US initial jobless claims fell to 206K, below the 225K estimate and down from the prior week’s revised 229K, according to the US Department of Labor. Attention then shifts to Friday releases: the Core PCE Price Index, the advance Q4 US GDP estimate, and preliminary February PMI figures.
The US Dollar Index traded near a four-week high of 97.90 after the labour data. Markets continued to weigh the latest FOMC Minutes, which showed divisions within the Committee.
Key Fx Moves And Central Bank Watch
EUR/USD traded near 1.1770 after reports that ECB President Christine Lagarde may leave before her planned October 2027 retirement. GBP/USD traded around 1.3460 amid cooler UK inflation and softer job market conditions.
USD/JPY was near 154.90, recovering part of the prior day’s move, alongside firm US data and a hawkish tone in the FOMC Minutes. AUD/USD hovered around 0.7050 after losing momentum following a three-year high last week.
USD/CAD sat close to 1.3700, extending a week-long rise as the Bank of Canada maintained a dovish stance and inflation stayed near its 2% target. Gold traded at $4,982 with limited daily change as geopolitical tensions eased.
Planned data included UK January Retail Sales, Germany and Eurozone flash PMIs, UK flash S&P Global PMIs, US December Core PCE, and February US S&P Global PMIs. Central banks added 1,136 tonnes of gold worth about $70 billion in 2022, the highest annual purchase on record, according to the World Gold Council.
One Year Comparison And Market Implications
Looking back a year ago in February 2025, we saw the US Dollar Index strengthening to around 97.90 on the back of very strong labor market data. Today, the situation is different as the Dollar trades at a much higher level of 104.55 after a year of restrictive policy. With the latest Non-Farm Payrolls report showing job growth slowing to 155,000, we should anticipate increased volatility as the market debates a potential Federal Reserve pivot.
A year ago, EUR/USD was trading near 1.1770, but it has since declined to the 1.0750 region amid persistent economic weakness in the Eurozone. Recent German manufacturing PMI data came in at a contractionary 46.1, signaling that the European Central Bank may need to cut interest rates before the Fed. We should consider strategies that benefit from further downside in the pair over the coming weeks.
We recall GBP/USD trading near 1.3460 in February 2025, weighed down by a cooling UK economy. The pair is now trading lower at 1.2580, as the UK continues to struggle with sticky inflation, which was last reported at 3.2%, well above the Bank of England’s target. This difficult mix of slow growth and persistent inflation suggests we should prepare for unpredictable price swings in the Pound.
The interest rate differential has continued to drive USD/JPY from its 154.90 level a year ago to its current price of 162.30. The Bank of Japan has maintained its ultra-loose monetary policy, while the Federal Reserve’s key interest rate stands at 4.75%. As long as this wide gap in rates persists, the path of least resistance for the pair remains upwards.
One year ago, AUD/USD was pulling back from a three-year high and trading around 0.7050. It now trades at 0.6540 as concerns over slowing global growth, particularly in China, have weighed on the commodity-linked currency. We expect this sensitivity to global risk sentiment to keep the Aussie dollar under pressure.
Last year we saw Gold at $1,982 an ounce as geopolitical tensions eased. Today, Gold is trading significantly higher at $2,150, supported by economic uncertainty and continued strong demand from central banks, which added over 800 tonnes to their reserves in 2025. Given the questions surrounding the Fed’s next move, Gold is an attractive asset for hedging against a weaker dollar or a market downturn.
