US data showed the four-week average ADP Employment Change rose to 10.3K private-sector jobs, up from 7.8K. Canada’s January CPI eased to 2.3% year-on-year, below the 2.4% forecast and prior reading.
The US Dollar Index traded near 97.20 after reaching a one-week high of 97.54. EUR/USD held around 1.1850 after Germany’s January HICP matched expectations at 2.1%, while February ZEW sentiment fell in Germany and the Eurozone.
Major Fx Moves And Key Drivers
GBP/USD traded near 1.3560 and moved lower after UK claimant count, employment change and the December ILO unemployment rate pointed to weaker labour conditions. AUD/USD hovered near 0.7080 after rebounding from a five-day low following the RBA minutes.
USD/CAD was near 1.3640 after slipping from earlier gains ahead of the softer Canadian CPI result. USD/JPY traded around 153.20, still lower on the day, with attention on Japan’s pro-stimulus agenda and a hawkish Bank of Japan stance.
Gold traded near $4,877 and remained below $5,000. Upcoming events include the RBNZ rate decision, UK January CPI and FOMC minutes (18 Feb), Australia jobs data (19 Feb), and UK retail sales, PMIs, and US December core PCE (20 Feb).
Central banks added 1,136 tonnes of gold worth about $70 billion in 2022, the highest annual purchase on record. Gold often moves inversely to the US Dollar and US Treasuries, and is priced in dollars (XAU/USD).
One Year Later Market Context
Looking back a year, we saw the US Dollar Index at 97.20 in February 2025. Now, with the DXY trading firmly around 104.50, the sustained dollar strength is the dominant trend traders must respect. Given that the latest US inflation data from January 2026 showed a sticky 2.8% figure, options strategies that bet against a swift return to dollar weakness seem prudent.
A year ago, we were discussing a dip in Canadian inflation to 2.3%, but the broader story has been the persistence of price pressures globally. The upcoming FOMC minutes will be critical, as they were last year, for clues on the Federal Reserve’s patience. Traders should use derivatives to hedge against volatility, as any hint of a prolonged “higher for longer” stance could trigger sharp market moves.
In February 2025, USD/JPY was at 153.20 amid talk of a hawkish Bank of Japan. While the BoJ did finally move away from negative rates later that year, the massive interest rate differential with the US has pushed the pair even higher, recently trading near 158.00. The yen carry trade remains a powerful force, suggesting that selling yen call options or buying USD/JPY call spreads could still be a viable strategy.
We noted signs of a deteriorating UK labor market in early 2025 when GBP/USD was near 1.3560. This weakness, combined with relentless dollar strength, has driven the pair down to the 1.2550 level we see today. Given this clear year-long trend, traders should remain cautious of long positions on the pound and could consider put options to protect against further downside.
Gold was struggling to retake $5,000 a year ago, and despite persistent geopolitical risks, it remains capped by high interest rates and a strong dollar. Central banks have continued their historic buying spree, with the World Gold Council reporting another 800 tonnes added to reserves in 2025, but this has only provided a floor, not a catalyst. Derivative trades on gold are therefore highly dependent on a trader’s outlook for a reversal in US monetary policy.
