There was a slight pickup in risk appetite yesterday, with USD softening after early support and GBP finding general support. Bank of England commentary kept markets on their toes: Governor Andrew Bailey said a March rate cut remains an “open question”, highlighting sticky services inflation, while Chief Economist Huw Pill stressed underlying inflation pressures. MPC member Alan Taylor leaned more dovish, suggesting the BoE could deliver a couple of rate cuts before reaching neutral.
In the US, the Conference Board’s consumer confidence index rose to 91.2 in February, a rebound from January and above expectations, driven by the expectations component, though current conditions eased slightly.
*Daily move - against G10 rates as of 17:00 GMT, 24.02.26
** Indicative rates - interbank rates as of 17:00 GMT, 24.02.26
USD slipped overnight after Donald Trump said he would restore broad tariffs despite the Supreme Court decision, going as far as to suggest tariff revenues could eventually replace income tax. The prospect of heavier reliance on trade barriers raised concerns for USD, as analysts warned it signals prolonged protectionism.
Meanwhile, JPY weakened further after Prime Minister Sanae Takaichi nominated two reflation-leaning academics to the Bank of Japan board, reinforcing expectations the BOJ will be cautious on rate hikes.
Today's FX calendar is light but still worth watching. Eurozone CPI (final, Jan) is expected to confirm prior readings: core YoY at 2.2%, headline YoY at 1.7%, and MoM at -0.5%, so limited market reaction is likely unless there’s a surprise. For the US, MBA mortgage applications for the week of Feb 20 will provide a glimpse into housing demand, though no consensus is available. Expect EUR crosses to stay sensitive to CPI prints, while USD moves may be more muted unless the mortgage data hints at broader credit trends.
For GBP, the spotlight remains on the Gorton and Denton byelections on Thursday. The Greens currently have the most poll support, followed by Reform UK, with Labour trailing. A Labour win would be marginally positive for GBP, potentially delaying a leadership challenge, though Andy Burnham’s influence and the second-place finisher could shape market reaction; a Greens win would likely weigh on GBP and increase the odds of a leftward shift, while a Reform win would also weigh but less so. This underlines how the market interprets a lean-left tilt as negative for GBP.
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