Forex News

Commerzbank’s Carsten Fritsch expects OPEC+ to only slightly increase Oil production from April, with Russia underproducing and Kazakhstan constrained, so a modest quota hike should not pressure prices. He highlights that US–Iran tensions and the risk of a US strike are likely to keep Oil well supported in the near term despite marginal supply increases.

OPEC+ caution and US–Iran tensions

"The eight OPEC+ countries with voluntary production restrictions will decide this weekend how to proceed with oil production in April. Statements from OPEC+ sources indicate that production quotas could be increased by 137,000 barrels per day. This is because the oil market is less oversupplied than expected at the beginning of the year, as a considerable portion of the oversupply is difficult to sell due to sanctions and is being stored in tankers at sea. In addition, there have been supply disruptions, such as recently in Kazakhstan."

"The OPEC+ decision is complicated by the US-Iran conflict, as it is currently difficult to predict whether there will be supply disruptions and how severe they will be. This also argues in favour of a gradual expansion of production. However, this is unlikely to be fully implemented, as Russia is already producing significantly less than agreed."

"The announcement of a slight increase in production by OPEC+ is therefore unlikely to weigh on oil prices."

"More important for oil prices at present are the news on the conflict between the US and Iran. Although yesterday's talks did not result in a breakthrough, they were viewed positively by the mediator Oman and Iran. Another round of talks is scheduled for next week."

"The continuing risk of a US military strike is therefore likely to remain the dominant issue on the oil market, which suggests that oil prices will remain well supported."

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

• The US Dollar Index (DXY) shows a limited response despite stronger US PPI data.
• Core PPI jumps 0.8% MoM, reinforcing sticky inflation concerns.
• Markets dial back June cut odds below 50%.

The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, shows a limited reaction to the stronger-than-expected US Producer Price Index (PPI) data released on Friday. At the time of writing, the index trades near 97.65, easing from the daily high around 97.85.

Data released by the US Bureau of Labor Statistics showed that the headline PPI increased 0.5% MoM in January, exceeding the 0.3% forecast. December’s reading was revised lower to 0.4% from 0.5%.

On an annual basis, PPI rose 2.9%, above the 2.6% expectation, though slightly below the previous 3% print.

Core PPI, which excludes food and energy, climbed 0.8% MoM, sharply higher than the 0.3% estimate. December’s core reading was revised lower to 0.6% from 0.7%. On a yearly basis, core PPI accelerated to 3.6% from 3.3%, topping the 3% forecast.

The hotter-than-expected producer price data reinforced the view that underlying inflation pressure remains persistent, strengthening the case for the Federal Reserve (Fed) to remain patient before resuming interest rate cuts, as officials wait for clearer evidence that inflation is moving sustainably back toward the 2% target.

Markets increasingly expect the Fed to keep interest rates unchanged at the March and April meetings, while the probability of a June rate cut has fallen below 50%, according to the CME FedWatch Tool. Traders now see July as the more likely point for the Fed to resume its easing cycle, with around 50 basis points of total rate cuts priced in by year-end.

Diminishing expectations for near-term interest rate cuts are lending short-term support to the Greenback, helping cushion the downside and partially offset concerns over renewed trade policy uncertainty.

Earlier this week, a fresh 10% global tariff took effect, just days after the US Supreme Court ruled against the Trump administration’s earlier use of emergency powers to impose tariffs.

Broader structural headwinds continue to cap any sustained recovery in the US Dollar. Major central banks are reducing their USD holdings amid concerns over US President Donald Trump’s protectionist trade policies and attacks on the Fed's independence.

ING’s James Knightley expects upcoming US ISM surveys to soften from January’s strength, reflecting weaker regional Federal Reserve signals. He argues the economy is truly adding about 50,000 jobs per month, with private education and healthcare dominating gains, and sees the unemployment rate edging up to 4.4%. ING still anticipates no Federal Reserve rate cut before June.

Jobs breadth, ISM signals and Fed path

"The ISM reports were both very robust in January, but the regional Federal Reserve surveys have painted a slightly softer picture for the economy in February, and we expect that to be reflected in the ISMs."

"We believe the underlying story is that the economy is adding around 50,000 jobs per month, but that private education & healthcare services continue to be the main source of employment – accounting for around 70% of all the jobs added over the past three years."

"The lack of breadth of job creation is a concern, and we expect the unemployment rate to tick back up to 4.4% after the surprise drop last month."

"None of this will be enough to trigger imminent Fed rate cuts, with the next move unlikely before June, in our view."

"Still, our view is that it would take quite a lot to get the Fed thinking about an imminent rate cut."

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

• USD/CAD trades around 1.3680 on Friday, virtually unchanged on the day.
• US Producer Price Index inflation slowed to 2.9% YoY in January, beating market expectations.
• Canada’s Gross Domestic Product contracted by 0.6% in the fourth quarter, versus forecasts for no growth.

USD/CAD trades around 1.3680 at the time of writing on Friday, virtually unchanged on the day, as investors digest a fresh batch of macroeconomic data from the United States (US) and Canada.

In the US, producer price inflation sended mixed signals. The Producer Price Index (PPI) eased to 2.9% YoY in January, down from 3% in December, according to data released by the Bureau of Labor Statistics (BLS). However, the reading came in above market expectations of 2.6%, highlighting more persistent underlying price pressures than anticipated. On a monthly basis, the index rose by 0.5% after a revised 0.4% increase in December, while the index excluding food and energy climbed 3.6% YoY, also exceeding forecasts.

Despite the firmer-than-expected figures, the US Dollar Index (DXY), which measures the performance of the US Dollar against a basket of six major currencies, remains capped below the 98.00 mark and shows no significant reaction. This relative stability limits moves in USD/CAD, as traders appear to be waiting for clearer signals regarding the monetary policy path of the Federal Reserve (Fed).

In Canada, the picture is more negative. Gross Domestic Product (GDP) contracted at an annualized rate of 0.6% in the fourth quarter, following a revised 2.4% growth in the previous quarter, according to Statistics Canada. The consensus forecast had pointed to flat growth. On a quarterly basis, the economy declined by 0.2%, reversing the 0.6% expansion recorded in the third quarter. The statistical agency notes that annual growth was weighed down mainly by lower exports, particularly to the United States.

BNY’s Head of Markets Macro Strategy Bob Savage notes Australia’s January financial aggregates show total credit up 0.5% month-on-month and 7.7% year-on-year, with housing and business credit both accelerating on an annual basis. Broad money growth has also picked up. However, he argues these figures are unlikely to alter the Reserve Bank of Australia’s current policy stance, leaving AUD/USD modestly firmer.

Credit expansion not shifting RBA stance

"Australia’s financial aggregates in January showed total credit rising 0.5% m/m, easing from 0.8% in December, while the y/y rate accelerated to 7.7% from 6.5% in January last year."

"Housing credit increased by 0.6% m/m and 7.0% y/y, compared with 0.7% m/m and 5.6% y/y previously."

"Business credit grew 0.5% m/m, down from 1.0%, with annual growth strengthening to 9.4% from 8.9%."

"Broad money expanded 0.6% m/m, up from 0.5%, and rose 7.4% y/y, compared with 5.2% a year earlier."

"The figures are unlikely to change the current RBA view on policy."

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

• Canada's GDP contracted in Q4 after expanding in Q3.
• USD/CAD remains within a tight daily trading channel below 1.3700.

Canada's real Gross Domestic Product (GDP) contracted at an annualized rate of 0.6% in the fourth quarter, Statistics Canada reported on Friday. This print followed the 2.4% growth recorded in the previous quarter and came in below the market expectation of 0%.

On a quarterly basis, GDP contracted by 0.2% after the third quarter's 0.6% expansion.

"Real GDP increased 1.7% in 2025, the slowest pace of annual growth since the decline in 2020. Lower exports, particularly to the United States, were the main contributor to the slower rise in GDP in 2025," the press release read.

Market reaction

USD/CAD largely ignored these figures and was last seen trading unchanged on the day at 1.3680.

• EUR/GBP extends gains as Sterling weakens on political uncertainty.
• Soft UK consumer confidence and dovish BoE expectations weigh on Sterling.
• German inflation cools, but the Euro remains supported amid a steady ECB outlook.

The Euro (EUR) ticks higher against the British Pound (GBP) on Friday, with Sterling under broad pressure as renewed political uncertainty in the United Kingdom (UK) dampens investor sentiment. At the time of writing, EUR/GBP is trading around 0.8771, hovering near its highest level since December 19.

The UK Labour Party lost the parliamentary by-election in the Greater Manchester seat of Gorton and Denton, a constituency it had represented for nearly 100 years.

The unexpected defeat has increased scrutiny on Prime Minister Keir Starmer’s leadership and has fueled internal discussions within the Labour Party about the possibility of a leadership challenge ahead of the next general election.

On the data front, the latest GfK Consumer Confidence index fell to -19 in February, down from -16 in January, missing the forecast of -15.

In the Eurozone, softer German inflation data did little to temper the bullish tone in EUR/GBP. Preliminary data showed Germany’s Consumer Price Index (CPI) rose 0.2% MoM in February, below the 0.5% forecast, though slightly higher than the previous 0.1% increase. On an annual basis, CPI eased to 1.9% YoY, down from 2.1%, missing expectations of 2%.

Meanwhile, the preliminary Harmonized Index of Consumer Prices (HICP) climbed 0.4% MoM, undershooting the 0.5% forecast but rebounding from -0.1% previously. The annual HICP rate eased to 2.0% from 2.1%.

On the interest rate outlook, growing expectations of a more dovish outlook from the Bank of England (BoE) are also weighing on the Pound. Markets are increasingly pricing in the possibility of a rate cut at the March meeting, amid cooling inflation and deteriorating labor market conditions.

In contrast, the European Central Bank is widely expected to keep interest rates unchanged through the rest of 2026, as inflation stabilizes below the 2% target.