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The latest AI disruption scare caused losses of 1.05% (S&P) to 1.65% (Dow) for major US indices yesterday evening. European risk sentiment was weak at the onset of trading but key bourses managed to flip those losses to small gains currently amid an empty eco calendar. For Chicago Fed Goolsbee (non-voter this year) it’s not obvious that Fed policy is restrictive. He sees room for more rate cuts, but that requires progress on inflation. The current 3% is not good enough. The labour market and growth don’t seem to be especially fragile. It’s the current majority thinking within the FOMC. As long as the stabilization on the labour market holds, rate cuts are only the outcome in case of goods disinflation. Even Fed board member Waller yesterday suggested that he might flip back from voting in favour of a rate cut to rate stability if the February jobs report is strong. Dallas Fed Logan over the weekend suggested that 30k monthly job gains are currently probably sufficient to keep the job market stable. Looking further, Fed Waller remains on high alert though with firms starting to shed labour after over-hiring post-Covd and with CEO’s telling him that significant job cuts are coming from AI. The US yield curve at the moment shows a very modest bear steepening with the US 2-yr and 10-yr holding above support levels at respectively 3.4% and 4%. EUR/USD is going nowhere at 1.1775. US equity benchmarks open unchanged, but AI disruption headlines hit the screens again as AI giant Anthropic launched new updates to Claude Cowork and released new plugins for workflows related to investment banking and HR. Focus for US investors shifts to this evening’s State of the Union address by President Trump (9pm ET or 3am CET). Three large software firms release earnings this week (Workday, Salesforce and Intuit) in what might also gather more attention than usual given the AI disruption scare.

The biggest moves in FX space came from Asia today. The Chinese yuan extends its strengthening run with USD/CNY trading below 6.90 for the first time since April 2023 amid the trade truce between the two nations. US President Trump is still planning to travel to China from March 31 to April 2 for a meeting with Chinese President Xi Jinping to talk on tariffs, truce, Taiwan and returning to a stable relationship. The Japanese yen suffers ground with USD/JPY one big figure higher after local media reported that PM Takaichi voiced apprehension over more rate hikes in a meeting with BoJ governor Ueda last week. EUR/GBP holds below 0.8750 resistance as BoE governor Bailey left the March rate debate open: "The question for me is have I seen enough further evidence to feel that I'm confident to take that (rate cut) step. It is a genuinely open question at the moment."

News & Views

Business and consumer combined Czech confidence rose from 100.2 to 101.1 to remain among the highest since the last couple of years. A slight decline in consumer views was offset by rising corporate confidence (from 98.6 to 99.8), particularly in the industrial and construction sector. Trade remained unchanged while services fell a couple of points. The consumer gauge fell 0.6 points to a still-solid 107.6. The share of households expecting their financial situation to improve over the next twelve months declined and was only partially offset by a smaller share anticipating the economy to deteriorate and a fewer believing they are financially worse off than in the previous 12 months. The number of respondents who do not plan to make any major purchases in the next twelve months remained almost unchanged. The Czech crown trades little changed on the day. EUR/CZK holds steady around 24.23 and is trapped in a months-long tight sideways trading range.

The Hungarian central bank (MNB) cut the policy rate by 25 bps to 6.25%. It resumed policy normalization after having held the rate steady for almost 1.5 years. The trigger to do so were January inflation figures that brought headline CPI to 2.1% and core inflation to 2.7%. The MNB noted that the January repricing in market services, a flash point for the MNB, was at is lowest level observed in recent years. Combined with the price margin restrictions recently being extended until the end of May, the general improvement in the external cost environment and the pass-through of a stronger forint, the MNB anticipates inflation to remain below the 3% target in coming months. It repeated expectations for a sustained return to 3% by 2027H2 and added that risks to the outlook are balanced. The central bank keeps a slight hawkish edge in the statement by saying that price stability can be achieved through tight monetary conditions. It will as such continue to ensure positive real interest rates. The forint reacted stoic with EUR/HUF hovering around 379.25.

US consumer confidence improved modestly in February, with the The Conference Board index rising from 89.0 to 91.2, beating expectations of 88.2. The rebound follows January’s decline and suggests some stabilization in household sentiment, though overall levels remain well below the November 2024 peak of 112.8.

The details were mixed. The Present Situation Index slipped -1.8 points to 120.0, indicating slightly softer assessments of current conditions. However, the Expectations Index jumped 4.8 points to 72.0, pointing to easing pessimism about the economic outlook over the next six months.

Chief Economist Dana M. Peterson said four of five components improved, but cautioned that consumer commentary continues to skew negative. Concerns about prices and inflation remain dominant, with references to trade and politics increasing. While labor market mentions eased somewhat, broader unease suggests confidence is stabilizing rather than turning decisively positive.

Full US Conference Board consumer confidence release here.

At a UK Treasury Committee hearing, Andrew Bailey said a March rate cut remains a “genuinely open question”. Bailey noted inflation is now expected to return to around the 2% target “sooner than we were expecting”, with April’s data—due in May—potentially showing inflation near target.

He added that the latest inflation reading came in broadly as expected, but the composition showed notable shifts. Goods prices have softened more than anticipated, likely reflecting trade effects from China, while food prices also eased more than forecast. Services inflation, however, has proven stickier.

MPC member Megan Greene, who has consistently voted to hold rates, cautioned that she remains concerned about the transition embedded in the central forecast. She described it as a “nifty handoff” where inflation hits target just as wage growth and expectations moderate, offsetting fiscal effects—a sequence she worries may not unfold smoothly.

Greene said she would need further evidence that wage growth is continuing to ease and that business and household inflation expectations are moderating before supporting a cut.

• US100 holds losses after AI-scare trade selloff.
• Gold softens but remains near three‑week high amid tariff chaos, geopolitics.
• USDJPY eyes triangle breakout as Takaichi’s rate‑hike stance pressures yen ahead of inflation data.

AI woes hit Wall Street – US100

US stock futures steadied on Tuesday after a wobbly start to the week, as a fresh bout of AI‑disruption‑driven selling rattled investors. Sentiment was further pressured by renewed uncertainty surrounding US President Donald Trump’s tariff policy. Concerns about the displacement effects of artificial intelligence across software and broader industries intensified following a bearish Citirni Research report outlining potential AI‑related risks beyond the tech sector.

Although traders appear to be sidestepping some of the tech‑led declines as the so‑called “AI scare” trade moderates, markets remain unsettled by confusion over tariff developments. This follows Friday’s fallout after the US Supreme Court struck down President Trump’s original sweeping duties.

The US100 is attempting to consolidate following a 1.13% drop in the previous session, which pushed the index below the medium‑term ascending trendline drawn from the August lows. It currently sits just under the 38.2% Fibonacci retracement of the October 30 – November 21 pullback from the record high at 24,757. Strong support is expected at the 23.6% Fibonacci level near 24,400, while any bullish correction could see the index retesting the short‑term simple moving averages (SMAs) at 25,075 and 25,300 respectively.

Renewed tariff turmoil, US – Iran tensions – Gold

Gold is easing from a three‑week high near 5,250 as a firmer US dollar and profit‑taking weigh on prices following a rally driven by uncertainty over US tariffs and Middle East tensions. Investors are awaiting clarity on President Donald Trump’s tariff plans after the Supreme Court on Friday invalidated his previous global tariff regime. In response, the administration has implemented temporary 15% duties intended to address what it calls a balance‑of‑payments crisis – an assessment many economists dispute.

Market focus also remains on the US-Iran standoff ahead of a third round of talks, with the White House appearing to edge closer to potential military action over Iran’s nuclear program, including deploying additional warships to the region. Later today, President Trump is set to deliver the State of the Union address, adding another potential catalyst for volatility.

Gold is edging lower, snapping a four‑day winning streak, and is now testing strong support at 5,141 – the 61.8% Fibonacci retracement of the January 29-February 2 pullback from the record high – with the 20‑day SMA near the key 5,000 level as additional support. Despite short‑term softness, the broader outlook remains skewed to the upside, with the MACD and the RSI signals remaining in positive territory despite turning cautious. A rebound could target 5,342, with new highs above 5,420 still possible.

Takaichi rate‑hike view weighs on yen ahead of CPI – USD/JPY

The yen extended its softness against a stronger dollar as tariff concerns resurfaced and reports indicated Japanese Prime Minister Sanae Takaichi expressed reservations about further BoJ rate hikes during a meeting with Governor Kazuo Ueda. The yen’s post‑election rebound from February 8 has now faded, reviving the “Takaichi trade” amid worries that fiscal expansion could weaken the currency further.

Ongoing yen weakness also sharpens focus on inflation ahead of Friday’s Tokyo CPI. Fiscal measures announced so far are unlikely to keep inflation anchored at the BoJ’s 2% target, while recent data suggest earlier cost‑push pressures are easing. Persistent currency softness could bring forward expectations for the next BoJ rate increase—from December to as soon as April.

USDJPY is nearing an upside breakout from a symmetrical triangle, testing two‑week highs around 156.30. Momentum remains limited, with the RSI hovering near neutral at 50 and the MACD still below zero. A daily close above the 50‑day SMA, aligning with the triangle’s upper boundary, would open a path toward 157.60. Conversely, a drop below the 20‑day SMA could expose the psychological 154.00 level.

Chicago Fed President Austan Goolsbee said the Fed should avoid moving too quickly on rate cuts, even as inflation has moderated from its highs. He warned that policymakers learned hard lessons from previously labeling inflation as “transitory” and must not underestimate persistence again.

While acknowledging progress, Goolsbee argued that cutting rates prematurely could jeopardize gains in price stability. He said it would be imprudent to front-load easing before there is firm confirmation that inflation is on a sustained path back to the 2% objective.

"Before we cut rates more to stimulate the economy, let’s be sure inflation is heading back to 2%," emphasized.

He also rejected complacency around 3% inflation rate, stating it is “not good enough” and falls short of the Fed’s commitment. "Stalling out at 3% is not a safe place to be for a myriad of reasons we know all too well,” he added.

Daily Pivots: (S1) 154.10; (P) 154.57; (R1) 155.14; More...

Intraday bias in USD/JPY stays on the upside for 157.65 resistance first. Firm break there will target a retest on 159.44 high. On the downside, below 153.98 minor support will turn intraday bias neutral again first. Overall, with 38.2% retracement of 139.87 to 159.44 at 151.96 intact, price actions from 159.44 are seen as a corrective pattern. Also, rise from 139.87 is expected to resume through 159.44 at a later stage.

In the bigger picture, outlook is unchanged that corrective pattern from 161.94 (2024 high) should have completed with three waves at 139.87. Larger up trend from 102.58 (2021 low) could be ready to resume through 161.94. This will remain the favored case as long as 55 W EMA (now at 151.93) holds. However, sustained break of 55 W EMA will argue that the pattern from 161.94 is extending with another falling leg.

Daily Pivots: (S1) 0.7717; (P) 0.7742; (R1) 0.7775; More….

Range trading continues in USD/CHF and intraday bias stays neutral. Consolidation pattern from 0.7603 is still in progress. In case of stronger rise, upside upside should be limited by 55 D EMA (now at 0.7832) to complete the pattern. On the downside, below 0.7627 will bring retest of 0.7603. Firm break there will resume larger down trend, and target 0.7382 projection level next. However, sustained break of 55 D EMA will indicate that a larger scale corrective bounce in underway and target 0.8039 resistance next.

In the bigger picture, down trend from 1.0342 (2017 high) is still in progress. Next target is 100% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.7382. In any case, outlook will stay bearish as long as 0.8123 resistance holds.

Daily Pivots: (S1) 1.3468; (P) 1.3501; (R1) 1.3527; More...

GBP/USD is still bounded in sideway trading above 1.3432 and intraday bias remains neutral. For now, fall from 1.3867 is seen as correcting the whole rise from 1.2099. Risk will stay on the downside as long as 1.3711 resistance holds. Below 1.3432 will target 1.3342 support first. Firm break there will solidify this case, and target 161.8% projection of 1.3867 to 1.3507 from 1.3711 at 1.3129.

In the bigger picture, as long as 1.3008 support holds, rise from 1.3051 (2022 low) should still be in progress for 1.4284 key resistance (2021 high). Decisive break there will add to the case of long term bullish trend reversal. However, firm break of 1.3008 will raise the chance of medium term bearish reversal and target 1.2099 support next.

Daily Pivots: (S1) 1.1762; (P) 1.1798; (R1) 1.1822; More….

EUR/USD is staying in consolidations above 1.1740 and intraday bias remains neutral. Near term risk will remain on the downside as long as 1.1928 resistance holds. Below 1.1740 temporary low will target 1.1576 support next. Firm break there should confirm rejection by 1.2 key psychological level and turn near term outlook bearish. However, break of 1.1928 argue that fall from 1.2081 has completed as a correction, and revive near term bullishness. Retest of 1.2081 should then be seen next.

In the bigger picture, as long as 55 W EMA (now at 1.1494) 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.

Yen came under marked pressure in otherwise subdued trading, with the move driven less by global risk appetite and more by domestic political developments. The catalyst was a reported shift in tone from Prime Minister Sanae Takaichi, who is said to have voiced direct opposition to further rate hikes in discussions with BoJ Governor Kazuo Ueda.

The signal triggered a repricing in rate expectations. Markets that had leaned toward an April move from the BoJ are now pushing that timeline back toward June at the earliest. The adjustment was enough to send USD/JPY higher and weigh broadly on Yen crosses. The political angle matters. If Tokyo is signaling reluctance to tighten further, the BoJ’s path toward normalization becomes more constrained. That tension between monetary independence and political priorities is now being reflected in FX markets.

At the same time, Aussie is also softer as traders position ahead of January’s Monthly CPI Indicator due tomorrow. Although senior officials at the RBA continue to emphasize quarterly data, the monthly print remains a key guide for near-term rate expectations.

Consensus sees headline CPI easing to 3.7% from 3.8% in December. However, the “danger zone” lies in a repeat or upside surprise. A reading of 3.8% or higher would suggest that the RBA’s recent hike to 3.85% may not have been sufficient to curb underlying pressures. Even more important will be the trimmed mean measure, which stood at 3.3% previously. Any upward move in core inflation would significantly raise the probability of another hike in May, reversing today's AUD weakness.

Meanwhile, Dollar is mildly firmer as markets look ahead to US President Donald Trump’s State of the Union address. While the speech is expected to be wide-ranging, traders will focus on any references to tariff policy and tensions with Iran.

On a weekly basis, Swiss Franc leads performance, followed by Sterling and Dollar. Aussie sits at the bottom, trailed by Yen and Kiwi, while Euro and Loonie trade in the middle of the pack.

Fed's Bostic: Lean into structural change, not rate cuts

Outgoing Atlanta Fed President Raphael Bostic told said the rapid adoption of artificial intelligence may push the US into a period of structurally higher unemployment. In an interview with Reuters, he suggested that firms may simply need fewer workers, raising the level of joblessness considered consistent with full employment.

Rather than attempting to artificially suppress unemployment with rate cuts, Bostic argued policymakers should recognize structural shifts and set rates accordingly. “This is a very hard time to be a central banker,” he said, noting that the same economic indicators may now carry different implications as technological change reshapes the labor market.

With inflation still above target, Bostic warned that easing policy to counter structural forces could lead to both higher inflation and misaligned employment signals. "To address short-run issues that are structural in nature could put us at risk of a much more difficult situation, where both of our mandate measures seem to be moving in the wrong direction," Bostic said.

He steps down as president of the Federal Reserve Bank of Atlanta at the end of his term on February 28.

Takaichi caps rate hopes, USD/JPY jumps; Is intervention at next?

Yen tumbled broadly after reports that Japanese Prime Minister Sanae Takaichi expressed reluctance to raise interest rates further during her February 16 meeting with BoJ Governor Kazuo Ueda. The report, carried by Mainichi Shimbun and citing multiple unnamed sources, suggested a firmer stance against tightening than previously seen.

According to the report, Takaichi emphasized that monetary policy must not “extinguish the fire” of economic recovery supported by her administration’s stimulus measures. Her position was described as stricter than at the prior November 2025 meeting.

The BoJ is widely viewed as recognizing the need for further tightening to normalize the financial system and address persistent Yen weakness. Yet with Takaichi strengthened politically after a landslide lower house victory, the balance between monetary independence and political priorities is under scrutiny.

The timing of the leak is notable. With Japan’s annual Shunto wage negotiations due in March, markets have been pricing a high probability of the next rate hike in Q2, particularly April. The deliberate nature of the Mainichi report suggests an attempt by the administration to cap rate expectations ahead of wage outcomes.

March has already been seen as too early for a move, as policymakers would prefer to assess wage negotiation results first. But if Takaichi’s reluctance proves durable, June may become the more realistic window for any additional tightening.

This creates an inherent policy tension. Takaichi seeks to avoid choking off recovery through higher rates, yet Japan also faces pressure from a weakening Yen. Balancing lower borrowing costs with currency stability presents a narrowing path.

Some analysts speculate that if rate hikes are delayed, authorities may lean more heavily on FX intervention should USD/JPY approach the 160 level, the line in the sand for Takaichi.

Technically, USD/JPY’s sharp jump reinforces the view that recent price action from 159.44 represents a near term sideway consolidation pattern only. The broader uptrend from the 139.87 low in 2025 remains intact, suggesting eventual resumption toward and potentially beyond 159.44 . But then risk of intervention will surge as USD/JPY marches on.

RBA stays focused on quarterly trimmed mean during CPI transition

In a speech today, Michael Plumb, head of economic analysis at the RBA, said the central bank welcomes the introduction of a complete monthly CPI, noting that more frequent and comprehensive data will materially improve the timeliness of its inflation assessment.

However, Plumb cautioned that it will "take us some" time to understand the properties and seasonal patterns of the new monthly series. During the transition, the RBA will continue to "focus on the quarterly data", particularly the quarterly trimmed mean measure, for forecasting and evaluating underlying inflationary pressures.

While maintaining its quarterly focus, the RBA has begun analyzing underlying inflation measures constructed from monthly data. Plumb said policymakers will assess potential biases, seasonal differences, responsiveness to economic conditions, and usefulness as a leading indicator.

The central bank intends to engage widely and communicate transparently before any shift in preferred measures in what he described as a gradual move toward a “post-quarterly CPI world.”

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1762; (P) 1.1798; (R1) 1.1822; More….

EUR/USD is staying in consolidations above 1.1740 and intraday bias remains neutral. Near term risk will remain on the downside as long as 1.1928 resistance holds. Below 1.1740 temporary low will target 1.1576 support next. Firm break there should confirm rejection by 1.2 key psychological level and turn near term outlook bearish. However, break of 1.1928 argue that fall from 1.2081 has completed as a correction, and revive near term bullishness. Retest of 1.2081 should then be seen next.

In the bigger picture, as long as 55 W EMA (now at 1.1494) 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.