The US Dollar fell over the week, even though January Nonfarm Payrolls showed 130K new jobs and the Unemployment Rate dipped to 4.3% from 4.4%. The DXY traded near 96.80, down from 97.15 after a softer January CPI. US December PCE is due on Friday. EUR/USD traded near 1.1880 after the Eurozone flash Q4 GDP print came in at 1.4% year-on-year, above the 1.3% forecast. AUD/USD hovered near 0.7080, close to a three-year high. Australia’s Business Confidence and Wage Price Index are due Wednesday, followed by jobs data and the flash S&P Global Composite PMI on Thursday. USD/CAD traded near 1.3600 ahead of Canadian December Retail Sales on Friday. USD/JPY traded near 152.80, with Japan’s National CPI due Thursday. GBP/USD sat near 1.3650, with UK PPI and RPI on Wednesday and UK Retail Sales on Friday. Gold traded near $5,038 after recouping most of Thursday’s losses, but it remained below January’s $5,598 peak. Scheduled speakers run from 14–20 February, including Lagarde on 14, 15, and 20 February, multiple Fed speakers, and RBNZ’s Breman on 19 February. Key data include Japanese flash Q4 GDP (15 February), RBA minutes and Canadian January CPI (17 February), the RBNZ rate decision and FOMC minutes (18 February), and Australia employment and unemployment (19 February). Other releases include UK Retail Sales, German and Eurozone PMIs, US December core PCE, and February US S&P Global PMIs (20 February). Looking back to this time in 2025, the US Dollar was under heavy pressure around 96.80. Softer inflation data led markets to expect the Federal Reserve to cut rates soon. That view drove positioning for months and reinforced the idea of a weaker dollar. Today the picture is different. The US Dollar Index has been more resilient and has recently traded above 104.50. The rate cuts expected in 2025 did not happen as quickly as many thought. Core inflation stayed sticky through year-end and remained above the Fed’s 2% target. Traders should be cautious about being short USD. Options markets also show lower implied volatility for DXY than the spike seen in the middle of last year. The Eurozone surprised to the upside in late 2024, but more recent Q4 2025 data points to slowing momentum, with GDP growth revised down to just 0.1%. That leaves the European Central Bank in a tough spot and increases the odds it cuts rates before the Fed. This policy gap could keep pressure on EUR/USD. Traders may look at bearish setups or consider buying puts ahead of upcoming ECB speeches. The Reserve Bank of Australia sounded hawkish last year, but that tone has eased. Australia’s latest quarterly CPI for Q4 2025 was 4.1%, down from above 5% earlier in the year, and the RBA is now clearly on hold. That removes a key support for AUD/USD and makes the pair more sensitive to shifts in global risk sentiment. Sterling is still driven by domestic inflation. While inflation has come down from its peak, it remains the highest among G7 nations as of January 2026. That keeps pressure on the Bank of England to hold rates high, even as growth stalls. The result is often choppy GBP/USD price action, where range-trading can work better than chasing breakouts. The gold rally seen in early 2025 has cooled. High US interest rates raised the opportunity cost of holding non-yielding bullion. Even with last year’s elevated prices, gold has not been able to break those highs and has instead settled into a new range as markets accept a “higher-for-longer” rate path. Real yields remain a key driver, and a sustained drop in real yields could bring buyers back to gold. In the weeks ahead, the main theme is central-bank divergence. That is a clear change from last year, when most markets were focused on inflation in a similar way. One approach is to trade pairs that reflect this split, such as being long USD versus currencies with more dovish central banks, like the EUR or CAD. Volatility could jump around major data, especially the US PCE report, so using options to define risk may be sensible.

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