– Written by


Frank Davies

STORY LINK Euro to Dollar Forecast: EUR/USD Swings as Markets Reprice the Fed

The Euro to Dollar exchange rate (EUR/USD) is being driven almost entirely by Federal Reserve expectations, with investors reassessing the outlook for US rate cuts amid mixed labour-market signals, political uncertainty and growing scrutiny of the Fed’s next leadership.

After a sharp pullback from recent highs, EUR/USD has stabilised below 1.18 as markets weigh weakening US jobs data against the risk of a dollar rebound, leaving the pair highly sensitive to incoming payrolls and Fed rhetoric.

EUR/USD Forecasts: All about the Fed

MUFG forecasts that the Euro to Dollar (EUR/USD) exchange rate will strengthen to 1.25 at the end of 2026 as the dollar is subjected to further pressure.

SocGen, however, expects that any near-term gains will fade with a retreat to 1.14 by the end of this year as the dollar recovers and the Euro fades.

EUR/USD posted sharp losses to below 1.18 amid a wider dollar rebound and unwinding of long Euro positions, but stabilised later in the week.

SocGen commented on potential selling above 1.20; “Client conviction still low over a sustained move above 1.20.”

A partial US shutdown delayed the latest US employment report. There was, however, an increase in jobless claims for the latest week and the JOLTS data also recorded a sharp decline in job openings to the lowest level since August 2020.

ING commented; “The Fed is becoming more relaxed about the US jobs market. Yet data this week makes that look complacent. And payroll numbers next week will be key.”

It added; “Major downward revisions to payrolls next week would add to the pressure to eventually resume rate cuts.”

Markets now see close to a 20% chance of a rate cut in March and close to a 75% chance of a move by June. Wider issues surrounding Fed policy remain crucial elements for the markets.

According to MUFG; “Further rates cuts and the predictable uncertainties associated with the Trump presidency points to further dollar depreciation this year. Trump described the dollar’s

performance as “great” in January and the Fed checking rates in USD/JPY will ensure investors continue to suspect the Trump administration wants a weaker Dollar.”

Any rhetoric from Fed Chair nominee Warsh will be watched closely.

Lloyds commented on the outlook; “How Warsh intends to reshape the Fed ought to become clearer during the Congressional confirmation hearings . The focus will be on how he could deliver rate cuts — which he must surely have promised to get the job.”

It added; “Whether Powell feels he needs to stay on as Governor, to help protect Fed independence, will be important too . It’ll become clear fairly soon whether the three rate cuts delivered at the end of last year have stabilised the labour market.”

The ECB held the deposit rate at 2.00%, in line with strong expectations. There was no formal guidance and President Lagarde played down the potential risks from a stronger Euro.

Rabobank commented; “We continue to see policy on hold through 2026.”

SocGen, however, sees scope for a looser ECB monetary policy; “We expect disinflation to dominate 2026, driven by moderating wage growth and supportive commodity dynamics, particularly in Brent and agricultural prices.”

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TAGS: Euro Dollar Forecasts

The GBPJPY pair failed to confirm breaking 212.85 level, which forces it to delay the previously suggested negative scenario, forming bullish waves to test the broken bullish channel’s support at 214.40 in this morning’s trading, forming a new bearish decline to settle near 213.40.

The contradiction between the main indicators might push the price to provide temporary trading, to keep waiting to confirm the negative scenario by reaching below 212.85, opening the way for targeting negative stations at 212.00 and 211.25, while breaching 214.40 and holding above it will confirm regaining the bullish track, providing strong chances to record new gains by its rally towards 215.50.

The expected trading range for today is between 211.25 and 213.85

Trend forecast: Sideways

– Written by


Tim Boyer

STORY LINK GBP/USD Forecast: Pound Sterling Supported Amid Yen Strength, Jobs Doubts

The Pound to US Dollar exchange rate (GBP/USD) found modest support at the start of the week, with the pair steadying as doubts over the outlook for US employment weighed on the Dollar.

At the time of writing, GBP/USD was trading close to $1.3652, up around 0.3% from Monday’s opening levels as investors grew increasingly cautious ahead of key US labour market data.

The US Dollar struggled to find momentum as confidence in the resilience of the American jobs market continued to ebb.

A run of softer-than-expected employment indicators released last week has left markets wary ahead of January’s delayed non-farm payrolls report. Any disappointment could weigh heavily on the Greenback and further complicate expectations for Federal Reserve policy in the months ahead.

Adding to the Dollar’s woes was renewed strength in the Japanese Yen.

The Yen rallied after Japan’s ruling Liberal Democratic Party secured a decisive election victory, fuelling expectations of fresh fiscal stimulus and pushing Japanese government bond yields higher. The move encouraged capital flows away from the US Dollar, further pressuring USD exchange rates.

Sterling, meanwhile, struggled to build on its early gains as political uncertainty in the UK resurfaced.

Confidence in the Pound took a knock following the resignation of Prime Minister Keir Starmer’s chief of staff, Morgan McSweeney, over the weekend. The departure has intensified scrutiny of Starmer’s leadership and unsettled investors.

The episode has also revived attention on Starmer’s decision to appoint Peter Mandelson as the UK’s ambassador to Washington, with renewed focus on Mandelson’s past links to Jeffrey Epstein adding to the unease.

For GBP investors, McSweeney’s exit has heightened concerns over instability within the government, particularly at a time when divisions inside the Labour Party appear to be becoming more visible.

GBP/USD Forecast: US Jobs Data to Drive Near-Term Direction

Looking ahead, the next major test for the Pound to US Dollar exchange rate will be Wednesday’s release of the US non-farm payrolls report.

Markets are forecasting job creation of around 70,000 in January, an improvement on December’s 50,000 gain. A result in line with expectations could offer the US Dollar some support.

However, another downside surprise would likely trigger renewed USD selling, especially given the recent run of underwhelming labour data.

With no significant UK economic releases scheduled, Sterling is likely to remain sensitive to domestic political developments. Any further pressure on Prime Minister Starmer’s leadership could leave the Pound vulnerable through the remainder of the week.

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TAGS: Pound Dollar Forecasts

Created on February 09, 2026

The interest rate differential continues to be a mainstay of this pair, as we are levitating into the weekend, looking bullish overall.

USD/JPY

The US dollar has been noisy against the Japanese yen during the trading session here on Friday as we are simply hanging around the 156-yen level. I think at this point in time we are probably due for a little bit of a pullback, but I do not want to buy the yen. What I want to do is buy cheaper US dollars.

The interest rate differential continues to favor the United States and that will play a major part in where we go next. Ultimately, I think this is a scenario that remains a buy-on-the-dip for some time, and I just don’t have any interest whatsoever in trying to fight the interest rate differential.

The Long-Term Problem for Japan

The 158-yen level followed by the 159-yen level, both I think are resistance and I think it’s going to be difficult to get above there. But if we can break above the dollar-yen reading of about 162, that’s the highest level since something like 1990.

So, we are on the precipice of something big. We could be talking about 100 yen before it’s all said and done. That doesn’t mean that you put all of your money in aiming for 250 yen, but I think you have to understand that this is a long-term problem for Japan, and I think it continues to be so.

Shorting the yen against a multitude of currencies might be the trade for the next several years, and this is the first place you do it, but there are other places: the Australian dollar, the New Zealand dollar, British pound, etc. I have no interest in shorting this pair. It would have to break down below the 150-yen level for me to rethink things. That doesn’t mean I chase it up here though, and that’s the point of the analysis.

Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.