Euro Inflation Slows to 1.7% (9-13 February)

The dollar slipped below 97.5, gold reclaimed the $5,000 level, and bond yields adjusted to shifting policy expectations.

Currency markets reacted to Japan’s election outcome and delayed U.S. data releases, while commodities drew support from a softer dollar and easing diplomatic conflicts.

U.S. and Japanese yields edged higher as investors priced fiscal and policy signals, while European data showed inflation cooling to 1.7%, reinforcing expectations that central banks remain in a holding phase even as rate-cut discussions stay on the horizon.

Currencies

Dollar Index: The dollar slipped below 97.5 for a second session as traders waited for delayed U.S. data on jobs, retail sales, and inflation. Expectations of steady Fed policy with scope for cuts, firmer risk sentiment, and post-election moves in Japan kept the greenback under pressure, particularly against the yen.
Euro: The euro moved above 1.1850, helped by improved risk appetite and rising expectations of additional Fed easing. Dollar softness linked to Japan’s election also supported the move, while ECB officials are expected to stick with a steady policy stance.
British Pound: Sterling drifted toward $1.36, heading for its steepest weekly drop since October. Political uncertainty and a more dovish tone from the Bank of England weighed on the currency, with a close policy vote pointing to growing support for rate cuts as inflation concerns ease.
Japanese Yen: The yen strengthened to around 156.5 per dollar after the LDP’s landslide win gave Prime Minister Sanae Takaichi a strong mandate. Official warnings on FX moves added support, though expectations of fiscal expansion and tax relief continue to cap gains while favoring equities.

Commodities

Gold Reclaims the $5,000 Handle

Gold pushed back above $5,000 per ounce, reaching its highest level in a week as a softer dollar lifted demand. Attention is turning to upcoming U.S. employment and inflation releases, which are shaping expectations around rate cuts. Support also came from comments by Mary Daly, continued buying by China’s central bank, and reduced tension tied to U.S.-Iran dialogue.

Diplomacy Weighs on Brent Prices

Brent crude slipped to around $67.4 per barrel, extending recent losses as talks between the U.S. and Iran reduced concern around near-term supply disruptions. While uncertainty remains, diplomatic signals pressured prices. Traders are also assessing possible changes in India’s purchases of Russian oil and awaiting fresh guidance from OPEC+ and the International Energy Agency.

Silver Surges as Buyers Return

Silver jumped about 5% to roughly $82, extending a sharp rebound from recent lows as buyers stepped back in. Improved risk appetite, alongside renewed interest in defensive assets, supported the move. The rally follows heightened volatility across precious metals and has been reinforced by expectations of easier U.S. monetary policy and broader haven demand.

Fixed Income

U.S. 10-Year Treasury: The 10-year yield climbed to 4.23% as investors waited for U.S. jobs, inflation, and retail sales data. Rates are expected to stay unchanged in March, with potential cuts later in the year, while reports of China trimming Treasury holdings added pressure.
UK 10-Year Gilt: UK gilt yields fell to 4.55% after the Bank of England held rates at 3.75% and struck a more dovish tone. A narrow 5–4 vote signaled growing support for cuts as inflation pressures ease, reversing earlier gains.
Japan 10-Year Government Bond: Japan’s 10-year yield rose to 2.27% after the LDP’s election landslide gave Prime Minister Sanae Takaichi a strong mandate for fiscal expansion. Expectations of looser policy and tax cuts weighed on bonds and the yen, while supporting equities.

Economic Data

EUR CPI (YoY) – January

Euro-area inflation eased to 1.7% in January 2026, down from 2.0% in December, marking its lowest reading since September 2024 as price pressures softened across the bloc.

ECB Interest Rate Decision – February

The European Central Bank left its three key policy rates unchanged, with the deposit rate held at 2%, in line with expectations. Officials reiterated that inflation is likely to converge toward the 2% target over the medium term, supported by resilient economic conditions despite ongoing global uncertainty.

U.S. S&P Global Services PMI – January

The final S&P Global Services PMI for January rose to 52.7, above the preliminary 52.5 reading, while the Composite PMI increased to 53.0, pointing to slightly firm expansion across the U.S. services sector and broader private economy.

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