The USD is mostly higher vs the major currencies with market focus on ongoing meetings between U.S. officials and Russian counterparts to discuss a resolution to the Russia-Ukraine conflict. However, the absence of Ukraine and European representatives raises doubts about potential progress.

The dollar is stronger by 0.27% vs the EUR, and 0.22% vs the JPY and the GBP to start the trading day. In the video above, I take a look at the technicals driving those 3 currency pairs to start the US trading day after the Monday holiday in observance of Presidents Day.

RBA

In central bank news overnight, the Reserve Bank of Australia cut rates for the 1st time in 4 years and the 1st time after 10 meetings of no change. Looking at the details of the statement, the following summary

Inflation

  • Underlying inflation is moderating.
  • Q4 trimmed mean inflation softer than expected, easing in housing and service costs.
  • Some upside risks to inflation appear to have eased, signs of faster disinflation.
  • Board more confident inflation is moving sustainably towards the midpoint of the 2–3% target range.
  • If monetary policy is eased too much too soon, disinflation could stall, and inflation would settle above the target midpoint.

Growth & Labour Market

  • GDP and inflation softer than expected, but the labour market is stronger.
  • Risk of overestimating excess demand in the labour market.
  • Labour market remains tight but might have more spare capacity than previously thought.
  • Some recent labour market data have been unexpectedly strong, suggesting tighter conditions.
  • Continued subdued growth in private demand, easing wage pressures.

Forecasts

  • CPI: 2.4% (June 2025), 3.2% (June 2026), 2.7% (June 2027).
  • Trimmed mean inflation: 2.7% (June 2025-2027).
  • GDP: 2.0% (June 2025), 2.3% (June 2026), 2.2% (June 2027).
  • Unemployment: 4.2% (June 2025-2027).
  • Wage growth: 3.4% (June 2025), 3.2% (June 2026), 3.1% (June 2027).
  • Cash rate assumption: 4.0% (June 2025), 3.6% (Dec 2025), 3.4% (June 2026).

Monetary Policy & Outlook

  • Domestic financial conditions assessed to be restrictive, rates above neutral.
  • Wide range of estimates for neutral rate, some estimates have declined.
  • Board acknowledges progress but remains cautious about further easing.
  • Monetary policy has been restrictive and will remain so after the reduction in the cash rate.
  • Board will rely on data and evolving risks to guide decisions.
  • Some reduction in policy restrictiveness, but outlook remains uncertain.
  • Upside risks to inflation and economic conditions remain.
  • Returning inflation to target is the priority.

External Risks & Global Factors

  • U.S. economic policies pose material risks to the global outlook.
  • Risk that U.S. tariffs could cause financial conditions to tighten noticeably.
  • A$ remains close to model estimates based on terms of trade and yield differentials

In the post-decision comments, RBA Governor Michele Bullock emphasized that while high interest rates have been effective, the battle against inflation is not yet won. She cautioned against assuming further rate cuts, stating that the market’s expectations are not guaranteed. The recent decision to slightly ease policy was heavily debated, with the rationale being that progress has been made toward the inflation target. However, policy remains restrictive, and further adjustments will depend on continued evidence of declining wage pressures, lower housing costs, and improvements in supply-side conditions.

Bullock acknowledged that the disinflation process could be uneven and that the neutral rate remains uncertain. While now was deemed the right time to unwind some of the previous rate hikes, she stressed that restrictive policy is still necessary to maintain downward pressure on inflation. She also noted that Australia did not raise rates as aggressively as some other countries, meaning there may be less room for cuts.

The RBA is focused on striking a balance, navigating what Bullock called the "narrow path" to sustainably bring inflation back to the 2%–3% target range. While the market appears confident about the trajectory of inflation, she remains more cautious, indicating that future policy moves will be data-dependent, particularly regarding inflation and labor market trends.

In other central banker news/comments:

  • BOE Governor Andrew Bailey highlighted that the UK is in a period of heightened uncertainty, emphasizing that the term "careful" was deliberately chosen to reflect this environment. He acknowledged weak economic growth in the UK but did not go into detail on monetary policy, as the discussion focused on preserving and enhancing open financial markets.
  • ECB policymaker Robert Holzmann expressed concerns about services and core inflation, emphasizing that rate cuts alone cannot replace a broader economic strategy. He stated that the March rate decision will be data-dependent and noted that cutting rates becomes more challenging as policy approaches a neutral stance.

On the economic calendar, German ZEW was stronger than expectations:

  • German ZEW Economic Sentiment Feb 26.0 vs. Exp. 20.0, Prev. 10.3 (Stronger than expected)
  • German ZEW Current Conditions Feb -88.5 vs. Exp. -90.0, Prev. -90.4 (Stronger than expected)
  • EU ZEW Survey Expectations Feb 24.2, Prev. 18 (Stronger than previous)
  • German ZEW attributes rising optimism to hopes for a new German government capable of action

UK jobs data was also better than forecast:

  • UK December ILO Unemployment Rate: 4.4% vs. 4.5% expected (Stronger than expected)
  • Employment Change: 107K vs. 48K expected, prior 35K (Stronger than expected)
  • Average Weekly Earnings: +6.0% vs. +5.9% expected, prior +5.6% (Stronger than expected)
  • Average Weekly Earnings (ex-bonus): +5.9% vs. +5.9% expected, prior +5.6% (As expected)
  • January Payrolls Change: 21K, prior -47K (revised to -14K) (Stronger than previous)

A look around the markets as US traders return from the holiday shows US yields are higher:

  • 2-year yield 4.280%, +2.1 basis points
  • 5-year yield 4.363%, +3.6 basis points.
  • 10 year yield 4.513%, +3.7 basis points
  • 30 year 4.728%, +3.3 basis points.

Looking at the premarket for US stocks, the futures are implying a higher open. Recall if the S&P record closes above 6118.71, it would be a new record close. With the premarket gains, the market would be opening above that level:

  • Dow industrial average up 66 points
  • S&P up 20.83 points
  • NASDAQ index up 100.31 points

Recall on Friday, the major indices close mixed with the Dow industrial average closing lower, the S&P index unchanged, and the NASDAQ index higher:

  • Dow industrial average -165.35 points or -0.37%
  • S&P index -0.44 points or -0.01% at 6114.63.
  • NASDAQ index rose 81.13 points or 0.41%.

European shares are higher with

  • German DAX of 0.06%.
  • France's CAC up 0.32%,
  • UK's FTSE 100 of 0.21%,
  • Spain's Ibex up 0.71% and
  • Italy's FTSE MIB up 0.60%

In other markets :

  • WTI crude oil is up $0.40 or 0.57% $71.14
  • Spot gold is trading up $19.23 or 0.67% at $2917.88
  • Silver is trading up $0.11 or 0.30% at $32.46.
  • Bitcoin is trading of $386 and $96,158

Canada will release their CPI data for January 8:30 AM:

  • CPI MoM 0.1% versus -0.1%
  • CPI YoY 1.9% versus 1.8% last month
  • CPI trimmed mean 2.6% versus 2.5% last month
  • CPI median 2.5% versus 2.4% last month

IN the US:

  • New York Fed manufacturing index for February -1.0 versus -12.6 last month
  • NAHB housing market index for January is expected and 47 versus 47 last month
Source: Forex Live