders have reinforced their bearish GBP stance for several sessions, with a key options gauge now at its most negative since early December.
CHF Inflation test looms. The CHF rally has cooled after the recent spike in US risk premia boosted safe‑haven demand, but the franc remains up over 2% versus the dollar and 1.5% versus the euro year‑to‑date. That strength heightens the risk of further downside misses in Swiss inflation relative to SNB forecasts and raises questions about how long the Bank can resist cutting rates back toward negative territory. For now, President Schlegel insists the inflation outlook is essentially unchanged, making a dovish shift unlikely. Combined with timid FX intervention, the backdrop still points to persistent franc strength- which makes the upcoming February 13 inflation print especially interesting given everything above. EUR/CHF support at 0.9140 remains critical, and the same goes for 0.76 in USD/CHF — both pivotal lines that will dictate whether the franc’s strength extends or finally pauses.
CAD Loonie remains vulnerable. The USD/CAD has swung sharply over the past few months: after touching a multi‑month high near 1.411 in early November, the pair slid to a late‑January trough around 1.348 before bouncing back toward the 1.36–1.37 area. The latest levels reflect a market that’s recalibrating quickly as the narrative shifts from headline risk to fundamentals, while the US Dollar recovers from extreme bearishness sentiment. What’s driving the turn? A bounce in sentiment around the greenback and a widening data gap. In Canada, November GDP was flat after a decline in October, underscoring softer momentum into year‑end. Together, those dynamics have reinforced a mild fundamental tailwind for the dollar against the Loonie. With domestic growth soft, risk sentiment wobbling, and the BoC maintaining a cautious tone, USD/CAD continues to trade like a laggard in the G10 complex rather than a currency poised to benefit from any near‑term macro tailwinds.
AUD RBA signals more tightening ahead. The Reserve Bank of Australia’s decision to raise the cash rate by 25 basis points to 3.85% last week was widely anticipated, with markets pricing in a 75% probability ahead of the meeting. The statement accompanying the decision was notably hawkish, confirming that inflationary pressures picked up materially in the second half of 2025 and are expected to remain above target for some time. The RBA’s updated forecasts reflect this persistence, with core inflation projections raised by 0.5 percentage points and the unemployment rate forecast lowered by 0.1 percentage points. Importantly, these projections are based on an assumed year‑end cash rate of 4.2%, implying the Board sees scope for up to two additional hikes this year if inflation does not moderate as expected. The Aussie has slipped more than 2% from its recent peak of 0.7094, last reached on 29 January. The next key support sits near the 21‑day EMA at 0.6880, followed by the 50‑day EMA at 0.6770. Market participants will keep an eye out for building approvals and home loans.
CNH Yuan steadies as US-China tensions deepen. China’s leaders have concluded that pulling back from the US economy is unavoidable, and they’re directing nearly $1 trillion toward becoming more self‑sufficient in areas such as soybeans and semiconductors. The move reflects a long‑held goal to stop playing a junior role to the West. At the same time, the Trump administration is using tariffs to curb imports and boost domestic manufacturing, pushing some companies to shift production from China to the US. As the Wall Street Journal reports, both countries are now managing a “messy divorce” on sensitive trade issues, each framing the rivalry as a national security priority. Neither side wants to cut trade entirely, but competition with the US now shapes China’s economic strategy, and President Xi Jinping appears determined to stay ahead. USDCNH has slipped below the key 6.9500 level. Resistance sits near the 21‑day EMA at 6.9563, followed by the 50‑day EMA at 6.9925. Traders will watch upcoming CPI and PPI releases.
JPY BoJ flags rising inflation risks. Bank of Japan policymakers raised concerns about rising inflation at their January meeting, warning that delaying action risks falling behind the curve. Although the BoJ kept rates unchanged last month, its summary of opinions indicated broad support for future rate increases if economic and price forecasts hold. Members highlighted persistent price pressures, stronger pass‑through of import costs, widening inequality from a weaker yen, and higher long‑term yields as issues requiring close monitoring. Some advocated for timely, incremental hikes—potentially every few months—to avoid falling behind, while others emphasized the need for flexible bond‑purchase operations to stabilise volatile markets. USDJPY is almost 2% below its recent high of 159.45, last reached on 14 January. Support sits near 155.88 (50‑day EMA) and 154.39 (100‑day EMA). Dollar buyers may see value at current levels. Traders will also watch for upcoming current and adjusted current account figures.
MXN Taking a breather. Policymakers unanimously voted to hold the benchmark interest rate at 7% on Thursday, marking a strategic pause after 12 consecutive cuts totaling 425 basis points. This shift was prompted by a revised inflation outlook, with headline figures now expected to peak at 4.0% in the first quarter. While the pause signals caution, forward guidance indicates the easing cycle hasn’t fully concluded, leaving the door open for future cuts should the data allow. This localized caution coincides with a broader resurgence in emerging markets, spurred by a softer U.S. dollar and a renewed appetite for risk. Throughout early 2026, investors have doubled down on high-yield Latin American currencies to capture a “trifecta” of carry, commodity-linked valuation recovery, and lower risk premiums. Momentum in the region accelerated following “Liberation Day,” as Latin American assets began outpacing global benchmarks during a rare window of regional stability. However, the USD/MXN has taken a breather. After the pair slid toward 17.1, the advance hit a meaningful speed bump over the last few days, pushing the pair back above 17.4. This reversal has been fueled by a firming dollar and rising US yields, thanks to a string of robust macro data from the US and the market’s reaction to the nomination of Kevin Warsh.
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