Forex News

ING’s FX team maintains a bearish Dollar baseline for 2026, expecting lower front-end US rates and softer US growth in the second half of the year to support EUR/USD. With Eurozone data seen improving relative to the US and risks concentrated on the US side, the bank projects EUR/USD to grind higher into year-end.

Fed cuts and Eurozone resilience support upside

"Our baseline view for the dollar is a bearish one for the remainder of 2026. USD hedging should keep up at a good pace thanks to lower front-end rates (we expect two Fed cuts this year), and a slowdown in US growth in the second half of the year will, in our view, coincide with upbeat eurozone figures, lifting EUR/USD."

"We don’t expect this year’s dollar decline to match 2025’s in magnitude, but the concentration of risks in the US – from equity valuations to fiscal and political risks ahead of the midterm elections – means the risks remain on the downside for the greenback. We target 1.22 in EUR/USD by year-end."

"We agreed with the report’s findings that high dollar hedging costs had kept investor dollar hedge ratios low, although it was notable – looking at EUR/USD hedging levels anyway – that investors were relatively underhedged early last year."

"Our baseline assumes that the cyclical factor of a 50bp Fed cut versus unchanged ECB rates will see dollar hedging costs narrow further and should be consistent with dollar hedge ratios being raised to around 74% by the end of the year."

"It’s not that the US outlook is deteriorating. It’s just that, for the first time in a long time, there are some more attractive opportunities overseas. This theme is consistent with a benign dollar decline."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Nomura’s Andrzej Szczepaniak expects Euro area HICP inflation to average just below the ECB’s 2.0% target in H1 2026, mainly on energy base effects, with little surprise versus consensus. However, he argues that in 2027 and 2028 risks are skewed to the upside, driven by a strong labour market, rising wage pressures and GDP growth above potential.

HICP seen below target before re-accelerating

"European inflation data for February 2026 is released this week (Belgium, France, Spain, Slovenia, Portugal, and Germany) and next."

"We and the consensus expect euro area HICP inflation to on average print marginally below the ECB’s 2.0% target in H1 2026, largely driven by energy base effects."

"However, in 2027 and 2028, we see risks as skewed to the upside largely due to a strong labour market generating upwards wage pressures and GDP growth rising above potential."

"In Germany, risks are skewed to the downside relative to our forecast due to energy prices, and the risk of further pass-through of reduced electricity grid prices, albeit upside risks from services inflation exist."

"In France, the jump in February relative to January is almost entirely base effects owing to energy prices, and we see downside risks due to a reduction in regulated energy prices"

"Meanwhile, we think the risks for Spain are finely balanced."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

• Gold climbs to a three-week high above $5,150 on renewed safe-haven demand.
• US tariff escalation and rising US-Iran tensions lift geopolitical risk premium.
• Technical momentum strengthens after a decisive break above $5,100.

Gold (XAU/USD) jumps to a three-week high on Monday as fresh uncertainty over United States (US) trade policy and escalating tensions between the US and Iran boost safe-haven demand. At the time of writing, XAU/USD is trading around $5,150, up nearly 1.0% on the day.

US Supreme Court ruling triggers fresh tariff escalation

On Friday, the US Supreme Court ruled against President Donald Trump’s use of the International Emergency Economic Powers Act (IEEPA) to impose sweeping reciprocal tariffs.

Following the ruling, the Trump administration invoked Section 122 of the Trade Act of 1974, announcing a temporary 10% flat tariff on imports from all countries, which was raised to 15% on Saturday. The duty will take effect on February 24 and can remain in force for 150 days without Congressional approval.

The move revived global trade uncertainty and amplified concerns about US fiscal and policy credibility, prompting investors to diversify into Gold while trimming exposure to US assets.

US-Iran tensions escalate amid military buildup

Meanwhile, uncertainty surrounding US-Iran nuclear talks continues to keep markets on edge, with reports of a large US military buildup in the Middle East raising fears of potential action against Iran. Negotiations are scheduled to resume in Geneva on Thursday.

Iran has indicated it is willing to make concessions on its nuclear program in exchange for sanctions relief and recognition of its right to enrich uranium, aiming to avoid further escalation.

These developments keep geopolitical risk premiums elevated, helping the precious metal extend its recovery. However, stronger follow-through could emerge once Chinese markets return on Tuesday after the Lunar New Year holiday.

Light US data calendar keeps focus on geopolitical risks

On the data front, the US economic calendar is relatively light this week, leaving Gold sensitive to trade and war-related headlines.

Key releases include the four-week average for the ADP Employment Change and the Conference Board Consumer Confidence on Tuesday, followed by President Donald Trump’s State of the Union address on Wednesday, weekly Jobless Claims on Thursday, and the January Producer Price Index (PPI) on Friday.

Last week’s US data showed slower Gross Domestic Product (GDP) growth alongside firm Personal Consumption Expenditures (PCE) inflation, reinforcing the view that the Federal Reserve (Fed) will remain patient before resuming interest rate cuts.

Still, traders expect a total of 50 bps of easing by the end of the year, which could provide longer-term support for Gold.

Technical analysis: XAU/USD extends breakout above $5,100

From a technical perspective, Gold’s near-term outlook has improved after a decisive break above the $5,100 resistance level, which also marked the upper boundary of a symmetrical triangle pattern on the 4-hour chart.

The breakout suggests bullish momentum is building, although it lacks strong conviction. The Relative Strength Index (RSI) is hovering near 69, close to overbought territory, while the Moving Average Convergence Divergence (MACD) histogram remains in positive territory but has begun to contract.

A sustained move above $5,200 would strengthen the bullish case and target the $5,400-$5,500 area. Conversely, a drop back below $5,100 may shift focus to the 100-period SMA at $4,964, with deeper support at $4,850 and $4,650.

• GBP/JPY holds within a two-week range on Monday amid holiday-thinned trade.
• Sterling struggles for direction amid growing BoE rate cut expectations.
• Markets await Friday’s Tokyo CPI and Industrial Production data from Japan.

GBP/JPY trades with a mild negative bias on Monday, as a market holiday in Japan and a sparse UK economic calendar keep liquidity thin. In the absence of fresh catalysts, the British Pound (GBP) is struggling to gain meaningful traction against the Japanese Yen (Yen), leaving the cross confined within a well-established two-week range.

At the time of writing, GBP/JPY trades near 208.80, rebounding slightly from an intraday low of 208.22.

Growing expectations of interest rate cuts by the Bank of England (BoE) are weighing on the British Pound, as traders increasingly anticipate the central bank will lower borrowing costs as soon as March amid softer labor market conditions and easing inflation pressure.

Interest rate cut expectations were further reinforced by dovish remarks from BoE policymaker Alan Taylor earlier in the day. Taylor said there are “two or three more cuts to go before reaching a neutral rate.” He warned that weaker-than-expected productivity growth could pose a risk to the outlook and added that he now sees a risk of inflation undershooting the target. Taylor also said the Bank would respond to any downside shocks.

In Japan, sentiment remains fragile as traders weigh Prime Minister Sanae Takaichi’s fiscal stimulus stance, which could complicate the policy outlook and potentially delay interest rate hikes by the Bank of Japan (BoJ).

At the same time, softer inflation readings released last week added to the cautious tone. Japan’s National Consumer Price Index (CPI) rose 1.5% YoY in January, slowing from 2.1% in December.

Core measures also eased, with CPI excluding food and energy moderating to 2.6% from 2.9%, while CPI excluding fresh food slowed to 2% from 2.4%. The cooling in price pressures strengthens the case for the BoJ to remain patient before raising borrowing costs further.

Looking ahead, the UK economic calendar remains relatively quiet this week, with no major data releases scheduled, although a few BoE policymakers are expected to speak.

In Japan, traders brace for key releases on Friday, including the Tokyo CPI for February, January Industrial Production, Large Retailer Sales, and Retail Trade data.

Brown Brothers Harriman’s (BBH) Elias Haddad notes the Dollar started the week softer after the US Supreme Court tariff ruling, but stresses this move is not yet decisive. The bank keeps a structurally bearish Dollar view on fiscal and trade grounds, while staying cyclically neutral as USD trades in line with rate differentials. Fed funds futures still price 50 bps of easing by year-end, with the Fed seen able to remain patient.

Structural bearish view but cyclical neutrality

"The SCOTUS tariff ruling reinforces our structural bearish USD view because it threatens to worsen US fiscal credibility and risks fueling trade frictions. Cyclically, we remain neutral USD because the dollar is trading in line with rate differentials."

"The risk is the structural drags on USD outweigh the neutral cyclical USD backdrop and pull USD lower and further away from rate differentials, like it did in Q2 last year."

"Fed funds futures continue to fully price in a total of 50bps of easing by year-end. That remains reasonable because US labor demand is weak, upside risks to inflation are fading, and underlying domestic private-sector demand is softening."

"Nevertheless, the Fed can afford to be patient before resuming easing. A big fiscal thrust is expected over Q1 reflecting a boost from the One Big Beautiful Bill Act (OBBBA), there’s no layoff spiral underway, and core services less housing PCE inflation has been sticky between 3.2% and 3.4% since March 2025."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

National Bank of Canada’s (NBC) Angelo Katsoras and Jocelyn Paquet analyze how the Supreme Court ruling and subsequent White House response reshape US trade policy. They note the effective tariff rate briefly fell before a new 15% Section 122 tariff restored most of the prior burden. The report argues the US has likely passed peak tariff levels, but sustained trade restrictions will persist.

Court ruling and Section 122 reshape tariffs

"The Supreme Court’s February 20 decision to invalidate many of the Administration’s tariffs temporarily reduced the average effective rate on U.S. imports from roughly 13.6% to 6.4%. That relief, however, was short-lived."

"Following a proclamation last Friday, the President invoked Section 122 authority to impose a 15% across-the-board tariff, lifting the effective rate back to approximately 12% and largely restoring the previous trade burden."

"Further proof that the United States is now in peak-tariff territory can be seen in the response to the court ruling. Although the administration announced a global 15% tariff, its application was limited to products previously subject to reciprocal tariffs. Exemptions for USMCA-compliant goods were maintained, and an expanded carve-out was introduced for civil aircraft and parts, highlighting the political and economic constraints that now limit the scope for further tariff escalation."

"Although some tariffs may be reduced, it is unlikely that the United States — or other countries — will return to the era of fully liberalised trade seen in recent decades. In the short term, the US is expected to adjust its tariff strategy to preserve its negotiating leverage with trading partners and prevent its debt projections from deteriorating further. The Supreme Court’s ruling has reshaped the legal landscape, but trade policy uncertainty persists."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Rabobank’s Jane Foley highlights renewed Swiss Franc strength at the top of the G10 table following tariff-related uncertainty, underlining Switzerland’s classic safe haven credentials. Persistent CHF appreciation is seen as a headwind for exports and investment, with markets pricing only a slim chance of negative SNB rates and some risk of FX intervention. Rabobank trims its 3‑month EUR/CHF forecast to 0.91.

Safe haven flows and policy trade offs

"The CHF is back at the top of the G10 performance table on a 1-day view on the back of the tariff led uncertainty unleashed last Friday."

"In view of the persistence of currency strength, market implied policy rates suggest that the market continues to see a slim chance that the SNB may cut rates below zero this year."

"There is also the possibility that FX intervention will be employed to counter currency strength."

"We have tweaked our EUR/CHF forecasts by lowering our 3-month forecast to 0.91 from 0.92."

"In addition, overriding the demand about the pros and cons of SNB policy is the risk that the CHF will remain strong as long as geopolitical and trade tensions persist."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Derek Halpenny at MUFG argues that PM Takaichi’s focus on defence, economic security and investment-led growth, alongside efforts to move away from supplementary budgets, is supportive of a gradual BoJ policy normalisation. With the FY2026 budget likely to be passed, MUFG sees a high probability of a BoJ rate hike at the 28 April meeting.

Takaichi agenda underpins Yen-supportive shift

"We may well have seen our last supplementary budget in December and moving toward a more investment-led fiscal policy approach would certainly be more accepted by JGB investors. Importantly, PM Takaichi called for the early enactment of the FY2026 budget asking for “prompt deliberation” by the end of this fiscal year."

"We will watch this closely but having the budget passed and the full details therefore known will certainly increase the prospects of the BoJ being in a position to raise the policy rate at the April meeting."

"The policy focus laid out on Friday to keep pushing for growth and to drive investment-led fiscal spending will likely mean the BoJ will be required to tighten its monetary stance. The probability of a hike at the meeting on 28th April is currently about 70%. If the FY26 budget is passed by then and USD/JPY remains around current levels, the pressure will intensify for the BoJ to act."

"Next week may be when the government announces its picks to replace two BoJ Board members – Asahi Noguchi and Junko Nakagawa. Both on the dovish side of the spectrum and hence we could see overall balance of the Board turn a bit more hawkish. The nationwide CPI data on Friday was a little weaker than expected but we do not see that altering the prospects of an April rate hike – continued weaker prints would certainly put doubts on further hikes but not at this stage when the policy stance still requires further tightening."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)