Forex News
Rabobank’s Bas van Geffen discusses how EU leaders are increasingly considering a multispeed European Union to address structural reforms and competitiveness. The informal summit produced no decisions, but Von der Leyen’s planned “One Europe, One Market” roadmap and potential use of enhanced cooperation signal a willingness to move ahead without full unanimity, especially on corporate legislation and savings and investment initiatives.
EU weighs enhanced cooperation tools
"However, President of the European Commission Von der Leyen promised to present a “One Europe, One Market” roadmap at the next formal summit, in March."
"Both Von der Leyen and European Council President Costa expressed their preference to move forward with all 27 EU member states."
"In particular, Von der Leyen believes that this may be required for the adoption of the 28th regime, a harmonized set of corporate legislation across the bloc to make it easier to scale up across borders – although the fact that this will coexist next to national law (its not the “One Regime”) may add some complexity as companies have to choose between the two regimes."
"Von der Leyen has said that if no progress is made on the Savings and Investment Union this year, she will push ahead with a smaller group of countries."
"In any case, whether Eurobonds make the list or not, it is clear that in an attempt to strengthen the Union, the EU is now willing to move less in unison."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Annual inflation in the US, as measured by the change in the Consumer Price Index (CPI), declined to 2.4% in January from 2.7% in December, the US Bureau of Labor Statistics (BLS) reported on Friday. This print came in below the market expectation of 2.5%.
Follow our live coverage of the US Consumer Price Index data and the market reaction.
On a monthly basis, the CPI rose by 0.2% in January following the 0.3% increase recorded in December. The core CPI, which excludes volatile food and energy prices, increased by 2.5% on a yearly basis, matching analysts' estimate.
Market reaction to US CPI inflation data
The US Dollar (USD) Index retreated from session highs with the immediate reaction to the inflation data and was last seen trading virtually unchanged on the day at 96.90.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.52% | -0.27% | -2.80% | -0.44% | -0.88% | -0.41% | -1.18% | |
| EUR | 0.52% | 0.25% | -2.42% | 0.09% | -0.37% | 0.11% | -0.67% | |
| GBP | 0.27% | -0.25% | -2.38% | -0.16% | -0.62% | -0.14% | -0.91% | |
| JPY | 2.80% | 2.42% | 2.38% | 2.55% | 2.08% | 2.58% | 1.67% | |
| CAD | 0.44% | -0.09% | 0.16% | -2.55% | -0.35% | 0.03% | -0.75% | |
| AUD | 0.88% | 0.37% | 0.62% | -2.08% | 0.35% | 0.48% | -0.30% | |
| NZD | 0.41% | -0.11% | 0.14% | -2.58% | -0.03% | -0.48% | -0.77% | |
| CHF | 1.18% | 0.67% | 0.91% | -1.67% | 0.75% | 0.30% | 0.77% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
This section below was published as a preview of the US Consumer Price Index (CPI) data at 05:00 GMT.
- The US Consumer Price Index is expected to rise 2.5% YoY in January.
- Core CPI inflation is expected to ease modestly, but above the Fed’s goal.
- EUR/USD could test its recent multi-year highs at 1.2082.
The US Bureau of Labor Statistics (BLS) will publish January’s Consumer Price Index (CPI) data on Friday, delayed by the brief and partial United States (US) government shutdown. The report is expected to show that inflationary pressures eased modestly but also remained above the Federal Reserve’s (Fed) 2% target.
The monthly CPI is forecast to remain steady at 0.3%, matching the December figure, while the annualized reading is expected at 2.5%, slightly below the 2.7% posted in the previous month. Core readings are expected at 0.3% MoM and 2.5% YoY, little changed from the previous 0.2% and 2.6%, respectively.
Inflation data is critical for Fed officials, although the CPI is not their preferred gauge. Policymakers base their monetary policy decisions on the Personal Consumption Expenditures (PCE) Price Index. Nevertheless, CPI figures are a strong indication of where price pressures are heading and therefore tend to trigger relevant market movements.
What to expect in the next CPI data report?
The anticipated figures are not expected to produce any shock. The CPI has been below 3% since mid-2024, but stubbornly above the desired 2%. The lowest reading in the last two years was 2.3%, posted in April 2025. One might believe that, as long as inflation remains within those parameters, the impact on financial markets will be moderate.
But it is not as simple as that. Indeed, a 2.3% or a 3% print will shake the foundations. The nearer the figure comes to the 2% goal, the higher the chances of a soon-to-come interest rate cut. Conversely, a reading near 3% wouldl dilute the odds for lower rates. That would be easy to interpret if it weren’t for US President Donald Trump’s desire for lower rates and his actions over the last year, which have sought to force policymakers' hands to the point of calling into question the Fed’s independence.
President Trump has nominated Kevin Warsh as the next Fed Chair, as Jerome Powell's term ends in May. Powell has refused to reduce interest rates simply because President Trump wants them to. Trump hopes that putting a hawk at the head of the Fed will support his case. Still, if inflation is closer to 3% than 2%, Warsh would have a hard time pleasing Trump.
Meanwhile, a strong Nonfarm Payrolls (NFP) January report adds another factor to the Fed’s picture. The surprise improvement in the employment sector is good news for the Fed, which has lately worried that the labor market had cooled a bit too much. Yet it’s also worth reminding that an overly strong labor market also works against interest rate cuts. A strong reading that followed several weak ones is not a concern. But a couple more strong NFP reports are likely to take their toll on rate moves.
How could the US Consumer Price Index report affect EUR/USD?
Back to the CPI release, market participants will rush to price in the Fed’s potential response to the data as soon as it is released. A reading in line with the market expectations will have no material impact on the USD trend. A yearly reading of 2.4% or below would be considered extremely positive and boost the odds for an interest rate cut, while spurring demand for the USD. On the contrary, a reading of 2.7% or higher will diminish the odds for lower rates and trigger broad USD weakness.
Valeria Bednarik, FXStreet Chief Analyst, notes: “Ahead of the US CPI announcement, the EUR/USD pair consolidates just below the 1.1900 mark. The daily chart shows the positive momentum receded, but also that buyers hold the grip, as the pair continues developing well above all its moving averages, with the 20-day Simple Moving Average (SMA) providing dynamic support in the 1.1820 region. The same chart shows technical indicators remain within positive levels, but are losing their upward slopes. Finally, the pair has retreated for three consecutive days on approaches to the 1.1930 level, converting the area into a relevant resistance zone.”
Bednarik adds: “A clear advance beyond 1.1930 should result in a test of the 1.1980 level, en route to the recent multi-year high at 1.2082. On the other hand, a clear breach of the 1.1800-20 price zone should open the door to a steeper decline, initially targeting 1.1760 and heading towards the 1.1700 threshold.”
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
- EUR/GBP rebounds from the 0.8700 handle, supported by in-line Eurozone Q4 GDP and firmer labour data.
- UK growth misses expectations, keeping sentiment around the Pound mixed as BoE easing expectations linger.
- Diverging policy signals from the ECB and the BoE keep the cross underpinned.
EUR/GBP rebounds from earlier daily lows on Friday, with the Euro (EUR) drawing modest support from preliminary Eurozone Gross Domestic Product (GDP) data that showed the economy growing in line with expectations in the fourth quarter of 2025. At the time of writing, the cross trades around 0.8717, after bouncing from the 0.8700 psychological level.
Data released by Eurostat showed that the Eurozone economy expanded by 0.3% QoQ, matching both market expectations and the previous estimate. On an annual basis, GDP rose 1.4% in Q4, 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.
The data also supports the case for the European Central Bank (ECB) to keep policy unchanged. Speaking on Thursday, ECB Governing Council member Gabriel Makhlouf said that inflation is “basically on target” and that the central bank is in a good place on policy.
In the United Kingdom, data released on Thursday by the Office for National Statistics showed that the economy grew by 0.1% QoQ in the fourth quarter, missing expectations for a 0.2% rise. On a yearly basis, GDP growth slowed to 1% in Q4, down from 1.2% previously.
The softer UK data keeps sentiment around the British Pound (GBP) mixed, while dovish Bank of England (BoE) expectations and a steady ECB stance. BoE chief economist Huw Pill said on Friday that policy should focus on underlying inflation, adding that it currently looks closer to 2.5% rather than 2%. He said the monetary policy stance remains restrictive and that holding rates at current levels, rather than raising them further, should be enough to bring inflation under control.
Adding to the supportive tone, risk reversals, which show the difference between the cost of buying the Euro against the Pound and selling it, rose to 78.8 basis points on Tuesday, the highest level since late September, signalling a stronger positive bias toward the Euro, Reuters reported earlier on Friday.
Danske Research Team highlights Norway’s Q1 oil investment survey, which points to higher-than-expected nominal spending in 2026 and 2027. After adjusting for cost inflation, investment volumes appear stronger than Norges Bank’s December projections. The team also notes Norges Bank’s plan to publish MPC discussion summaries, which could improve market guidance and reduce meeting-day volatility.
Upbeat capex survey and more NB transparency
"In Norway, the Q1 oil investment survey revealed that oil companies expect to invest NOK 255.3 billion in 2026 and NOK 201.1 billion in 2027, indicating nominal growth of 0.6% and 2.0%, respectively."
"Adjusting for cost inflation, the figures suggest slightly stronger growth than Norges Bank's December MPR volume estimate for 2026 at -3%, and significantly stronger for 2027 at -6%."
"As expected, there was no new monetary signals in NB governor Wolden Bache's annual address last night."
"The most interesting point short term is that Norges Bank is getting more transparent: 'In the course of this year, we will begin to publish a summary of the Committee's discussions.'"
"This could improve market guiding and avoid some of the volatility occasionally seen on the day of the MPC-meeting the last couple of years"
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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