USD firmed against its G10 peers today, supported by higher long-end US yields after the Treasury’s quarterly refunding announcement that they will maintain their current coupon auction sizes over the next 3 months. US data was mixed: ADP payrolls pointed to continued, but moderating, job growth, while ISM services stayed expansionary, reinforcing the view that US activity remains resilient without forcing the Fed to rush back into easing. Overall, higher US yields gave the USD a short-term lift, but structural headwinds and relative policy divergence continue to cap upside.
In Europe, euro-area CPI eased again, underscoring disinflationary momentum and keeping pressure on the ECB to remain cautious, which weighed modestly on the EUR.
*Daily move - against G10 rates as of 17:00 GMT, 02.02.26
** Indicative rates - interbank rates as of 17:00 GMT, 02.02.26
GBP is under pressure this morning, with renewed scrutiny of Starmer’s leadership and the Mandelson controversy lifting the UK political risk premium and souring sentiment. Combined with a broader risk-off mood and a firmer USD, this has driven GBPUSD back towards a one-week low.
Today’s BoE meeting is expected to deliver no change with a 7–2 or 6–3 vote split, but even a slightly hawkish tone may offer only limited GBP support given the political backdrop.
Markets are braced for todays ECB and BoE meetings, with both central banks widely expected to hold rates. At the ECB, all eyes are on Lagarde’s guidance, as inflation remains below target and the EUR’s strength complicates the outlook; any hint at future easing could weigh on the EUR.
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