In January, the annual Harmonised Index of Consumer Prices (HICP) eased to 1.7%, remaining well below the ECB’s target, while the core measure—excluding volatile components—fell to multi-year lows. This is primarily explained by lower energy prices and easing imbalances in global supply chains. At the February 5 meeting, the key rate was kept at 2.15%. In its accompanying statement, officials stressed that price pressures are expected to continue cooling through 2026, but any further policy adjustments will be data-dependent, taking into account geopolitical tensions and potential shifts in global trade policy. Overall, euro area macro indicators point to stagnation rather than recession, allowing the ECB to maintain a wait-and-see stance. The Sentix investor confidence index rose from –1.8 to 4.2 in February, while the key releases will arrive later this week with revised Q4 GDP figures: annual growth is seen slowing from 1.4% to 1.3%, while employment is projected to be revised from 0.2% to 0.1% quarter-on-quarter. On Friday at 15:30 (GMT+2), attention will turn to the US inflation report, which could materially influence the Federal Reserve’s next steps. Market expectations point to a moderation in annual inflation from 2.7% to 2.5%, while the core index is also likely to dip from 2.6% to 2.5%. On a monthly basis, a slight uptick from 0.2% to 0.3% is possible. This backdrop supports the case for moderate monetary easing over the medium term.
GBP/USD
The pound is holding near 1.3680, positioning for a test of fresh local highs. Morning retail sales data from the British Retail Consortium (BRC)—which tracks like-for-like sales at stores open for at least a year—showed the annual rate accelerating from 1.0% to 2.3%, well above the 1.2% consensus. However, the bullish impulse remained capped by an overall mixed fundamental backdrop. The main economic challenge—inflation—has been slowing, but remains among the highest in the G7: January CPI was 3.4% year-on-year, far above the Bank of England’s target range. The BoE still expects inflation to gradually move toward 2.0% by mid-2026, leaving room for policy adjustments. On February 5, the key rate was kept at 3.75%, but several MPC members argued for an immediate cut, meaning a more dovish tone could intensify at the April meeting. The next major catalyst for sterling will be the Q4 GDP report due on Thursday at 09:00 (GMT+2), which may show annual growth easing from 1.3% to 1.2%, while quarterly growth could improve from 0.1% to 0.2%. Traders will also watch December industrial output, where annual growth is expected to slow from 2.3% to 1.4%, underscoring ongoing pressure on the manufacturing sector and adding uncertainty for the pound in the medium term.
NZD/USD
The New Zealand dollar is posting a modest gain against the US dollar in the NZD/USD pair during the Asian session on February 10, extending the fairly strong bullish impulse formed late last week and testing the 0.6040 level to the upside. Today at 15:30 (GMT+2), the focus will be on December retail sales. Current forecasts suggest the monthly figure could slow from 0.6% to 0.4%, indirectly signalling easing inflation risks, while investors continue to parse the tone from monetary policymakers. Last Friday, San Francisco Fed President Mary Daly said one or two additional rate cuts could be needed to stabilise the labour market, but policy changes require confidence that inflation effects from trade tariffs will fade and consumer price growth will slow. Fed Vice Chair Philip Jefferson struck a cautiously optimistic tone for 2026, suggesting the recovery could outperform forecasts, the labour market may normalise, and inflation could move toward the 2.0% target.
New Zealand macro data did little to support the currency: unemployment rose to 5.4%, largely linked to higher economic activity as the labour force participation rate climbed to 70.5% and employment grew 0.5%, well above forecasts and marking the first quarterly increase since mid-2024. However, this has not translated into significant wage-driven inflation pressure. Annual private-sector cost growth remains moderate at around 2.0%, indicating spare capacity and limiting the need for immediate tightening by the Reserve Bank of New Zealand (RBNZ). The regulator appears to have завершed its dovish cycle, cutting the policy rate by 325 bps since November 2024 to 2.25%. Meanwhile, business activity improved: the manufacturing PMI stood at 56.1 in December, and the services index rose to 53.4, pointing to rising orders and a steady recovery in domestic demand. Consumer confidence (ANZ) accelerated to 107.2 in January, the highest since August 2021. Corporate sentiment also strengthened, with hiring plans and investment intentions improving sharply.
USD/JPY
During the Asian session, the US dollar is edging lower against the yen, testing 155.80 to the downside and remaining driven by technical factors, while the fundamental backdrop is largely unchanged. Investors continue to assess the weekend election outcome: Japan’s Liberal Democratic Party, led by Prime Minister Sanae Takaichi, regained a majority in the lower house with 316 of 465 seats—its best result since 2017, when Shinzo Abe was in office. Although widely anticipated, the outcome could become a fresh catalyst for yen selling, as markets interpret it as a mandate for fiscal policy oriented toward large-scale spending. The coalition emphasised household support measures, with the most debated point being a temporary suspension of the 8.0% consumption tax on food and beverages. Analysts estimate this could reduce annual budget revenues by $32.0 billion and add to inflation pressures. Plans also include revisiting national security and defence strategies and military spending programs. If the government avoids issuing new debt, it may tap state reserves currently estimated at $1.4 trillion.
Political stability implies the government can implement its agenda with limited domestic resistance, which is broadly negative for the yen, making Bank of Japan policy a key variable. Having ended a long era of negative rates, the BoJ is gradually normalising conditions, keeping the policy rate at 0.25% and signalling the potential for another 0.25–0.50 pp increase over the next 12 months. Asset purchase programs are also being adjusted, including Japanese government bonds (JGBs), with holdings around ¥650 trillion expected to be reduced toward ¥600–620 trillion by year-end. The key constraint on further yen weakness and USD/JPY upside remains intervention risk: authorities have repeatedly warned about excessive volatility and sharp speculative moves. Finance Minister Satsuki Katayama reiterated after the election that officials will monitor markets even more closely and may act to stabilise conditions if needed. Historically, 160.00 yen per dollar is a critical psychological line for policymakers; a late-January approach toward this level triggered “rate checks” and a sharp, temporary yen strengthening, though it was almost fully reversed by the end of last week.
Japan’s latest macro data were mixed: the Eco Watchers current conditions index dipped from 47.7 to 47.6 in January versus a 49.1 expectation, while the outlook index improved from 49.5 to 50.1, moving back above the key “50” threshold. A positive driver was faster bank lending growth from 4.3% to 4.5% year-on-year, which could support domestic consumption and improve the inflation outlook.
XAU/USD
XAU/USD is extending its upside momentum, once again testing 5,070.0 dollars per troy ounce to the upside. Demand for gold remains elevated despite the recent pullback and reports that the Republican White House administration has nominated Kevin Warsh as the next Federal Reserve Chair once Jerome Powell’s second four-year term ends in May. In recent months, Powell has faced criticism from President Donald Trump over the timing of policy adjustments, which raised concerns about the Fed’s independence. As a result, some risk-averse investors increased allocations to safe-haven assets, particularly gold.
Another notable driver is record physical demand from central banks in emerging markets—especially China—which continues to build gold reserves as part of a long-term, non-speculative de-dollarisation strategy. At the same time, some investors are beginning to view gold not only as an inflation hedge, but also as protection against broader fiat-currency risks, including the dollar, amid high sovereign debt burdens in major economies. Finally, markets are pricing in further monetary easing ahead, particularly in the US, where the trajectory will depend heavily on incoming macro data—especially labour market indicators. Recall that last week’s January jobs report was not released due to the four-day government shutdown in early February.
