The improvement in US macro has not been enough to materially revamp confidence in the , and we don’t have high hopes for this week’s calendar. Still, in the short term, a break below 1.180 looks more likely than 1.20 in given the stretched valuation. In the UK, key data could endorse a March BoE cut this week and weigh on
USD: Data and Stock Volatility in Focus This Week
The past couple of weeks have shown that the improvement in the US macro picture isn’t enough to bring the dollar back to early January levels. The mid‑January “sell America” episode is leaving lasting damage on the greenback – much like in summer 2025. Last week’s post‑ reaction confirmed that confidence hasn’t returned: strong data, hawkish repricing, but only a short‑lived and modest dollar rally.
This week we’ll have more data, but it will be less impactful. Weekly (tomorrow) will be watched after the latest soft print, while Friday’s for December and 4Q are the highlights. is the Fed’s preferred inflation gauge, and we expect a 0.3% MoM acceleration, which should curb the dovish tone that followed last week’s slightly sub‑consensus . A solid growth figure, along with Wednesday’s , could have a similar effect.
There is, however, a good chance that stock market developments will continue to overshadow macro developments. Tech stocks are heading into a potential make-or-break earnings release by Nvidia (NASDAQ:) on 25 February, and the implications for FX of further volatility jolts can be significant. One important note on this: the dollar has lost a good chunk of its safe-haven value, but unlike the summer of 2025, it is still negatively correlated with US equities at the time being. In this fragile risk environment, we are more concerned about high‑beta currencies like .
We think risks are on the upside for USD this week, but still lack conviction about a material recovery. Today is a US holiday: expect smaller volumes.
EUR: ECB Pushing Eurisation
The ECB announced some (widely expected) steps to boost access and utilisation of the euro this weekend. From the third quarter, EUR repo lines will be extended to all monetary authorities around the world (unless excluded on certain legal grounds), mimicking the Fed’s backstop facility that has proven crucial to promote dollarisation.
At the latest ECB meeting, President Lagarde said that euro globalisation does not necessarily imply a stronger exchange rate. However, in an environment where dollar confidence is eroding, greater EUR-isation can only reinforce medium-term EUR/USD bullishness, which is strictly tied to capital rotation from the US to Europe.
On more short-term considerations, the eurozone calendar becomes more interesting this week, with tomorrow and on Friday. We are quite upbeat on these surveys, but the euro impact isn’t likely to be major.
We continue to look past our short-term valuation estimates that point to meaningful downside risk for EUR/USD, given recent price action that points to persistent buy‑the‑dip behaviour. Still, we see a break below 1.180 as more likely than a move to 1.20 this week.
GBP: Big Data Week
It’s a busy week for the UK calendar. On Tuesday, the January jobs report should show further cooling in the labour market along with slower annual wage growth. If these trends persist into the March data, a Bank of England rate cut next month looks increasingly likely.
On Wednesday, January inflation data is released. Headline is expected to edge lower due to volatile airfare movements, easing food price pressures, and the waning impact of last year’s private school tax rise, though core services inflation is unlikely to shift much.
Political noise has eased somewhat, but PM Keir Starmer is still seen as vulnerable, with betting markets assigning roughly a 70% chance he will step down by the end of June. The pound should continue to face depreciation episodes whenever Starmer’s political position deteriorates. Combined with our dovish BoE view, we remain bullish on with a 0.88 target.
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