The Euro is steady after four straight days of losses, holding near the roughly four-year high of $1.2081 reached in late January. ECB President Lagarde struck an optimistic tone, emphasizing incentives over taxes and suggesting that US trade tensions could accelerate European reforms, while noting continued capital inflows into Europe. The ECB also announced plans to expand repo access to more central banks starting in Q3 2026, supporting euro liquidity and reinforcing its global role. Markets now turn to upcoming data, including Sweden’s January unemployment rate and Eurozone industrial production for December.

The pair is on track to snap a five-day losing streak, though it remains close to last Thursday’s two-week low of 152.24. Japan’s preliminary fourth-quarter GDP disappointed due to weak business spending, while the GDP deflator held firm at 3.4% year-over-year, pointing to ongoing inflation pressures. BoJ member Tamura indicated the 2% inflation target could be achieved as soon as spring if wage growth continues, highlighting growing pressure on Governor Ueda to proceed with policy normalization. Overall, the medium-term outlook increasingly reflects gradual BoJ tightening alongside a less aggressively hawkish Federal Reserve.

The Aussie dollar is modestly higher, recovering some of Friday’s losses and holding near last week’s roughly three-year high of 0.7147. The currency remains supported by the RBA’s hawkish stance and solid domestic data, with markets pricing in about an 80% chance of a rate hike in May and a strong possibility of another later this year. Attention now turns to the upcoming RBA meeting minutes and Thursday’s jobs report, which will be key in shaping expectations for the policy outlook.

The euro edged slightly lower but stayed range-bound as markets weighed a steady dollar against a stable ECB outlook. ECB President Lagarde said inflation is in a “good place,” but strong US jobs data has capped euro upside, leaving US CPI as the next key catalyst—weak data could lift EURUSD above 1.1929, while a strong print risks a move toward 1.1766. In Europe, upcoming CPI, GDP, and trade data are expected to confirm steady growth and easing price pressures, with these releases, alongside US inflation, guiding near-term direction for the euro.

The pair is edging toward ending a four-day slide but is still down a nice amount on the week, as markets react positively to PM Takaichi’s fiscal agenda. Her decisive election win has boosted confidence in higher government spending and tax cuts, supporting growth expectations and giving the Bank of Japan more room to gradually normalize policy. At the same time, firm rhetoric from Japanese officials on curbing FX volatility has underpinned the yen, with a break below 152.10 opening the door to further gains—especially if US CPI comes in weaker than expected.

The Australian dollar is slightly lower, extending Thursday’s decline, but remains close to a 3.5-year high around 0.7150. The RBA struck a hawkish tone, with Governor Bullock signaling a willingness to raise rates again if inflation stays sticky, reinforced by a jump in inflation expectations to 5% in February. As a result, markets are increasingly pricing in a possible rate hike in May, pending upcoming inflation, jobs, and GDP data.

The euro is little changed after a two-day drop that pushed it below 1.1900, with price action still driven as much by the dollar as by euro-specific factors. While ECB President Lagarde struck a steady tone on the eurozone inflation outlook, sentiment remains weighed down by political uncertainty in France, Germany’s fiscal constraints, and reports that Bank of France Governor Villeroy de Galhau may step down earlier than expected. Attention now turns to speeches from ECB officials for policy clues, with markets pricing nearly 60 bps of rate cuts by year-end and a modest chance of a March move.

The yen is modestly stronger against the dollar, with USDJPY hovering just above a fresh two-week low near 152.27, even after solid US labour data. The pair remains under pressure amid renewed verbal intervention from Japanese officials, optimism around firmer domestic growth following PM Takaichi’s election mandate, and the backdrop of gradually normalizing Bank of Japan policy. Meanwhile, Japan’s producer inflation slowed to 2.3% year-on-year in January—the weakest pace in 20 months—suggesting easing price pressures that could give the BoJ greater flexibility to adjust policy in the months ahead.

The Australian dollar is edging higher near a three-year high, supported by the RBA’s increasingly hawkish tone. Governor Michele Bullock reiterated that inflation in the “threes” is unacceptable and said rates could rise further if price pressures persist, echoing recent warnings from other RBA officials. With the cash rate now at 3.85% and economists expecting at least one more hike, inflation expectations climbing, and the labor market still tight, markets are focused on upcoming data and fresh commentary from Assistant Governor Sarah Hunter for clues on the next policy move.

The euro is modestly firmer, retracing Tuesday’s dip while holding most of the sharp rebound from the 1.1766 area, though it has eased slightly after pushing back above 1.19. Recent European Central Bank commentary has played down the euro’s rise as manageable and already factored into baseline forecasts, with inflation near target and little urgency to push back against currency strength. While some officials flag a stronger euro, Chinese imports, and US tariffs as downside risks that could keep inflation undershooting, others warn trade fragmentation may prove inflationary over time—leaving risks finely balanced. Meanwhile, elevated speculative long EUR positioning suggests the currency could be vulnerable to pullbacks if data or ECB messaging disappoints.

The yen has strengthened modestly as softer US data and a weaker dollar allow it to pull back from recent extremes, while optimism around PM Takaichi’s post-election agenda has raised hopes for more durable growth and gradual BOJ normalization. Near term, the yen is still expected to trade with a soft bias rather than slide sharply, despite foreign inflows into Japanese equities that may actually weigh on the currency due to hedging. Further out, however, tighter fiscal discipline, a more constructive JGB backdrop, and a cautious BOJ could help the yen move away from its weakest levels, especially as risks grow around an overcrowded yen carry trade that could unwind if volatility rises. Recent data add nuance: Japan’s January machine tool orders surged on strong overseas demand, highlighting solid global momentum but still-weak domestic activity.

The Australian dollar outperformed in Asia, rising about 0.7% to just below a three-year high after RBA Deputy Governor Hauser signaled lingering inflation risks and a still-restrictive policy stance, reinforced by firm housing credit growth. While borrowing remains resilient, softer consumer and business surveys—alongside a December pullback in household spending—point to easing momentum and growing cost-of-living strain. Markets continue to price a year-end cash rate near 4.25%, but expectations are shifting toward a more gradual RBA path if inflation cools further. Positioning shows increased optimism for AUD on yield support, though the currency remains highly sensitive to upcoming inflation, labor, and wage data.

The euro was little changed, consolidating after Monday’s jump and holding near the late-January 4.5-year high. Recent ECB messaging has been notably calm, with President Lagarde and several Governing Council members downplaying the rise in the currency as “not dramatic,” stressing that the exchange rate is already baked into baseline forecasts and that inflation remains in a good place, leaving little appetite to push back against euro strength while it stays within recent ranges. Officials including Nagel and Kazimir have reinforced that view, signaling comfort with a temporary dip below the 2% inflation target in coming years and making clear that only a material deviation from the current outlook would justify a rate rethink, rather than modest euro-driven disinflation. Beyond near-term policy, Lagarde is also framing price stability within a broader EU push on competitiveness and resilience—highlighting initiatives such as a savings and investment union, a digital euro, and a deeper single market—which, alongside fiscal support in large economies like Germany, underpins a gradual medium-term growth story that many still see as structurally supportive for the euro. That said, CFTC data show speculative long positioning already stretched, leaving the currency vulnerable to sharper pullbacks if data or ECB communication were to challenge this steady baseline narrative.

The yen extended its rebound following Japan’s election, where the LDP and its allies secured a decisive super-majority, giving PM Takaichi a strong mandate to pursue a more activist but still measured policy agenda. While markets initially leaned into the so-called “Takaichi trade” — pricing a pro-growth mix of tax cuts, higher defense spending, rising JGB yields and firmer equities alongside renewed yen weakness — investor focus is now shifting to how far fiscal expansion can go without testing bond-market tolerance. Some banks see the stronger mandate accelerating BOJ normalization, pulling forward the first rate hike to as early as April and lifting terminal rate expectations, while others still favor a July move given the BOJ’s wage focus and caution around carry-trade risks. Near term, concerns around fiscal slippage keep USDJPY biased higher, with the 157–160 zone in focus as a potential intervention trigger, but medium-term dynamics look more constructive for the yen as political breathing room, gradual rate hikes and a BOJ normalizing on its own terms reduce the risk of entrenched, one-way weakness.

The Australian dollar is modestly lower on the day and consolidating just below a near three-year high after Monday’s sharp rally, as investors weigh signs that domestic demand may be cooling faster than the RBA expected even with markets still pricing the cash rate close to 4.25% by year-end. December data released late Monday showed household spending fell 0.4%, well below expectations and reversing earlier strength, with weakness broad-based and more pronounced after adjusting for population growth, suggesting consumers ended 2025 on a softer footing. In contrast, the NAB’s January business confidence survey pointed to a more optimistic outlook, with confidence rising to its highest level since October, though this was tempered by a pullback in business conditions. While Governor Bullock has reiterated the RBA’s discomfort with inflation remaining above target and the need for demand to slow unless supply improves, the latest data hint the economy may already be losing momentum, potentially easing inflation pressures over time. Positioning data show speculators have increased net long AUD exposure, reflecting lingering optimism around relatively tight policy, but the currency remains highly sensitive to upcoming inflation, labor and wage data, where any renewed price pressure could quickly revive rate-hike expectations and push AUDUSD higher.

The euro edged higher, driven more by a lack of dollar follow-through than any fresh euro catalyst. ECB officials have downplayed the move as “not dramatic,” noting the exchange rate is already baked into forecasts and signaling little urgency to push back against strength unless it moves beyond recent ranges, though some warn prolonged gains could risk inflation undershooting. The euro-area economy showed modest resilience with roughly 0.3% q/q growth in Q4 and added support from Germany’s increased fiscal spending, even as data remain mixed. Medium-term optimism around EU reforms and integration offers a structural tailwind for the euro, but stretched speculative long positioning means the currency could be vulnerable to pullbacks on negative surprises.

The yen initially firmed after Japan’s snap election but remains under pressure as markets refocus on weak fundamentals. The LDP’s landslide victory under Takaichi has revived expectations of aggressive fiscal support and tolerance for yen weakness, keeping near-term risks skewed toward further depreciation. Still, some banks argue the huge mandate could ultimately rein in fiscal excess, especially with US pressure, prospective BoJ normalization, and supportive balance-of-payments dynamics pointing to a more constructive medium-term outlook for the yen despite ongoing volatility.

The Aussie dollar is modestly higher, holding up despite softer household spending data as markets continue to focus on the RBA’s still-restrictive stance. Investors are pricing a higher-for-longer cash rate, with policymakers clearly uncomfortable about inflation staying above target amid tighter capacity constraints and demand that still needs cooling. Ongoing debate around expansionary fiscal policy is adding a hawkish undertone, reinforcing expectations that rates may not fall anytime soon. As a result, the AUD remains sensitive to upcoming inflation, jobs and growth data, with any upside surprises likely to fuel renewed tightening bets and further AUD strength.

The euro is modestly higher on the day but still set for a weekly loss as markets reassess growth and policy amid renewed trade risks. The European Central Bank left rates unchanged at 2% and struck a patient, data-dependent tone, saying policy is in a “good place” even as uncertainty rises from fresh tariff threats by President Trump and ongoing geopolitical tensions. With inflation soft but growth holding up—helped by fiscal support in Germany—markets see little chance of near-term ECB moves, while expectations of further easing from the Federal Reserve underpin a constructive medium-term EURUSD outlook, with several banks still looking for a gradual move back toward the low-1.20s over the next year as rate gaps narrow and reserve managers diversify into euros on dips.

The yen edged firmer into the close as investors stayed cautious ahead of Japan’s Lower House election, wary of fiscal risks and reluctant to push USDJPY higher despite solid demand at a 30-year JGB auction. While stronger bond buying helped long-end yields ease, it hasn’t meaningfully supported the yen, with markets still focused on the prospect of looser fiscal policy and only gradual BOJ normalization. Meanwhile, December household spending fell much more than expected, underscoring fragile consumer demand and reinforcing expectations that the BOJ will struggle to tighten aggressively—supportive for JGBs but a headwind for sustained yen strength.

The Aussie dollar is stabilizing after Thursday’s sharp drop, supported by Australia’s recent rate hike, still-elevated inflation, and a backdrop of higher yields, steady growth, and a positive current account—all of which argue for a firmer currency over time. Near-term pressure from the global tech selloff has weighed on high-beta FX, but markets continue to price further RBA tightening, while China’s steady mid-4% growth outlook and resilient commodity demand remain key external supports. With the yuan expected to strengthen modestly and capital flows rotating toward higher-yielding, resource-linked currencies, AUDUSD has scope to move back toward 0.71, especially given that the Aussie still looks undervalued versus long-run fair-value estimates once risk sentiment settles.

The euro has slipped modestly as a firmer dollar and lingering uncertainty around Europe’s growth and policy outlook weigh on sentiment. Softer inflation—now below target and likely to stay there for some time—has strengthened the case for eventual rate cuts, helped by easing wages, cheaper imports, and lower energy prices. While most analysts see risks tilted toward easing, expectations of steadier medium-term growth (supported by fiscal stimulus) are keeping policymakers in wait-and-see mode and limiting bets on aggressive cuts. Beyond the current pullback, however, the broader outlook for the euro remains constructive, with narrowing rate differentials, recovering eurozone demand, and anticipated U.S. rate cuts supporting forecasts for a gradual move higher against the dollar.

USDJPY is up over 2% in five sessions as investors stay cautious ahead of Japan’s election and a more fragile domestic backdrop. Hedge funds have rebuilt bearish yen positions as the pair drifts toward 156–157, helped by earlier weak-currency remarks from Sanae Takaichi and bullish options flows, while longer-term asset managers remain largely sidelined and favor options over outright longs. Stronger services PMI data has done little for the yen, as markets focus instead on limits to support from Bank of Japan, with authorities leaning mainly on verbal warnings from officials like Satsuki Katayama to curb excessive moves. Overall, markets may be reluctant to chase USDJPY much higher into the vote and a possible earlier BOJ hike, though one Japanese bank cautions that a post-election spike toward 160 could trigger intervention, potentially during the thinner liquidity around Japan’s Feb 11 holiday.

The Aussie dollar is down about 0.4%, easing back from last week’s near three-year high after a strong January, even as December trade data showed a wider surplus that missed expectations. The Reserve Bank of Australia surprised markets by restarting rate hikes with a unanimous 25bp increase to 3.85%, citing persistent inflation in services and housing alongside tight labor conditions, though Governor Michele Bullock stressed the path ahead remains cautious and data-dependent. Markets have since pared back expectations of an aggressive hiking cycle, now pricing just one further move toward ~4.1% by mid-year, with strategists divided between a “one-and-done” view and calls for at least one more hike. Near term, AUDUSD is likely to retain a modest upside bias, with dips attracting buyers while the RBA stays focused on inflation and the Federal Reserve moves gradually toward easing—keeping 0.71–0.72 in sight, barring setbacks from China or renewed U.S. dollar strength.

The euro has edged modestly higher, but overall trading is rangebound as investors reassess euro-area growth and policy amid rising uncertainty. Eurozone banks unexpectedly tightened lending in late 2025—especially in Germany and France—raising rates and collateral demands while rejecting more loans, threatening to slow the recovery into 2026. At the same time, trade and geopolitical risks, including higher U.S. tariffs, are weighing on corporate confidence, with the ECB viewing recent euro strength as driven more by mistrust of U.S. politics and external headwinds than strong domestic growth. Heading into this week’s meeting, the ECB is expected to keep rates on hold, and with sticky inflation, resilient labor markets, and weaker credit supply, policymakers are likely to stick to a steady approach—leaving rate differentials broadly stable and supporting the euro without signaling a major policy shift.

USDJPY climbed about 0.4% in Asia, extending its rally to a fourth day and hovering near a 1½-week high, with the move driven more by yen weakness than dollar strength. Markets are focused on domestic risks in Japan—especially the prospect of expanded fiscal spending and tax cuts—which is reviving concerns over debt-funded growth even as activity data improved and the BOJ shows rising urgency about rate hikes amid persistent above-target inflation. Still, policymakers continue to signal only gradual tightening, keeping US-Japan yield gaps wide, while a soft 10-year JGB auction and elevated yields highlight investor caution ahead of elections and potential stimulus. Overall, traders appear reluctant to push USDJPY much higher given election uncertainty, the risk of an earlier BOJ hike, and sensitivity from authorities to further yen weakness.

The Australian dollar is holding near multi-year highs after the surprise RBA rate hike, though the initial rally has cooled as markets shift into wait-and-see mode on whether more tightening follows. While the move briefly made AUD the top-performing G10 currency this year, policymakers struck a more cautious, data-dependent tone, prompting yields and AUDUSD to give back some gains as expectations for aggressive follow-up hikes were pared back. Strategists remain split between a “one-or-two-and-done” view and the risk of further tightening, but near term the Aussie retains a modest upside bias, with dips likely supported and a move toward 0.71–0.72 achievable if domestic data stay firm and the Fed begins gradual easing.

The euro is modestly higher, stabilizing after last week’s four-year high as a softer dollar offered mild support ahead of this week’s ECB meeting, where rates are widely expected to remain unchanged. Euro-area growth surprised to the upside in Q4, lifting 2025 GDP to 1.5% on solid domestic demand, while recent data from Germany and Spain point to stickier-than-expected inflation, reinforcing signs of resilient underlying price pressures. Against this backdrop of firmer growth, persistent inflation and elevated geopolitical risks, the ECB is likely to stick with a “steady hand,” keeping the deposit rate at 2% and avoiding a dovish pivot, which should help keep rate differentials stable and provide support for the euro.

USDJPY slipped as traders grew cautious ahead of Japan’s Feb. 8 snap election and remained hesitant to push the pair higher after recent volatility and intervention fears, leaving it stuck in a mid-150s range. At the same time, the Bank of Japan is sounding more serious about rate hikes as inflation stays above target, prompting markets to pull forward expectations toward April, though officials are still signaling only gradual tightening. That keeps yield gaps wide and limits near-term yen strength. Overall, positioning looks wary of chasing USDJPY higher given intervention risk and a potentially earlier BOJ move, but wide rate differentials continue to support the pair—suggesting range trading with a mild upside bias for now, while rallies into the upper-150s look increasingly vulnerable to policy or political shifts.

The Aussie jumped about 0.9% in Asia after the RBA delivered a widely expected 25bp hike, lifting rates to 3.85% and reinforcing Australia’s position at the hawkish end of the G10. Policymakers pointed to renewed inflation pressures from firm demand, tight labor markets, and lingering capacity constraints, arguing policy needed to lean harder against growth to keep inflation from settling above target. The move helped the currency rebound from recent weakness, though attention now shifts to whether this was a one-off “insurance” hike or the start of a short tightening phase—either way, after a strong run since December, further gains may be harder to come by, with resistance likely near 0.71.