Dollar Tries to Strengthen, Yen Under Pressure from Weak Growth Data
The US dollar attempted a slight rebound on Monday (February 16th), but its movement was somewhat erratic amidst thin liquidity due to holidays in the US and much of Asia. The Dollar Index rose 0.1% to 96.860 at 3:55 a.m. Eastern Time (8:55 a.m. GMT), after falling 0.8% last week.
The main sentiment still stemmed from softer US inflation data on Friday, which opened the door for the Fed to cut interest rates again in the second half of the year—especially as the market began factoring in the possibility of Kevin Warsh becoming Fed Chair in May. However, last week's employment data was still quite solid, making the urgency of a quick cut less apparent. Futures contracts are now pricing in a total of around 62 bps of easing by the end of the year, with the probability of another cut in June estimated at around 68%.
ING believes the dollar still bears the scars of the mid-January "sell America" episode—similar to the pattern of the summer of 2025. Even after the strong payrolls release, the dollar's rally is considered short-lived and limited: the good data briefly triggered a more hawkish repricing, but the boost to the dollar quickly faded.
This week's focus will shift to a series of major data: ADP jobs on Tuesday, FOMC meeting minutes on Wednesday, and then a key data package on Friday—December core PCE and Q4 GDP.
In Europe, EUR/USD fell 0.1% to 1.1861 ahead of the release of Eurozone industrial production. The Eurozone economy itself grew 0.3% in Q4 2025 (annual rate of 1.4%). ING sees a busy European calendar with ZEW (Tuesday) and PMI (Friday), but the impact on the euro is expected to be limited. They believe a break below 1.180 is more likely than a surge to 1.20 this week.
Sterling also remained unconvincing: GBP/USD edged up to 1.3653, but remained fragile due to UK political uncertainty. ING highlighted betting markets that still rate the chances of PM Keir Starmer stepping down before the end of June as high (around 70%).
The pound could potentially be in for another shock any time Starmer's political standing weakens, while key UK data will come in the form of the jobs report (Tuesday) and inflation (Wednesday).
From Asia, the yen weakened after disappointing Japanese growth data. USD/JPY rose 0.4% to 153.27, following fourth-quarter GDP growth of just 0.2% (annualized)—far below expectations of 1.6%. This figure signals that the fiscal stimulus package for late 2025 hasn't significantly boosted the economy, so Prime Minister Sanae Takaichi's government may need to open up more spending, especially as her coalition has a strong legislative pipeline after winning a supermajority in the House of Representatives.
Meanwhile, USD/CNY edged up to 6.9087 in quiet trading due to a week-long Chinese market holiday. AUD/USD strengthened 0.2% to 0.7088, maintaining its position near a three-year peak following a hawkish signal from the Reserve Bank of Australia last week.
Source: Newsmaker.id
