Dollar Consolidates Ahead of US CPI & Payrolls, Euro Firm on USD Moves, Sterling Pressured by Political Risk.
USD – The dollar is steadying ahead of US CPI Friday, with inflation data set to determine whether rate cut expectations are reinforced or pared back.
EUR – The euro is holding recent gains, driven largely by dollar movements, with US inflation likely to dictate near-term direction.
GBP – Sterling remains vulnerable amid ongoing UK political uncertainty and shifting Bank of England rate expectations.
USD:
The US dollar is trading cautiously this morning as markets position ahead of Friday’s closely watched US inflation release. After a soft start to the week, the greenback has stabilised somewhat, with traders reluctant to extend short positions before CPI data provides clearer direction. Recent labour market softness has increased sensitivity to inflation surprises, as a weaker print could strengthen expectations for Federal Reserve easing later in the year. Conversely, any upside surprise would likely prompt a repricing of rate cut expectations and support the dollar. Treasury yields remain the key driver for intraday USD moves, with volatility expected to pick up significantly once the data is released. The dollar is consolidating ahead of CPI and Nonfarm payroll figures, with inflation data likely to dictate the next directional move.
EUR:
The euro is holding onto recent gains, supported primarily by a softer dollar rather than eurozone-specific catalysts. With limited domestic data this week, EUR/USD continues to trade as a function of US rate expectations and broader risk sentiment. ECB commentary has remained relatively measured, offering little in the way of fresh policy signals, though markets still see the ECB moving cautiously compared to the Fed. From a technical perspective, the pair remains near recent highs, but momentum may stall if US data surprises to the upside. The euro remains supported by dollar dynamics, but upside momentum depends heavily on US inflation outcomes.
GBP:
Sterling remains on the defensive, with political uncertainty continuing to weigh on investor confidence. Ongoing speculation surrounding UK leadership stability has kept risk premia elevated, while markets continue to reassess the timing and scale of potential Bank of England rate cuts. Against the dollar, GBP is particularly sensitive to US CPI release Friday, while against the euro it remains pressured by domestic headwinds. Until political clarity improves or UK data shifts materially, sterling may struggle to regain upward momentum. Sterling stays fragile amid political risk and shifting BoE expectations, with US data adding near-term volatility.
Economic Calendar
| Expected | Previous | ||
|---|---|---|---|
| 13:30 | US Average Hourly Earnings (MoM) (Jan) | 0.3% | 0.3% |
| 13:30 | US Average Hourly Earnings (YoY) (Jan) | 3.6% | 3.8% |
| 13:30 | US Nonfarm Payrolls (Jan) | 70k | 50k |