Forex markets are trading relatively steady as the US session gets underway, with no strong directional conviction emerging. Early risk-on momentum from Asia has faded, leaving major pairs consolidating rather than extending moves.
The initial lift in sentiment came from Asia following the announcement of a US–India trade deal, which helped support higher-beta currencies. Australian and New Zealand Dollars benefited most, while traditional defensive currencies such as Yen and, to a lesser extent, Dollar lagged. Aussie also drew support from the hawkish RBA rate hike, as new forecasts suggest at least one more rate hike is likely later this year.
That lack of conviction is unlikely to change today, given the empty US economic calendar. In the absence of fresh data, price action is expected to remain driven by positioning rather than fundamentals. Ironically, the most anticipated US data release of the week will not arrive on time. The January 2026 non-farm payrolls report has been delayed again due to the the temporary US government shutdown.
Although data collection has already been completed, the shutdown has forced a delay in publication. The report, originally due on Friday, will be released once federal funding is restored, leaving a gap in near-term labor market signals.
Politically, progress is being made toward resolving the shutdown. The Senate passed multiple funding bills last week, including a short-term measure for the Department of Homeland Security, but final approval still rests with the House. The House Rules Committee met today to prepare a floor vote, with Republican leadership aiming for a final passage vote tomorrow.
In FX performance terms for the week so far, Aussie sits at the top of the leaderboard, followed by Kiwi and Sterling. Yen is the clear underperformer, trailed by Swiss Franc and the Euro. Dollar and Loonie remain positioned in the middle of the pack.
In Europe, at the time of writing, FTSE is down -0.73%. DAX is up 0.22%. CAC is down -0.20%. UK 10-year yield is up 0.015 at 4.524. Germany 10-year yield is up 0.029 at 2.899. Earlier in Asia, Nikkei rose 3.92%. Hong Kong HSI rose 0.22%. China Shanghai SSE rose 1.29%. Singapore Strait Times rose 1.06%. Japan 10-year JGB yield rose 0.023 to 2.260.
Fed’s Miran sees scope for over 100bp of Fed easing this year
Fed Stephen Miran, a well-known policy dove, said he is looking for “a little bit more than a point” of interest rate cuts over the course of the year, arguing that current monetary policy remains too restrictive for the economy. Speaking in an interview with Fox Business today, Miran said the balance of risks now favors easing rather than prolonged restraint.
Miran acknowledged that inflation remains above the Fed’s 2% target, but stressed that underlying price pressures appear far more benign than headline readings suggest. In his view, solid growth combined with easing regulatory burdens has improved the economy’s supply-side dynamics, giving policymakers room to cut rates without reigniting inflation.
While Miran’s formal term as a temporary governor ended at the close of January, he continues to serve until a successor is confirmed.
Fed’s Barkin says economic “fog” lifting, inflation miss still demands caution
Richmond Fed President Tom Barkin said the economic environment is becoming clearer as the US moves into 2026, after what he described as an overwhelming pace of change last year. Speaking today, Barkin likened 2025 to “driving in a dense fog,” citing geopolitical tensions, rapid advances in artificial intelligence, and sweeping government policy shifts spanning tariffs, immigration, taxes, deregulation, and fiscal spending.
Barkin argued that the fog now appears to be lifting, revealing an economy that remains “remarkably resilient.” He pointed to meaningful additional support from government policy, including tax refunds, reduced withholding, lower gasoline prices, and the cumulative impact of the Fed’s rate cuts over the past year and a half. Deregulatory efforts should also bolster growth, while slower net migration reduces the pace of job growth needed to keep unemployment stable. At the same time, renewed bipartisan focus on affordability could add disinflationary pressure in coming months.
Despite the more constructive outlook, Barkin stressed that inflation remains above target and has done so since 2021. He said it would be easy to attribute the overshoot to one-off factors such as tariffs or shelter-cost measurement lags, but warned against complacency. “I take this sustained miss seriously,” he said, arguing that today’s inflation outcomes, regardless of their cause, “significantly influence tomorrow’s inflation.”
RBA delivers expected hike, forecast path points to another move
The RBA raised the cash rate by 25bps to 3.85% as widely expected, with the decision taken unanimously. While the accompanying statement avoided any explicit commitment to further tightening, the updated forecasts carried a more hawkish undertone.
Notably, the new projections are built on an assumption that the policy rate rises further to around 4.2% by the end of this year. That implicitly points to at least one additional hike being needed in the Bank’s view to contain resurging inflationary pressures.
In its statement, the RBA acknowledged that a broad range of recent data confirms inflationary pressures “picked up materially” in the second half of 2025. While part of the acceleration is judged to be temporary, the Bank highlighted that private demand is growing faster than expected, capacity pressures are higher than previously assessed, and labour market conditions remain slightly tight. Against that backdrop, the Board concluded that inflation is “likely to remain above target for some time,” justifying today’s move.
The message suggests policy is shifting from fine-tuning toward a more deliberate effort to re-anchor inflation expectations. The revised forecasts reinforce that view. CPI is now projected to peak at 4.2% in June 2026, up sharply from the previous 3.7% estimate, before easing to 3.6% by December 2026 and only gradually returning to 2.7% by end-2027. Trimmed mean inflation was also revised higher across the horizon, with the peak lifted to 3.7% in mid-2026.
Growth and labour market assumptions remain resilient. Average GDP growth for 2026 was revised up to 2.1% (from 1.9%), while the unemployment rate was nudged lower to 4.3% (down from 4.4%) next year, before edging higher to 4.5% in 2027. That profile suggests the RBA sees room to keep policy restrictive without inflicting material damage on employment, keeping the door open for further tightening if inflation fails to cool as projected.
AUD/CAD Breaks Higher, 0.97 Next
Aussie rallied sharply after the hawkish rate hike from the RBA , but gains cooled as Governor Michele Bullock delivered a measured press conference. The price action reflected a strong initial policy reaction followed by a pause as guidance resisted a straight-line tightening narrative. Even so, Aussie remains the strongest performer on the day. The moderation in momentum should be read as consolidation rather than reversal, with Bullock deliberately avoiding language that would lock the Bank into a clear tightening sequence.
Bullock stressed that the RBA is “not ruling anything in or out” and will remain data dependent. Despite the Bank’s own forecasts implying another hike later this year, she resisted giving a straight answer on whether policy is now in a tightening cycle, saying, “I don’t know if it is in a cycle.”
She emphasized the Board’s cautious approach, noting that policymakers have delivered one rate rise and will now assess how financial conditions respond. Early signs of tightening through the exchange rate are already evident, but the RBA wants to observe impacts on credit and housing before drawing conclusions. Crucially, Bullock preserved optionality. While she stopped short of predicting further hikes, she also made clear that additional tightening remains possible if inflation stays too high, keeping the policy bias conditionally hawkish rather than pre-committed.
Across the crosses, the Aussie’s strength is more pronounced. AUD/CAD broke above the 0.9589 temporary top to resume its uptrend, supported by a rising 55 4H EMA. With prior break of the medium-term rising channel ceiling signaling upside acceleration, the outlook stays firmly bullish. Next target is 200% projection of 0.8902 to 0.9225 from 0.9055 at 0.9701. Decisive break there will target 261.8% projection at 0.9901.
EUR/USD Mid-Day Outlook
Daily Pivots: (S1) 1.1752; (P) 1.1814; (R1) 1.1851; More….
EUR/USD’s fall from 1.2081 short term top is still in progress. Intraday bias remains mildly on the downside for 55 D EMA (now at 1.1721). Firm break there will raise the chance of reversal on rejection by 1.2 psychological level, and target 1.1576 support. On the upside, above 1.1893 minor resistance will turn bias neutral. Decisive break above 1.2 will carry larger bullish implications.
In the bigger picture, as long as 55 W EMA (now at 1.1458) holds, up trend from 0.9534 (2022 low) is still in favor to continue. Decisive break of 1.2 key psychological level will add to the case of long term bullish trend reversal. Next medium term target will be 138.2% projection of 0.9534 to 1.1274 from 1.0176 at 1.2581. However, sustained trading below 55 W EMA will argue that rise from 0.9534 has completed as a three wave corrective bounce, and keep long term outlook bearish.
