Euro-area data and market pricing suggest the euro remains mildly constructive but vulnerable in the near term, with downside risks increasingly driven by geopolitics and US trade policy rather than domestic fundamentals. Rising US-Iran tensions, elevated war risks in Europe, and renewed tariff uncertainty have strengthened the dollar’s safe-haven appeal, while options markets show growing demand for downside euro protection. Many analysts warn EURUSD could drift lower toward the mid-1.16 area if geopolitical tensions or trade pressures intensify, with rallies likely capped unless external risks ease. Meanwhile, upcoming euro-area data—particularly Germany’s IFO survey—is expected to show only modest improvement, reinforcing the view of a fragile, sideways economy rather than a clear recovery.

USDJPY remains supported above the late-January low after pulling back from its early-February peak, with price now consolidating around 155. Prime Minister Sanae Takaichi’s first major policy speech signaled a shift away from austerity toward more expansionary, investment-led fiscal policy, though framed carefully to reassure markets about debt sustainability and currency stability. While the outlook is seen as mildly negative for the yen over time due to looser fiscal conditions, her emphasis on stability and caution against excessive weakness may limit downside risks. Meanwhile, former BOJ official Makoto Sakurai noted the central bank could raise rates as early as March if yen depreciation intensifies, with gradual tightening expected longer term as policymakers balance inflation risks against financial stability concerns. Key upcoming data include Tokyo CPI and Retail Sales, which could influence policy expectations.

The Australian Dollar continues to find strong support above the 9 February low, with consistent buying seen, leaving room for a rebound toward the 0.7147–0.7158 area if this base holds. Australia’s labor market remains tight, with unemployment at 4.1%, solid job gains, and firm wage growth, reinforcing concerns that inflation pressures will persist. Combined with ongoing fiscal support and expectations that the RBA may raise rates further—potentially keeping them above those in the U.S.—the policy outlook favors the AUD, especially as USD sentiment has softened amid tariff-related uncertainty and shifting Fed expectations. Near-term direction will hinge on upcoming Australian inflation data and guidance from the RBA Governor, both critical for shaping expectations around additional tightening or a pause.