USD: Greenback slips as tech nerves grow
The greenback fell on Tuesday, turning lower after a recent recovery from four-year lows, with US sharemarkets hit by concerns about technology valuations.
The US’s tech‑focused Nasdaq fell for the third time in four sessions, with an ongoing shift away from technology firms defining stockmarket trading in the US so far in 2026.
Additionally, uncertainty around the path of US rate cuts – following the nomination of Kevin Warsh for Federal Reserve chair – also weighed on sentiment.
The S&P 500 fell 0.8% while the Nasdaq lost 1.4%.
The US dollar was mostly lower, with the Aussie and kiwi the strongest performers following yesterday’s Australian rate hike.
EUR: From global moves to domestic risks
Yesterday was a relatively quiet session for EUR/USD, with the pause in US data releases this week stalling the recent USD driven momentum that had pressured the pair. It therefore consolidated just above the 1.18 mark, which acted as a key short-term support level.
Where the euro did struggle was against commodity-linked currencies. Precious metals rebounded after their steepest drop in decades, lifting metals centric FX such as ZAR and AUD, with the latter also supported by a hawkish RBA. The move spilled over into the broader commodity beta complex, including NOK, leaving the euro softer on the crosses.
For the remainder of the week, focus shifts to domestic developments, with today’s preliminary release of eurozone inflation expected to tick down to 1.7% in January from 2.9% in December. While we believe it is premature for the ECB to directly reference possible intervention on the back of recent euro’s strength at the policy meeting tomorrow, today’s inflation print will be instructive for how markets may interpret any comment on this topic. The expected low headline figure is mostly a base effect, but core is where attention should fall. Should core dip below December’s 2.3% reading – perhaps a services-led move – markets may place more weight on any sign of openness from Lagarde toward additional easing linked to a stronger euro. Our base case however remains a muted euro reaction following the press conference.
For today, and over on the US side, we will also keep an eye on the ADP release, one of the only reads on the US labour market this week as a result of the US government shutdown, which ended yesterday (let’s not forget ISM services survey today and the Challenger layoffs tomorrow too). Any significant surprise could see a test of 1.18, although we remain doubtful of any substantial break this week.
GBP: No data, no doves
A paucity of UK macro data ahead of tomorrow’s BoE meeting is no good news for doves and sterling sellers alike. In fact, very little has changed since the previous meeting in December. Since then, soft labour market figures have been offset by firmer readings in PMIs and retail sales. December inflation also came in slightly above expectations. Meanwhile, the Bank’s Decision Maker Panel survey still shows corporate wage growth expectations at 3.7%, broadly in line with recent months. That survey featured prominently in the last set of minutes as a key source of caution.
Sterling has enjoyed bullish momentum since November 2025. The initial trigger was the unwinding of short positions built up ahead of the UK Autumn Budget, but support is now becoming more fundamentally justified. The Bank of England remains undecided and continues to struggle to commit to further easing while inflation is still elevated, keeping the pound supported.
This points to not only a steady policy stance at the BoE policy meeting tomorrow but also very little clarity on the medium‑term policy outlook. The likely outcome for sterling is indifference, with a slight upward bias, as signs of further easing in the medium term gradually dissipate. Markets remain laser focused on the inflation narrative and are parsing for signs of further easing that would point to a more committed dovish MPC. Unfortunately, there is only one more inflation report before the March policy meeting, released this month (18th), and we doubt it will be sufficient to build stronger consensus around easing in March, leaving a cut as an April affair. This is why we remain mildly bullish GBP in the medium term.
Market snapshot
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Key global risk events
Calendar: February 2-6
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