EUR / USD
EUR/USD traded within a narrow range of roughly 0.32% over this three-day stretch, moving between a low near 1.1848 and a high around 1.1882. This signalled a marked contraction in volatility. The pair drifted modestly lower during the Asian and early European sessions on February 13, touching its trough around mid-afternoon before recovering into the late New York session, when the heaviest volume was concentrated during the early US hours. Price currently sits at approximately 1.1868, trading above all the moving averages, which act as immediate support, with the 20 SMA at 1.1850.
Currency markets are reflecting a growing divergence in monetary policy expectations, with the dollar remaining historically lower as markets price in a stronger rate-cutting cycle from the Fed. US inflation rose by 2.4% YoY, the slowest increase since May 2025, with shelter price increases as the main driver. Core inflation grew by 2.5% YoY, marking the slowest pace since March 2021. Expectations for further Fed cuts this year have accelerated, with 2-year US Treasury yields dropping toward 3.40%, the lowest since October. Markets are now pricing in slightly more than two rate cuts from the Fed in 2026, with the first expected in the June-July period.
This environment sets the stage for this week’s packed economic schedule, which could inject pockets of volatility into the EUR/USD pair. There is a strong bias for cautious strength, as softening labour data continues to weigh on dollar prospects.
USD / JPY
USD/JPY declined from approximately 153.40 in the early hours of February 13 to a weekend low near 152.59, a range of roughly 0.45%, before recovering to around 153.15 by mid-February 16. This move leaves the pair trading well below key resistance at the 50-day SMA (~156.11) and 20-day SMA (~155.12). The daily RSI, sitting near 34, reflects notably oversold conditions relative to recent weeks.
Sanae Takaichi has won a historic election victory, giving her a strong mandate for economic reform. This marks a significant political shift, as she signals a departure from fiscal austerity toward demand-side stimulus. Her proposals include tax cuts on consumption goods and increased government investment in strategic sectors. This represents a notable policy change for Japan, which has historically prioritised fiscal consolidation.
BOJ board members indicate the 2% inflation target may be achieved as early as spring 2026 if wage growth remains robust, and expectations for multiple rate hikes are building, providing a fundamental boost for the yen. We expect the pair to bounce back technically but remain below the 155 resistance in the near term.
GBP / USD
GBP/USD traded within a notably compressed range of approximately 0.4% over this period, reflecting subdued volatility. Price opened near 1.3604 on Friday the 13th, dipped to a session low around 1.3609 during the New York afternoon, and then rallied into the 1.3650–1.3658 zone by late Friday evening. The weekend gap saw it reopen slightly lower near 1.3633. The pair currently sits at roughly 1.3642, trading above the 20-day SMA at 1.3633, which has climbed to elevated levels, suggesting near-term support.
The BOE faces a tricky balancing act. Recent rate cuts have supported growth, but wholesale inflation is rising. The central bank must decide whether these are temporary supply-side shocks or signs of persistent inflation. This backdrop makes aggressive rate cuts less likely in the near term; we expect a more cautious, data-dependent approach. Market expectations for BOE cuts have likely moderated amid these inflation signals, but the next cut is still expected in April 2026. We expect the pair to soften over the medium term, with near-term support provided by a weaker dollar in the meantime.
Economic Calendar
