Forex News

• GBP/USD holds firm as softer CPI boosts June Fed rate-cut expectations.
• US inflation cools to 2.4%, extending disinflation trend despite resilient labor market.
• Sterling capped by Bank of England easing bets and uncertainty around Keir Starmer.

The GBP/USD pair holds firm at around 1.3620 as the latest inflation report in the United States prompted traders to reprice the likelihood of an interest rate reduction by the Federal Reserve (Fed) at the June meeting. The pair trades flat yet poised to end the week with a minimal gain of around 0.12%.

Sterling holds firm as cooler US inflation data boosts expectations of Federal Reserve easing

The US Consumer Price Index (CPI) in January was cooler than expected, the US Bureau of Labor Statistics reported. CPI dipped from 2.7% in December to 2.4% YoY, while the core figure was aligned with estimates for 2.5%, down from 2.6% in the previous month.

The resumption of the disinflation process pushed traders to price in 63 basis points of Fed easing towards the end of the year, according to Prime Market Terminal data.

Following the data release, the US Dollar Index (DXY) remained steady. The DXY, which tracks the buck’s value against a basket of six currencies, is firm at 96.96.

Now the question is whether the Fed will remain on pause or cut rates, due to the latest inflation print. The labor market has shown signs of strength, while prices are finally edging towards the Fed’s goal. So far, for the June meeting, the odds are 58% chance for a rate reduction.

In the United Kingdom (UK), political turmoil spurred by the linkage of the US ambassador nominees proposed by Prime Minister Keir Starmer to Jeffrey Epstein, put into question Starmer's leadership. Nevertheless, Starmer’s cabinet is on his side, a sign of relief for GBP buyers.

Nonetheless, Pound bulls are not out of the woods, as the recent UK GDP figures and the latest Bank of England (BoE) monetary policy decision have increased the odds for a cut in subsequent meetings.

For the March 19 meeting, there’s a 64% chance for a BoE rate cut of 25 basis points. However, comments from BoE Huw Pill were hawkish, despite acknowledging that the disinflation process is intact, but not complete.

Pill added that core inflation should be the main focus and that policy needs to remain restrictive.

Next week the UK economic docket will feature job data, inflation and Retail Sales. In the US, traders will digest speeches by Fed policymakers, Durable Goods Orders, jobs data, GDP figures and the Fed preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3622. The 50-, 100-, and 200-day simple moving averages slope higher, and price holds above the latest reading at 1.3511, sustaining a positive tone. This alignment supports continued pullbacks, as the trend structure remains firm.

The rising trend line from 1.3035 underpins the advance, offering support near 1.3490. A daily close below that threshold could weaken the structure and open a deeper retracement, while sustained trade above it would allow the pair to extend the climb.

(The technical analysis of this story was written with the help of an AI tool.)

• EUR/CHF trades close to record lows after soft Swiss CPI data.
• Eurozone Q4 GDP meets expectations but fails to lift the Euro.
• Monetary policy outlooks remain steady, with both the SNB and the ECB expected to stay on hold.

EUR/CHF extends its decline on Friday, as Swiss inflation data supports the Swiss Franc (CHF). At the time of writing, the pair is trading around 0.9120, hovering near the all-time low of 0.9095. Meanwhile, in-line preliminary Eurozone Gross Domestic Product (GDP) figures offered only limited support to the Euro (EUR).

Eurozone data showed that the economy grew by 0.3% in the fourth quarter, in line with expectations and unchanged from the earlier estimate. On a yearly basis, growth came in at 1.4%, slightly above the 1.3% forecast.

The labour market also showed steady momentum, with Employment Change holding at 0.2% QoQ in the fourth quarter, above the 0.1% forecast, while annual employment growth held at 0.6%, in line with expectations.

In Switzerland, data published by the Federal Statistical Office showed that the Consumer Price Index (CPI) fell 0.1% MoM in January, missing expectations for 0.0% and easing from a flat reading in December. On a yearly basis, CPI held steady at 0.1%, in line with both the market forecast and the previous month.

Inflation remains at the lower end of the Swiss National Bank's (SNB) target range, reinforcing expectations that the central bank will keep interest rates unchanged at its March meeting and through 2026.

Meanwhile, the ECB is also widely expected to keep policy on hold for an extended period. A Reuters poll conducted between February 9-12 showed that 66 out of 74 economists expect the central bank to hold its deposit rate at 2% through 2026, and no change is expected before 2027.

Bank of England (BoE) Chief Economist Huw Pill said on Friday he does not see a collapse in activity, citing forward-looking indicators at an event hosted by Santander, a bank, in London.

Key takeaways:

The key question for me is whether firms' wage and price-setting plans are stabilizing at levels slightly higher than what is consistent with a 2% CPI.

Underlying inflation appears to be more like 2.5%, not 2%.

Growth in the UK is positive, but it is not very dynamic; there is a strong cyclical component.

We are not seeing a collapse in activity, and forward-looking indicators do not suggest that this is likely.

Supply constraints may be significant in understanding the lackluster activity.

A significant portion of the rise in the UK unemployment rate is likely to be structural rather than cyclical.”

National Bank Of Canada’s Ethan Currie and Taylor Schleich stress that the U.S. fiscal trajectory remains unsustainable despite additional tariff revenues. The Congressional Budget Office (CBO) now projects more cumulative deficits versus its prior outlook, with the One, Big, Beautiful Bill and stricter immigration policy worsening the picture. Political uncertainty over future tariff policy adds another layer of risk to the U.S. macro backdrop.

Unsustainable deficits and tariff uncertainty

"This won’t come as news, but the U.S. federal government is on an unsustainable fiscal path."

"And even though tariffs were promised to be a source of fiscal consolidation, the broader deficit / debt burden outlook has worsened relative to the CBO’s prior (Jan-25) projections (Chart 2)."

"Taken together, this suggests that the primary deficit could step down over the next decade, though we’d note these projections assume policy stability—which is far from guaranteed, especially in regard to trade."

"While a protectionist agenda may persist, the White House is facing increasing pressure (ahead of midterm elections) to rein in debt, costs, and tariff rates."

"Uncertainty about whether tariffs will remain in place following this administration’s tenure also exists."

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

Rabobank’s Philip Marey argues that Kevin Warsh’s nomination as Fed Chair points to lower US policy rates in 2026, with three 25 bps cuts expected, slightly below the current neutral rate estimate. Marey highlights Warsh’s shift from inflation hawk to dove, his AI-driven neutral-rate argument, and his push to shrink the Fed’s balance sheet and potentially move from ample to scarce reserves.

Warsh tilt to cuts and QT risks

"So while definitely not the most dovish choice that Trump could have made – in fact Warsh was probably the least dovish on the final shortlist of four candidates –, we still think that the new Fed Chair is going to deliver rate cuts."

"We have three cuts of 25 bps each pencilled in for 2026, which would bring the federal funds rate slightly below what the median FOMC participant considers to be the neutral rate."

"In fact, Warsh may also try to convince other FOMC participants to lower their forecast of the neutral rate, based on the AI argument."

"Warsh’s argument is that this is exactly what will force the FOMC to cut policy rates, because this could offset the upward effect at the longer end of the curve."

"On balance, the longer end of the curve could even rise, which would not help solve the “housing recession” that Warsh wants to end through policy rate cuts."

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

• Gold recovers on Friday after a steep drop below the $5,000 handle.
• Soft US CPI data reinforces expectations for Fed rate cuts later this year.
• Technically, XAU/USD holds above the 20-day SMA, with $4,800 acting as initial support.

Gold (XAU/USD) edges higher on Friday as soft US CPI data bolstered expectations for interest-rate cuts by the Federal Reserve (Fed). At the time of writing, XAU/USD is trading around $5,000, rebounding after sliding to a near one-week low on the previous day near $ 4,880.

US CPI puts Fed rate-cut timing in focus

Elevated volatility in the precious metals space is keeping bulls from adding aggressive long positions after the recent correction in Gold's price from record highs around $5,600. Gold fell around 3.5% on Thursday, while Silver (XAG/USD) slumped nearly 11.5%, as broad-based outflows hit risk assets alongside equities and cryptocurrencies.

US inflation came in softer than expected in January. Headline CPI rose 0.2% on the month, below market expectations and easing from December’s 0.3% increase. On a yearly basis, CPI slowed to 2.4% from 2.7%, undershooting forecasts of 2.5%.

CPI excluding food and energy rose 0.3% MoM, in line with expectations and up from 0.2% previously, while the annual core rate eased slightly to 2.5% from 2.6%, matching market forecasts.

In reaction to the data, the US Dollar (USD) gave up its earlier gains and US Treasury yields extended their decline, as traders priced in more than 50 basis points (bps) of easing this year, lending additional support to the non-yielding metal.

At the same time, the broader macro backdrop remains supportive, with persistent geopolitical tensions and continued central-bank buying underpinning demand.

Technical analysis: XAU/USD consolidates near the $5,000 handle

XAU/USD remains in consolidation on the daily chart after the sharp pullback from record highs. Prices are hovering above the 20-day simple moving average (SMA), which also aligns with the middle Bollinger Band at $4,969.20.

Bollinger Bands continue to widen, with the upper band at $5,350.76 and the lower band at $4,587.64, indicating elevated volatility as price gravitates toward the middle line. The Relative Strength Index (RSI) at 53.92 is neutral, signalling balanced momentum.

A failure to sustain gains above the 20-day SMA would keep downside pressure in place, with initial support seen around the $4,800 zone, followed by the lower Bollinger Band near $4,588.
On the upside, bulls would need a clear break above the $5,000-$5,100 area to revive bullish momentum.

(The technical analysis of this story was written with the help of an AI tool.)

ING economists Rafal Benecki and Adam Antoniak note that Poland’s January CPI surprised on the upside due to technical factors and volatile components, but headline inflation remains below the National Bank of Poland target. They argue disinflation is deeply rooted and expect a 25bp rate cut in March, with scope for a lower terminal policy rate.

Polish CPI surprise within disinflation trend

"Poland’s January CPI inflation surprised to the upside due to technical quirks and volatile prices. Still, headline inflation has moderated below the central bank target. The higher-than-expected reading will not prevent a 25bp cut in March as the disinflationary trend is deeply rooted."

"According to the flash estimate for January, Polish CPI inflation declined to 2.2% YoY (ING and market consensus at 1.9% YoY) from 2.4% YoY posted in December. That means that for the second consecutive month, headline inflation was below the National Bank of Poland (NBP) target of 2.5% (+/- 1 perc. point)."

"Further disinflation was mainly driven by a decline in gasoline prices, and fuel fell 7.1% YoY after a decline of 3.1% YoY in December. We see three main reasons why inflation did not drop as much as expected."

"Despite the upward surprise in the annual January CPI inflation, the overall picture of price developments is positive, and disinflationary trends are deeply rooted. That is why we see room for further monetary policy easing."

"We believe that the March NBP macroeconomic projection will paint a much more favourable picture of the inflation outlook than the one presented in December. As a result, the target rate may turn out lower than the 3.50% often mentioned by policymakers in recent weeks."

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

Commerzbank’s Thu Lan Nguyen highlights that German gas storage is only about 25% full, far below past norms, but an outright shortage this winter is still seen as unlikely thanks to flexible LNG imports. However, persistently low storage incentives mean inventories may not reach 90% before next heating season, increasing the risk of winter shortages and price volatility.

Flexible LNG offsets but risks build

"At the beginning of February, gas storage levels in Germany are lower than they have been for a long time. A shortage is unlikely, as the current cold weather would have to continue well into March and suppliers could counteract this with higher imports of liquefied natural gas."

"However, gas storages are likely to be less full in the coming years than in previous years, which will increase the risk of shortages in winter and probably cause prices to fluctuate more."

"As a result, storage facilities are unlikely to be filled to the actual target level of 90% at the start of the new heating period in the course of this year. In fact, the starting position next winter could be even worse than this season."

"If gas storage levels were to fall to critical levels in such cases, European suppliers would be forced to purchase gas at significantly higher prices on the spot market and/or restrictions on consumption would be necessary."

"These would then primarily affect industry in order to protect private households."

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

• EUR/USD claws back part of its earlier losses after soft US CPI data weighs on the Greenback.
• Soft US CPI data reinforces expectations for Fed rate cuts later this year.
• Fed-ECB divergence supports EUR/USD, with the European Central Bank seen holding rates steady.

The Euro (EUR) regains some ground against the US Dollar (USD) on Friday, with EUR/USD clawing back part of its earlier losses as soft US Consumer Price Index (CPI) data pressures the Greenback. The pair is trading near 1.1870 at the time of writing, little changed on the day but still heading for small weekly gains.

US inflation came in softer than expected in January. Headline CPI rose 0.2% on the month, below market expectations and easing from December’s 0.3% increase. On a yearly basis, CPI slowed to 2.4% from 2.7%, undershooting forecasts of 2.5%.

Core inflation was more mixed. CPI excluding food and energy rose 0.3% MoM, in line with expectations and up from 0.2% previously, while the annual core rate eased slightly to 2.5% from 2.6%, matching market forecasts.

In reaction to the data, the US Dollar gave up its earlier gains, while Treasury yields extended their decline as easing inflation pressures bolstered expectations of monetary policy easing by the Federal Reserve (Fed).

The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, is trading near 96.91 at the time of writing, pulling back from an intraday high of 97.15.

US rate futures repriced sharply after the CPI report, with markets now pricing in around 61 basis points (bps) of Fed rate cuts in 2026, up from about 58 bps just before the release. According to the CME FedWatch Tool, markets assign around a 65% probability to the first rate cut being delivered in the June-July window.

Meanwhile, the European Central Bank is widely expected to keep rates on hold through 2026, pointing to a growing policy divergence with the Fed and leaving the EUR/USD tilted to the upside. However, the recent appreciation of the Euro could complicate the outlook.

ECB policymaker Martins Kazaks said on Friday that ECB officials are “in monitoring mode on euro strength” and warned earlier this week that a “sizeable and pacey” appreciation could weigh on the inflation outlook and potentially trigger a policy response.

TD Securities strategists Ryan McKay and Daniel Ghali outline how rising Middle East tensions and Iran-focused scenarios could reshape Oil markets. Drawing on three quarter-centuries of geopolitical risk premia, they map outcomes from a New Deal to Regional escalation, with estimated Brent moves from bearish supply gains to spikes above $100–120/bbl and persistent risk premia.

Iran scenarios drive Oil risk repricing

"New Deal: In this scenario, US-Iran negotiations are successful, potentially resulting in an easing sanctions regime and a commensurate reshuffling of commodity flows. This scenario skews the most bearish for energy prices."

"Clean Break: This scenario describes a quick intervention that prompts regime change, in favor of US interests, analogous to that seen in Venezuela. We would expect a knee-jerk reaction in prices as the operation takes place, but assuming energy infrastructure remains out of scope with no commensurate damage, the implications of this scenario echo that of a nuclear deal, with supply risk premia fading relatively quickly. "

"Unilateral Action: This describes a scenario in which Iran/Israel act unilaterally in what could be seen as akin to the Twelve Day War. This could reignite fears surrounding disruptions at the Strait of Hormuz, or of a broadening regional war. We expect that prices would initially spike ($5-10/bbl) as the operation takes place, in a redux of the price action observed around the Twelve Day War, which ultimately tracked the average path for energy supply risk premia in Middle Eastern conflicts."

"Expanded US Conflict: In this scenario, the US-Iranian conflict is expanded, posing an existential threat to the existing regime, raising risks of disruptions to the Strait of Hormuz. This scenario would cause major price spikes (+$15/bbl) even if disruptions are limited in time."

"Domestic Action: In this scenario, Iranian energy infrastructure is impacted by domestic conflicts. We would expect prices to spike (+$10/bbl) as Iranian supply and exports are severely reduced, potentially resulting in a larger-than-average supply risk premia. "

"Regional escalation: In this scenario, a broader conflict raises risks to energy infrastructure beyond Iranian borders. This would significantly raise energy supply risks (at least +$25/bbl, with prices potentially trading north of the $100-120/bbl range) given the potential for significant supply disruptions across the Middle East alongside increased risks associated with the Strait of Hormuz."

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