In January, the US ADP four-week average employment change rose to 10.3K from 6.5K previously
The United States ADP Employment Change 4-week average rose to 10.3K in January 2024. It was 6.5K in the prior period.
In hindsight, this small rise in January 2024 was an early sign that the labor market was holding up better than expected. That strength kept going through 2024 and 2025. As a result, the Federal Reserve did not cut rates as early as many investors expected. This long stretch of higher rates has shaped the market we trade today.
Savage says lower JGB yields and strong five-year demand have eased fiscal fears, boosting the yen since the February election
Global trading in 2026 has focused on interest rates as a brake on steady equity buying. Bond rallies have not done as much to cushion stock declines. But recent moves in Japanese government bond (JGB) yields suggest this may be changing.
Demand at Japan’s latest 5-year JGB auction rose to a 3.10 bid-to-cover ratio. This was the first increase in demand since September.
Election Driven Market Repricing
After the 8 February election, markets repriced risks tied to fiscal dominance and foreign exchange. Since the vote, Japan’s yield curve has flattened and the yen has strengthened. The yen’s gains have come alongside equity selling linked to profit-taking. Strong domestic bond demand has also kept more money invested inside Japan. USD/JPY 150 is now a key level to watch as the next support for the US dollar. It is also seen as a point where moves in equities and bonds could become less volatile. This article was produced using an AI tool and reviewed by an editor. FXStreet’s Insights Team selects market observations and adds notes from internal and external analysts.Trading Implications And Positioning
Market sentiment has shifted since the February 8 election, which appears to be easing concerns about fiscal policy. This showed up clearly in the 5-year JGB auction, where the bid-to-cover ratio reached 3.10. That is a strong pickup from the roughly 2.5 average seen through much of 2025, and it suggests domestic investors are keeping capital at home. The yen has strengthened by more than 2% against the dollar since the vote, putting the USD/JPY 150 level in focus as key support. Traders may consider buying USD/JPY put options with strikes just below 150 to position for a possible break lower. Another approach is to sell out-of-the-money call spreads, based on the view that yen strength could limit any major dollar rebound. This yen strength is also happening alongside profit-taking in stocks. The Nikkei 225 is down about 4% from its January peak. This points to a classic risk-off rotation. Buying puts on the Nikkei 225 or related ETFs could work as a hedge, or as a direct way to target further unwinding of equity positions. The most important near-term change is the drop in JGB yields and the resulting flattening of the yield curve. This is different from much of 2025, when rising global yields weighed on most assets. Now, Japan’s bond rally is supporting yen strength. In this setup, strategies that pair long yen exposure with short equity positions may do well, since the two trends appear closely linked. Create your live VT Markets account and start trading now.For a second session in a row, EUR falls against USD after weak Eurozone sentiment data disappoints investors
EUR/USD fell for a second straight day and traded near one-week lows around 1.1830. The pair extended its slide from last week’s 1.1925 peak, with selling pressure building after the latest ZEW survey.
Germany’s ZEW Economic Sentiment Index eased to 58.3 in February from 59.6 in January, well below the 65.0 forecast. The current situation gauge improved to -65.9 from -72.7, but still fell short of the -65.7 consensus.
The Eurozone Economic Sentiment Index dropped to 39.4 from 40.8, missing expectations of 45.2. In Germany, HICP fell 0.1% month-on-month in January, while annual inflation rose to 2.1% from 2.0% in December.
The US Dollar kept a slight upward bias as US markets reopened after a long weekend. Traders focused on the New York Empire State Manufacturing Index, with Fed minutes due Wednesday and US GDP and PCE inflation data due Friday.
From a technical view, EUR/USD broke a mid-January support area and tested 1.1830. On the 4-hour chart, the MACD stayed negative and the RSI slipped below 40. Support sits near 1.1775, while resistance is seen around 1.1870 and 1.1890.
Looking back to this time in 2025, EUR/USD was under heavy pressure as Eurozone sentiment weakened. Today, February 17, 2026, the story is starting to change, with recent data pointing to a cautious recovery. For example, Germany’s latest industrial production figures for December 2025 showed a modest 0.4% rebound, hinting that the slowdown may be easing.
The market debate around European Central Bank easing that dominated last year has flipped. With the Eurozone’s core HICP holding at 2.5% in the January 2026 reading, we think markets may be underpricing the chance of a more hawkish ECB later this year. That is a clear shift from the dovish tone that shaped most of 2025.
On the other side, the US Dollar’s mild bullish tone from early 2025 has faded. The Federal Reserve has left rates unchanged in the last two meetings, and the January jobs report showed wage growth cooling to 3.1% year-on-year, the slowest pace since mid-2024. This supports the view that the Fed’s tightening cycle is over.
For derivatives traders, this backdrop argues for reassessing Euro-bearish positions. We see value in medium-term EUR/USD call options with strikes above 1.2000 to position for a possible breakout later this spring. Historically, when the policy gap between the Fed and the ECB begins to narrow, EUR/USD has often moved into multi-month uptrends, as it did after 2021.
With that setup, we expect implied volatility to rise as markets weigh diverging central-bank paths. One way to express a cautiously bullish view is to sell out-of-the-money EUR/USD puts to collect premium. This approach can benefit if spot rises, and it can also benefit from time decay if the pair stays range-bound in the near term.
During the European session, GBP/USD regained half of its earlier losses but remained down 0.23% near 1.3600
GBP/USD recovered about half of its early losses during European trading on Tuesday. Still, it remained 0.23% lower near 1.3600. Earlier, it fell to 1.3551, near a two-week low, after weak UK labour data.
The UK Office for National Statistics said the ILO unemployment rate rose to 5.2% in the three months to December. That was up from 5.1% and the highest level in five years. Markets had expected 5.1%. Job gains also slowed, with 52K jobs added versus 82K previously.
Uk Labour Data Drives Sterling Weakness
The number of people claiming jobless benefits rose by 28.8K in January. Average Earnings Excluding Bonus increased 4.2%, down from 4.6%. Earnings including bonuses also rose 4.2%, down from 4.6%. This was the slowest wage growth in almost four years. On Monday, the pair failed to close above the 20-day simple moving average near 1.3635. Traders are watching support near 1.3500, the 200-day SMA near 1.3440, and Fibonacci support around 1.3340. Markets are also looking ahead to UK inflation data due on Wednesday. Sterling’s moves reflect expectations of a 25 bps Bank of England rate cut in March. Based on this morning’s jobs report, we see a clear bearish signal for the British pound. Unemployment is now at a five-year high, and wage growth is cooling faster than expected. Together, these signals point to a slowing UK economy.Rate Cut Expectations Pressure The Pound
These numbers strengthen our view that the Bank of England is likely to cut rates in March. Overnight index swaps now price an 85% chance of a 25-basis-point cut next month, up sharply from last week. This rising confidence is a major headwind for the pound. This outlook contrasts with the United States, where January retail sales were stronger than expected. This gap in policy direction—BoE easing while the Federal Reserve may hold rates steady for longer—should support the US dollar against the pound. That keeps GBP/USD downside strategies in focus. For derivatives traders, this may be a chance to position for further declines in GBP/USD. One approach is to buy put options expiring in late March or April, aiming for a move below the key 1.3500 support level. This offers downside exposure while keeping maximum risk defined. On the technical side, failing to hold above the 1.3635 moving average is a negative sign. In 2025, during the first BoE rate cuts, the pound often weakened in the weeks before the official decision. A break below trendline support near 1.3500 could speed up losses toward the 1.3440 area. Create your live VT Markets account and start trading now.BBH’s Elias Haddad expects the RBNZ to hold rates at 2.25% and signal earlier hikes, supporting the NZD
The Reserve Bank of New Zealand (RBNZ) is expected to keep the Official Cash Rate (OCR) unchanged at 2.25% while updating its OCR track. The main focus is the new forecast, not the rate decision.
In November, the RBNZ forecast the OCR would stay around 2.25% through 2026. It also projected almost 50bps of rate increases in 2027.
Updated Ocr Track Signals Earlier Hikes
The updated track is expected to bring forward rate hikes, driven by high inflation and a stronger labour market. Swap markets are pricing in 50bps of hikes over the next 12 months. This pricing is seen as supportive for the New Zealand dollar (NZD). The article also notes it was produced with the help of an AI tool and reviewed by an editor. We expect the RBNZ to hold the OCR at 2.25% today. However, traders will be watching the updated forecasts, which may point to earlier rate hikes than previously expected. A more hawkish outlook would likely support the NZD. Recent data backs this view. In the final quarter of 2025, inflation was 4.7%, well above the RBNZ’s 1–3% target range. The labour market has also tightened, with unemployment falling to 3.9%, which can push wages and prices higher.Options Strategies For Nzd Traders
For derivatives traders, this outlook may favour buying NZD call options in the coming weeks. If the RBNZ clearly signals earlier hikes, the NZD could rally. Options offer a way to benefit from that move with defined risk. NZD/USD could retest levels last seen in late 2025. The swaps market is already pricing 50bps of increases over the next year. That means the RBNZ needs a hawkish message just to match current expectations. If the bank sounds cautious or dovish, the NZD could drop sharply, even if only briefly. This may create an opportunity for traders using short-term put options. A similar pattern appeared during the RBNZ’s aggressive hiking cycle that began in late 2021. The NZD often strengthened on expectations of tighter policy, even before rate hikes happened. That history suggests positioning for NZD strength ahead of the updated guidance could be a reasonable approach. Create your live VT Markets account and start trading now.With key US data in focus, the dollar trades rangebound against the yen near 153.00
USD/JPY traded in a familiar range on Tuesday, holding near 153.00. It was rejected from 153.70 during Asia trade, found support near 152.70 (around 100 pips lower), and then moved back toward 153.00.
Overall FX markets were mostly flat, with light volumes early in the week. Trading in Asia was quieter due to Lunar New Year holidays, and U.S. activity followed a long weekend.
Yen Reaction To Japan Gdp
The Yen softened on Monday after Japan released preliminary Q4 GDP data. The economy grew 0.1% quarter-on-quarter after a 0.7% drop in Q3, missing the 0.4% forecast. Year-on-year growth was 0.2%, well below the 1.6% expected. Even after the release, USD/JPY still failed to break above 153.70. Focus then shifted to upcoming U.S. data, including Tuesday’s New York Empire State Manufacturing Index. Markets are also watching the Federal Reserve meeting minutes on Wednesday. Traders will also be looking ahead to U.S. Q4 GDP and the Personal Consumption Expenditures (PCE) Price Index due next Friday. The Yen is influenced by Japan’s economic performance, Bank of Japan policy, yield gaps versus the U.S., and overall risk sentiment. The BoJ’s very loose policy from 2013 to 2024 weakened the Yen, while its gradual policy unwind in 2024 has provided some support.Strategy Implications For Usd Jpy
We remember USD/JPY struggling to find direction around 153.00 in early 2025, when Japanese data was weak. Now things look very different. The pair is consolidating near 135.00 after the Bank of Japan’s major policy shifts over the past year. This setup calls for a different approach in the weeks ahead. The biggest change has been a narrowing in policy divergence. The Bank of Japan has delivered three rate hikes, lifting its main policy rate to 0.25%, a clear break from the ultra-loose era. At the same time, the U.S. Federal Reserve has started easing, with two cuts taking the Fed Funds rate to 4.00% as of last month. This convergence has tightened the spread between U.S. and Japanese 10-year bond yields. The gap is now about 300 basis points, down from more than 400 a year ago. While Japan’s Q4 2024 GDP rose only 0.1%, the recovery looks firmer now. Q4 2025 GDP has increased by a healthier 0.5% quarter-on-quarter, supporting the case for a stronger Yen. For derivatives traders, the trend still points to further downside in USD/JPY. Selling call options, or using bear call spreads with strikes above 138.00, may be a sensible way to earn premium while positioning for limited upside. This approach fits a market that expects rallies to fade. Stay alert to incoming data, especially the next U.S. PCE Price Index. An upside inflation surprise could slow the Fed’s rate cuts and trigger a short-term jump in USD/JPY. For that reason, disciplined risk management on short positions matters in the weeks ahead. Create your live VT Markets account and start trading now.EUR/JPY slips to 181.23 amid BoJ rate-hike speculation and Eurozone sentiment worries, down 0.40%
EUR/JPY traded near 181.23 on Tuesday, down 0.40% after two days of gains. The pair fell as the yen strengthened amid expectations that the Bank of Japan (BoJ) could raise rates sooner than previously thought.
Former BoJ board member Seiji Adachi said a rate hike could come as early as April if the data allow. BoJ Governor Kazuo Ueda said his talks with Prime Minister Sanae Takaichi focused on the economy and did not include any specific requests on monetary policy.
Yen Strength And Bond Market Signals
A rally in Japanese Government Bonds supported the yen and lowered the fiscal risk premium tied to domestic policy concerns. Japan’s GDP rose 0.1% quarter-on-quarter in Q4 after a 0.7% drop in the prior quarter. Annualised growth was 0.2%. Both figures missed forecasts. The euro came under pressure after weaker confidence data. Germany’s ZEW Economic Sentiment Index fell to 58.3 in February from 59.6 in January, and the Eurozone index also declined. Germany’s HICP confirmed a 0.1% monthly decline in January, while the annual rate stayed at 2.1%. The ECB broadened access to its euro liquidity backstop for central banks worldwide. It said inflation was in a “good place,” but warned about short-term volatility. A year ago, EUR/JPY was trading around 181.23, weighed down by strong speculation that a BoJ rate hike was close. Today, with the cross much higher near 185.50, it is clear that the expected policy convergence did not happen as fast as the market expected in early 2025. This context matters when we build today’s derivatives strategies.Implications For Current Options Strategy
In February 2025, the story centered on a possible BoJ hike as early as April. That hike did happen, but it was not followed by the aggressive tightening cycle that some traders had priced in. Since then, the BoJ has stayed cautious. Japan’s core inflation for January 2026 was 1.9%, slightly below the BoJ’s 2% target. Compared with last year’s firmer tone, this suggests the hurdle for further hikes is now much higher. Meanwhile, the euro faced headwinds last year from weak sentiment, including the German ZEW drop to 58.3, which increased expectations for ECB rate cuts. However, the Eurozone economy held up better than expected. With services inflation staying above 3% through late 2025, the ECB has taken a more patient approach. The latest ZEW reading for February 2026 rose to 61.5, showing a clear improvement in investor confidence versus a year ago. The gap between last year’s expectations and today’s reality suggests implied volatility in EUR/JPY may be too low. The key lesson from 2025 is that central bank messaging can change quickly, triggering sharp moves. Traders may want to consider buying options—such as straddles or strangles—to position for a potential breakout as the market reassesses the still-uncertain paths of the BoJ and ECB. In addition, the interest rate spread—while smaller than at its peak—still favors the euro and provides positive carry. This backdrop can support strategies like bull call spreads, which aim to benefit from gradual upside in EUR/JPY while keeping risk defined. This is a more measured stance than the outright short positions many considered when the pair was near 181 a year ago. Create your live VT Markets account and start trading now.INGING’s Frantisek Taborsky expects Romania’s central bank to hold rates at 6.50% as inflation eases and leu flexibility increases gradually
ING expects the National Bank of Romania (NBR) to keep the policy rate at 6.50%. Inflation remains high and is still close to 10% after recent tax increases, although it is expected to ease from mid-year.
The NBR has kept rates unchanged since August 2024, after market volatility following the presidential election. This meeting will also bring an updated forecast and inflation report, alongside new GDP data tied to fiscal consolidation.
Policy Outlook And Near Term Expectations
ING expects the first rate cut in May, with total easing of 100bp in 2026. EUR/RON is expected to stay broadly stable in the 5.09–5.10 range. A small rise is forecast later in the year, with a year-end target of 5.150. In early 2025, the call that the NBR would begin cutting rates was right, although the first cut came in June rather than May. The EUR/RON stability forecast near 5.09 also held through the first half of the year, before the pair began a gradual climb. EUR/RON is now trading above the 5.15 end-2025 target and is currently near 5.18. The main change now is that disinflation has sped up. January 2026 CPI shows inflation at 4.8%, far below last year’s levels. This gives the NBR room to ease policy further from the current key rate of 5.50%. With Q4 2025 GDP growth at a weak 1.2% year-over-year, the case for larger rate cuts in the next few months looks strong. For derivatives traders, this points to continued RON weakness versus the euro. We see value in buying near-term EUR/RON call options, looking for a move toward 5.20–5.22 over the next one to two months. This approach offers exposure to the expected policy divergence while keeping risk limited and defined.Derivatives Positioning And Volatility Considerations
The NBR has often managed the exchange rate to limit sharp swings. However, weaker fundamentals may make it harder to resist the market trend. The 2024 post-election turmoil showed the NBR will prioritize stability, but we think it will still allow (and manage) a gradual weakening in the currency. As a result, implied volatility may be too low. For traders expecting a bigger move around the next NBR meeting, long-volatility strategies such as straddles could be worth considering. Create your live VT Markets account and start trading now.Ahead of the US market open, the Indian rupee holds steady near 90.80 against the dollar
The Indian Rupee traded flat near Monday’s low. USD/INR was around 90.80 on Tuesday afternoon in India. Importers’ demand for US Dollars pressured the Rupee. At the same time, fears of Reserve Bank of India (RBI) intervention limited the downside.
Foreign Institutional Investors (FIIs) were net sellers in February. They cut holdings by Rs. 2,345.69 crore. On Monday, FIIs sold Rs. 972.13 crore in shares.
Markets also watched a second round of US-Iran talks in Geneva. Traders focused on what the talks could mean for oil prices. Higher oil prices can hurt the Rupee because India imports most of its oil.
The US Dollar was steady ahead of the US market open after a long weekend. The US Dollar Index (DXY) was near 97.15.
Traders expected no Federal Reserve rate cut in March or April, based on the CME FedWatch tool. US inflation eased in January. Headline inflation was 2.4% year on year, and core inflation was 2.5%.
Key US releases this week include the FOMC minutes and preliminary Q4 GDP data. The Fed kept rates at 3.50%–3.75% in January.
USD/INR was near 90.9035, just above the 20-day EMA at 90.8822. The 14-day RSI was 51.19. Key levels were 90.00 on the downside and 91.25 on the upside.
USD/INR remains stuck in a familiar range, similar to what we saw around this time in 2025. Strong dollar demand from importers is supporting the pair. However, gains are limited by the ongoing risk of RBI intervention. India’s foreign exchange reserves hit a record $710 billion in January 2026, giving the RBI plenty of room to curb any sharp Rupee weakness.
The Rupee outlook looks better than last year, when FIIs were net sellers. In the last quarter of 2025, flows flipped. FIIs became net buyers and put more than $5 billion into Indian stocks. This renewed foreign demand supports the INR.
Oil remains important, but the situation is calmer than during the US-Iran talks in 2025. Brent crude has traded in a tight $85–$90 per barrel range. That reduces the risk of a sudden jump in import costs that could pressure the Rupee. More stable energy prices also help reduce currency volatility.
On the US side, conditions have changed since early 2025, when the Fed was holding rates steady. The Fed funds rate is now higher, at 4.25%–4.50%. Even so, markets expect a pause. CME FedWatch shows less than a 20% chance of another hike in March. With no clear signal from the Fed, USD/INR is more likely to stay range-bound.
For derivatives traders, these forces point to continued consolidation in the coming weeks. One-month implied volatility for USD/INR has fallen to a multi-year low of 3.8%. That makes volatility-selling strategies, such as a short strangle, look more attractive. We can consider this approach to benefit from a market that is likely to stay calm.
During European trading, GBP/USD recovered half of its earlier losses but remained 0.23% lower near 1.3600
GBP/USD recovered about half of its early losses during European trade on Tuesday. Still, it was down 0.23% near 1.3600. The move followed weaker UK labour market data for the three months to December.
The UK ILO Unemployment Rate rose to 5.2%, the highest in five years, compared with forecasts of 5.1%. Job creation came in at 52K, down from 82K previously.
