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Market Insight 03-02-2026

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  • Market Insight 03-02-2026

FX Market Update – Tuesday, 3 February 2026

Key Points

  • RBA hikes 25 bps to 3.85%, AUD surges above 0.70
  • Partial US government shutdown delays key labour data
  • USD softens despite strong ISM manufacturing rebound
  • BoE and ECB expected to hold rates on Thursday
  • GBP steady ahead of BoE; EUR firmer as USD demand fades

Market Overview

The Australian Dollar dominated early trading after the RBA delivered a widely expected 25 bp hike to 3.85% and warned that inflation remains “too strong.” AUD/USD jumped more than 1%, trading above 0.7020 as markets priced in the risk of further tightening.

In the US, the partial government shutdown forced the BLS to postpone JOLTS, metro labour data and Friday’s NFP report. The Dollar’s two‑day rebound stalled, with the DXY slipping back below 97.50 despite Monday’s strong ISM manufacturing print (52.6), its best in more than three years.

Sterling and the Euro trade cautiously ahead of Thursday’s BoE and ECB decisions. Both central banks are expected to hold rates, with guidance and inflation commentary likely to drive market reaction.

GBP/EUR

GBP/EUR ~1.1570

  • Cross trades softer as markets position for Thursday’s BoE and ECB meetings.
  • ECB expected to hold at 2%, with Wednesday’s flash HICP (headline 1.7% expected, core 2.3%) the final input.
  • BoE seen holding at 3.75% after December’s cut; December CPI at 3.4% reduces appetite for back‑to‑back easing.

GBP/EUR remains range‑bound, with relative policy guidance likely to set direction later in the week.

GBP/USD

GBP/USD ~1.3685–1.3700

  • Sterling edges higher as the Dollar eases on shutdown uncertainty.
  • Strong UK PMIs and Retail Sales continue to support GBP.
  • USD strength from ISM and Warsh’s nomination has faded as the DXY retreats.

GBP/USD will take its cue from US ADP and ISM Services given the NFP delay.

EUR/USD

EUR/USD ~1.1785

  • EUR gives back gains as USD finds support from strong US data.
  • Trade deals with India and China helped ease some geopolitical risk.
  • Shutdown delays key US data, limiting follow‑through USD buying.

EUR/USD remains broadly range‑bound ahead of Thursday’s ECB meeting.

AUD/USD

AUD/USD just above 0.7000

  • RBA hikes to 3.85% and keeps door open to further tightening.
  • December CPI at 3.8% y/y reinforces the hawkish tone.
  • USD strength from ISM is being shrugged off as markets re‑price the RBA path higher.

AUD/USD trades with a constructive bias while above 0.6950.

USD/CAD

USD/CAD ~1.3660

  • USD pressured by shutdown uncertainty, though ISM data offers support.
  • BoC held at 2.25% and highlighted uncertainty around US trade policy and the CUSMA review.
  • CAD strength tempered by trade‑related risks.

USD/CAD likely to remain headline‑driven, with CUSMA and US shutdown developments key.

USD/CHF

USD/CHF ~0.7780

  • CHF firmer as safe‑haven demand persists amid US budget impasse.
  • Shutdown delays key US data, weighing on USD sentiment.
  • Stronger US manufacturing data helps cap losses.

USD/CHF remains biased lower on risk‑off episodes.

Final Summary

The RBA’s hawkish 25 bp hike set the tone for the session, lifting the Australian Dollar and reinforcing policy divergence across G10 FX. The US Dollar’s rebound stalled as the partial government shutdown delayed key labour data and revived concerns over institutional stability, despite strong ISM manufacturing numbers. Sterling and the Euro traded steadily ahead of Thursday’s BoE and ECB decisions, with both central banks expected to hold rates. CAD and CHF outperformed on political and trade‑related uncertainty, while gold and risk assets stabilised as markets awaited further US data and Fed communication.