← Back to posts🧠Dollar steady as Europe turns dovish and oil cools

🧠Dollar steady as Europe turns dovish and oil cools

Published: 2/6/2026

Good morning traders from a rain-slick, umbrella-crowded IntelliTrade desk. It is a chilly 2°C with on-and-off showers through the day, so while the streets stay wet, the real storm is in central-bank signalling, tech stocks and battered metals.



Overall Market Sentiment



Markets are in a cautious, mildly risk-off but not panicked mood. The US Dollar Index (DXY) is hovering around 97.8, marginally higher on the day and roughly 1 to 2 percent off last month’s lows, as traders digest a more hawkish-sounding future at the Federal Reserve and a string of softer non-tech equities.


Gold is under pressure again, sliding around 4 percent in the last 24 hours and flirting with the 4,750–4,800 dollars area, as a firmer dollar and sliding global stocks sap safe-haven enthusiasm after last week’s historic spike and crash.Brent crude is trading near 67–68 dollars, on track for its first weekly fall in almost two months, as traders price both upcoming US–Iran talks and recovering supply.


Equities are wobbling. The S&P 500 closed yesterday around 6,798, down about 1.2 percent, led lower by materials and consumer discretionary, while the Nasdaq dropped roughly 1.6 percent as the tech and AI shake-out continued.Crypto is behaving like the high-beta tail of that story, with Bitcoin sliding again toward the mid-60,000s region.





Geopolitics and policy



On the geopolitical side, markets are focused on US–Iran talks in Oman. Oil is still holding a risk premium because tensions remain high and the Strait of Hormuz is too important to ignore, but prices have backed off late-January highs and are now oscillating in the high 60s for Brent and low 60s for WTI as diplomacy is at least on the calendar.


In Europe, both the European Central Bank and the Bank of England kept rates on hold. The ECB left its deposit rate at 2 percent and talked up Eurozone resilience, signalling a patient, wait-and-see stance as inflation drifts toward 2 percent.The BoE also held at 3.75 percent, but the 5–4 split vote, with four members wanting a cut, was clearly dovish and pulled forward market expectations of easing later this quarter.


In the US, the story is still the combination of Kevin Warsh’s nomination and a partial data blackout. With the labor department confirming no Nonfarm Payrolls report this Friday because of the recent shutdown, the next big milestones become next week’s delayed January jobs report and CPI on February 13, both of which will be crucial for the rate-cut path.


In Australia, the Reserve Bank of Australia has kicked off a new phase by hiking 25 basis points to 3.85 percent, the first increase in two years and a clear signal that sticky inflation is not yet tamed. Markets are now debating whether the next hike comes as soon as May.





Today and the next week




Today, Friday



  • Focus in FX is on whether DXY can hold near 97.8 into the weekend as global risk assets wobble and metals remain fragile.
  • In Europe, markets are digesting a neutral ECB versus a dovish BoE mix: EUR is holding just under 1.18, while GBP has slid toward the 1.3550 region after the surprise closeness of the BoE vote.
  • Canada releases jobs data later in the day, which will help decide whether USDCAD stays pinned just below 1.37 or breaks higher in sympathy with a firm dollar and softer oil.




The week ahead (next Monday to Friday)



United States:

  • The rescheduled January Employment Report is now set for Wednesday, February 11, followed by January CPI on Friday, February 13. These two prints will be the main test of how far and how fast the Warsh-era Fed might actually move on cuts. Stronger labor and sticky inflation would reinforce a higher-for-longer narrative, supporting the dollar and pressuring metals and high-beta FX; softer data would likely spark some relief for gold, tech and EM.
  • Before that, secondary releases like wholesale inventories and trade data will matter mostly as context for growth, not as primary FX drivers.

Eurozone and UK:

  • With the ECB and BoE now out of the way, next week is about follow-through. Updated PMIs, retail sales and inflation revisions will shape whether markets lean toward one or two cuts later this year, or something more aggressive, especially in the UK where the 5–4 vote has opened the door to a March move.
  • For EUR and GBP this likely means more range trading against USD, unless US data dramatically surprise.

Asia-Pacific:

  • In Australia, markets will listen carefully to post-meeting speeches after the RBA’s hike to 3.85 percent to gauge how close the bank is to another move and whether the February hike was a one-off or the start of a mini-cycle.
  • In New Zealand, attention gradually shifts toward the February 18 Reserve Bank of New Zealand decision, with markets expecting a steady but cautious stance after last year’s cuts.
  • Region-wide, Chinese data and the ongoing tech rotation will continue to drive risk sentiment for AUD and NZD.






Currency outlooks




🔺 USD – Supported by central-bank repricing and data risk ahead



DXY is trading around 97.8, almost 10 percent below its level a year ago but significantly off the January lows, as markets price a later start to the easing cycle and fewer cuts in 2026. Futures still imply the first Fed cut around June, with about a 70 percent chance of no move before April.


The missing piece is hard US labor and inflation data, both pushed into next week by the shutdown. Until then, the dollar is likely to be driven by positioning and cross-asset risk rather than fresh macro surprises. For the coming days and into next week, risks for USD remain slightly tilted to further strength, especially if the delayed jobs report and CPI show only gradual cooling.


Markets are treating the 97.0 area on DXY as near support and the 98.5 zone as initial resistance, a band that would need to break on a strong data run to unlock a more sustained dollar up-leg.





🔻 EUR – ECB holds, euro drifts lower inside a soft growth story



EURUSD is fluctuating just below the 1.18 mark after the ECB kept all rates unchanged and reaffirmed its view that inflation will converge to 2 percent over the medium term.Growth is described as resilient rather than strong, with solid labor markets but ongoing headwinds from trade and geopolitics.


The euro’s main challenge is that the growth and inflation mix does not clearly justify a much stronger currency at a time when the dollar has regained some support and European data are mixed. Short-term technicals show EURUSD capped below 1.18–1.185, with several analyses highlighting a downward-tilted trend and potential targets into the mid-1.17s on renewed selling.


For the coming days and into next week, risks for EUR versus USD lean modestly to the downside. A very soft US data run could still push EURUSD back toward 1.20, but the burden of proof has shifted toward the Eurozone to deliver stronger growth surprises.





🔻 GBP – Dovish BoE split leaves sterling on the back foot



GBPUSD has slipped toward the 1.35–1.36 area, with spot trading close to 1.3550 in European hours, after the BoE held at 3.75 percent but revealed a surprisingly close 5–4 vote, with four policymakers already wanting a cut.That outcome brought forward market expectations for a first move possibly as early as March, and rate markets are now pricing a shallower peak and quicker easing path than they were even a week ago.


With UK growth forecasts revised down and unemployment expected to trend higher, the pound looks more like a yield story that has peaked, rather than a straightforward strength narrative. For the near term, risks for GBP versus USD are tilted toward further weakness or, at best, choppy consolidation, especially if upcoming US labor and CPI data validate a firmer dollar backdrop.


Key areas traders are watching: 1.35 as immediate support and the 1.37–1.38 band as resistance, where rallies have repeatedly stalled since late January.





⚖️ CAD – Jobs data in focus as oil softens and USD firms



USDCAD is trading just under 1.37, having held steady despite weaker oil and a stronger USD as traders brace for today’s Canadian employment numbers and the end of the US shutdown.Brent near 67–68 dollars keeps the terms-of-trade backdrop respectable, but the direction in crude is no longer clearly supportive as prices log their first weekly loss in nearly two months.


Domestic inflation is close to the middle of the Bank of Canada’s target range, which allows a steady policy for now, so near-term CAD moves are mostly about US data, oil headlines and global risk appetite. For the coming days, risks for CAD versus USD look broadly balanced: stronger Canadian jobs or a softer dollar could pull USDCAD back toward 1.35, while a firmer USD and weaker oil would likely nudge it into the 1.37–1.38 area.





🔺 CHF – Quietly firm as haven demand simmers in the background



USDCHF is hovering around the 0.77–0.78 region, still close to its lows of the year, which keeps the Swiss franc strong in both nominal and real terms.With inflation low and policy rates near zero, Swiss authorities remain comfortable with a relatively firm franc as an anchor against imported price shocks and a quiet hedge in a noisy geopolitical backdrop.


Short term, risks for CHF versus USD lean slightly toward further franc strength, especially if equities remain choppy and investors stay nervous about tech, Middle East headlines and the Warsh transition in Washington. Market participants see 0.77 as near support for USDCHF, with the 0.79–0.80 zone as resistance that would likely require a more decisive dollar breakout to clear.





🔻 JPY – Near 157 as rate gap and politics weigh on the yen



USDJPY is trading around 156.8–157.0, having climbed for five of the past six sessions as yen weakness reasserted itself after a brief bout of risk-off strength.The policy rate at the Bank of Japan remains just 0.75 percent, far below US levels, and although officials have started to talk more openly about further normalisation, the pace is gradual and data dependent.


Politics are also in the mix, with expectations of a strong LDP showing and continued fiscal support adding to the sense that Japan is still favouring reflation over aggressive tightening.For the days ahead and into next week, risks for JPY remain tilted toward further weakness, with markets treating the 155–157 band as a high-tension area where any additional dollar strength increases the chance of verbal or actual intervention.





🔺 AUD – Hawkish RBA keeps Aussie above 0.70 despite risk jitters



AUDUSD is holding just above 0.70, after the RBA’s 25 basis point hike to 3.85 percent and guidance that further tightening is possible if inflation does not behave.Markets now see a decent chance of another move in May, and RBA officials have highlighted stronger demand and still-sticky prices, which leaves Australia in a different phase from central banks that are already debating cuts.


The headwinds are global: a firmer USD, softer tech-led equities and ongoing volatility in metals. For this and next week, risks for AUD versus USD lean moderately to the upside, as long as the global growth story does not deteriorate sharply and Chinese data remain acceptable. Traders are watching the 0.695–0.70 band as key support and the 0.71 region as first resistance, which would likely require a softer USD or another hawkish RBA signal to break.





⚖️ NZD – Sitting near 0.60 ahead of RBNZ later this month



NZDUSD is hovering around the 0.59–0.60 region, consolidating after last month’s gains as a stronger USD and mixed global risk tone offset a still-cautious RBNZ stance.The New Zealand cash rate, recently cut to 2.25 percent, is expected to stay on hold for some time, with policymakers signalling that the easing cycle is likely complete unless growth deteriorates again.


As a classic high-beta currency, the kiwi will react strongly to next week’s US jobs and CPI prints plus any swings in equities and commodities. Into next week and toward the February 18 RBNZ meeting, risks for NZD versus USD look broadly balanced: a friendlier risk backdrop and softer dollar would favour a move back toward 0.61–0.62, while renewed risk aversion or a hot US data run would increase the probability of a retest of the mid-0.58s.





Cross-asset wrap



  • 🪙 Gold:
    Gold remains in post-crash price discovery. After an extraordinary spike above 5,500 dollars and a subsequent collapse of around 10 percent in a single day, spot has slipped again by roughly 3.9 percent and is testing the mid-4,700s as a firmer dollar and weaker stocks weigh.With next week’s US jobs and CPI now packed into a tight window, gold is likely to trade as a direct proxy for how much room markets think the Fed has to ease under Warsh.
  • 🛢 Oil:
    Brent is around 67–68 dollars and WTI near 64 dollars, on course for their first weekly decline in almost two months despite a modest intraday bounce.The combination of US–Iran talks, recovering supply from places like Kazakhstan and concerns about global demand is nudging crude away from its recent highs, turning it into a moderate inflation headwind rather than a full macro shock.
  • 📈 Stocks:
    The S&P 500 closed at 6,798, down about 1.2 percent, with materials and consumer discretionary leading losses and AI-linked software under heavy pressure.The pattern across regions is one of rotation, not capitulation: tech and growth names are bearing the brunt, while more cyclical and value-oriented sectors, especially in Europe, have held up better after the ECB’s steady messaging.
  • ₿ Crypto:
    Bitcoin has fallen around 8–13 percent this week, sliding toward the mid-60,000s as risk appetite fades, spot ETF flows weaken and the dollar holds firm.As long as yields stay elevated and central banks lean cautious, crypto is likely to behave as the high-beta tail of the macro risk complex rather than a standalone safe-haven story.






This is general, educational macro and FX commentary. It is not investment advice and not a trading signal.


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