ECB official Gabriel Makhlouf says the current policy stance is appropriate and sees no need to change rates unless clear evidence emerges, urging against overreacting to small or temporary dips below the 2% inflation target. While upcoming forecasts could push some policymakers toward a cut, he’s not concerned about inflation slightly undershooting—around 1.8%—as expectations remain well anchored. A narrowing rate gap with the Fed, combined with expected Eurozone growth support from German fiscal measures, could help the euro, which one major bank notes is already undervalued by about 2%. Recent Eurozone data, however, paints a mixed picture: German producer prices show tentative stabilization, but construction output has weakened sharply and consumer confidence remains deeply negative, signaling persistent economic fragility despite easing price pressures.

Recent remarks from members of Japan’s leadership have intensified yen weakness by suggesting the BOJ is unlikely to raise rates before March 2026 and may be facing growing government influence over its decisions. Finance Minister Katayama’s comments about potentially revising the BOJ–government accord, along with her signaling no immediate plans to address yen weakness, have fueled concerns about reduced central-bank independence and encouraged speculative pressure on the currency. At the same time, a massive new stimulus package requiring heavier bond issuance, rising geopolitical friction with China, and expectations that the Fed will drive future direction all keep USDJPY biased upward. Even with inflation running above the BOJ’s 2% target for a record stretch, any near-term rate hike may be seen as a one-off, leaving dovish policy, negative real rates, and a weakening yen as the likely outlet—making any intervention short-lived.

The Australian dollar fell with the broader risk-off tone in crypto and equities, but strong support levels and an oversold RSI suggest downside may be limited. The RBA remains on hold as Australia’s labor market stays very tight, wages are elevated, and inflation risks linger, prompting policymakers to adopt a patient, data-dependent stance after earlier rate cuts. Recent economic data—from firm PMIs to solid spending and wage figures—reinforces expectations that easing is likely finished, with some analysts seeing rates steady at 3.60% through 2025. If the RBA stays paused while the Fed cuts in 2026, Australia could hold the highest G10 yield, supporting the Aussie. Meanwhile, improved export prospects—including tariff relief from the U.S. and record iron ore shipments—add to Australia’s constructive growth outlook.