The second week of February was characterized by the "calm before the storm." Markets have stalled in anticipation of fresh US CPI data, which is expected to be the final argument in the Fed's rate debate. The dollar has noticeably lost steam, dropping about 0.6% over the week, while regional "hawks" from Australia and Japan have seized the initiative.
The US Dollar Index (DXY) is balancing near the 96.97 mark. Despite Wednesday's strong labor market report, the dollar is struggling to find the strength to rally.
Main trigger: All eyes are on today’s CPI report. Traders fear a hawkish surprise, as January has consistently delivered higher-than-forecast inflation growth over the past four years.
Change of power: The market is beginning to price in the arrival of Kevin Warsh as the Fed Chair in May. State Street analysts predict that more aggressive rate cuts under new leadership could cause the dollar to plunge by 10% as early as this year.
Tip for Trader: This is a classic time to "hit the brakes." Price dynamics show that any attempts by the dollar to rise are immediately bought up by bears. Do not rush into long positions until the inflation figures are confirmed.
The Australian dollar became the main "rocket" of the week, breaking above $0.71 for the first time since early 2023.
Driver: Hawkish rhetoric from Andrew Hauser (RBA). The Reserve Bank of Australia shows no signs of slowing down and is ready for further tightening if inflationary pressure does not subside.
Tip for Trader: AUD/USD looks strong, but there is always a risk of correction at highs. Keep a close eye on risk appetite in equity markets.
The Japanese yen posted its best weekly performance since November 2024, strengthening by 2.6% against the dollar.
The Core: Traders ignored Prime Minister Sanae Takaichi's plans to increase government spending, focusing instead on verbal interventions from officials. Fear of actual government intervention forced speculators to close out yen short positions en masse.
Tip for Trader: USD/JPY has pulled back to 153.45. As long as the intervention fear remains alive, the pair's upside will be limited.
European currencies spent the week without clear drivers, remaining hostages to internal issues.
Euro: Eurozone GDP demonstrated mild growth of 0.3% for the quarter. The ECB maintains a neutral stance, with Christine Lagarde remaining silent on the euro's strength, which gives the currency no stimulus for growth.
Pound: GBP/USD is stalling near 1.3623. Weak growth in the British economy and a new wave of political instability in London are weighing on quotes.
Tip for Trader: A sideways trend has emerged in EUR/USD. Without strong news from the US, the euro is unlikely to break out of the 1.1800–1.1900 range.
The black gold market is torn between a fundamental surplus and the fear of war.
Inventories: The IEA is ringing the alarm bells as global oil inventories are growing at the fastest pace since the pandemic, by nearly 0.5 billion barrels over the year. In the US, crude oil inventories unexpectedly jumped by 8.5 million barrels in a week.
Price: Despite the surplus, Brent is holding around $70. The market is spooked by deadlocked US-Iran negotiations and the possibility of a second aircraft carrier being deployed to the region.
Tip for Trader: Oil is currently pure politics. Fundamentally, the price should be lower, but any tweet from the White House could cause a gap on Monday. Lock in profits before the weekend.
The market is overheated with expectations. Keep in mind that a trader's professionalism in times like these is about staying on the sidelines when signals are contradictory.
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