The following is a rewritten version of the Forex article titled “FX Weekly – 09 February 2026” originally published on MUFG Research by Lee Hardman, Currency Analyst at MUFG Bank. This version restates the key insights and financial analysis from the original publication, reformulated for clarity and expanded to reach a length of at least 1000 words.
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FX Weekly Outlook – Week Commencing 9 February 2026
By Lee Hardman, MUFG Bank
The foreign exchange market has entered February with notable shifts in sentiment and positioning. As we progress through the first quarter of the year, the FX outlook is becoming increasingly influenced by diverging macroeconomic conditions, evolving monetary policy expectations, and ongoing geopolitical uncertainties. In this weekly commentary, key drivers of FX performance are assessed, with an emphasis on the US dollar (USD), euro (EUR), Japanese yen (JPY), British pound (GBP), and select emerging market (EM) currencies.
Summary of Recent Market Developments
– Yield spreads and central bank commentary are reinforcing new trends in FX markets, with investors recalibrating rate expectations.
– Risk sentiment remains on edge, with US equity markets posting gains despite underlying uncertainty about global growth.
– The USD has stabilized after experiencing notable weakness through late 2025 and early 2026.
– The ECB, BoJ, and BoE have all issued statements that contributed to further FX volatility in their respective currencies.
– Geopolitical tensions and commodity prices continue to affect sentiment, particularly in EM and commodity-linked currencies.
US Dollar (USD): Stabilizing Amid Growth Uncertainty
The US dollar has shown signs of stabilization after a period of broad underperformance against major currencies during the turn of the year. A strong risk rally in recent weeks pressured the dollar lower, but the trend weakened as markets recalibrated expectations for the Federal Reserve’s monetary policy path.
– December’s strong risk asset rally and expectations of early rate cuts fueled dollar weakness.
– However, resilient US economic data, particularly labor market performance, suggests the Fed could adopt a more patient stance.
– Markets are now pricing in fewer rate cuts in 2026 than previously expected, with the first full cut anticipated later in Q2 rather than in March.
– The US Treasury market has responded with higher yields across the curve, particularly in short- and medium-term durations.
Despite recent data showing moderating inflation trends, concerns about core inflation and wage pressures continue. With the Federal Reserve maintaining its data-dependent approach, the dollar remains sensitive to incoming economic releases.
Key data points to watch:
– Monthly CPI and PPI reports for indications on disinflation trends.
– Retail sales and industrial production as leading indicators of GDP.
– Weekly initial jobless claims and payroll reports for labor market health.
Euro (EUR): Supported by Stable Inflation and Hawkish Messaging
The euro has advanced modestly against the dollar in recent weeks, supported by resilient eurozone inflation data and a cautious approach from the European Central Bank (ECB). Although eurozone growth remains sluggish, the ECB’s insistence on waiting for clearer disinflation trends before cutting rates has increased the euro’s relative attractiveness.
– January headline inflation in the eurozone eased slightly, but core inflation remained persistently high.
– ECB President Christine Lagarde reiterated that cuts are not imminent and will depend on the inflation trajectory in the spring and early summer.
– Market pricing for ECB rate cuts has adjusted higher in terms of timing, with fewer cuts now projected through 2026.
Despite Germany and France posting weak economic indicators, the ECB’s credibility in managing inflation expectations has provided a cushion for the euro exchange rate.
Key developments in the euro area:
– Services sector activity has shown some signs of stabilization, while manufacturing remains in contraction territory.
– Fiscal support from member states remains limited but targeted, primarily through energy price caps and labor subsidies.
Capital flows into eurozone fixed income assets have also seen an uptick, supporting the euro’s position around 1.08 to
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