Market Insight 04-02-2026

• Written by: Ian Morley
• 04/02/2026

Daily Currency Market Update – Wednesday, 4 February 2026

Market Overview

Markets are subdued in early European trading as investors await a heavy round of macro releases. Eurozone inflation (HICP) is the main focus today, followed by US ADP Employment and the ISM Services PMI — both taking on added importance after the partial US government shutdown forced the postponement of Friday’s Nonfarm Payrolls.

The shutdown formally ended late Tuesday after the House approved a funding package, though markets largely ignored the development. The US Dollar Index trades sideways below 97.50, while US equity futures show modest gains.

GBP/EUR

GBP/EUR ~1.1580

The cross stabilises near a five‑month high as traders avoid large positioning ahead of Thursday’s ECB and BoE policy announcements.

Drivers

• ECB expected to hold the Deposit Facility Rate at 2%.
• Eurozone HICP expected at 1.7% YoY, down from 1.9%.
• Core HICP forecast to remain steady at 2.3%.
• BoE expected to hold Bank Rate at 3.75%, with a likely 7–2 vote split.
• December UK CPI at 3.4% reduces appetite for back‑to‑back cuts.

Outlook: GBP/EUR likely to remain range‑bound until central‑bank guidance becomes clearer.

GBP/USD

GBP/USD ~1.3725

Sterling trades slightly firmer as the Dollar softens ahead of key US data.

Drivers

• Markets expect the BoE to hold rates at 3.75% on Thursday.
• Investors will focus on Governor Bailey’s press conference and the Monetary Policy Report.
• The DXY trades near 97.40, consolidating after Monday’s rally.
• ADP Employment (expected 48K) and ISM Services PMI (53.5) will guide USD direction.

Outlook: GBP/USD remains supported but sensitive to US data surprises.

EUR/USD

EUR/USD ~1.1825

The Euro holds modest gains despite weaker services activity across the bloc.

Drivers

• Eurozone Services PMI fell to 51.6, below expectations.
• German Services PMI revised down to 52.4.
• Traders await Eurozone HICP — a softer print could revive ECB easing speculation.
• USD steady as markets digest Kevin Warsh’s nomination as the next Fed Chair.

Outlook: EUR/USD remains vulnerable to today’s inflation data.

AUD/USD

AUD/USD ~0.7010

The Australian Dollar holds firm after Tuesday’s RBA hike and strong domestic and Chinese PMIs.

Drivers

• RBA raised the cash rate to 3.85%, keeping the door open to further tightening.
• China’s Services PMI rose to 52.3, beating expectations.
• Australia’s Composite PMI surged to 55.7, the strongest in 45 months.
• Markets now price an 80% chance of another RBA hike by May.

Outlook: AUD/USD remains constructive while above 0.6950.

USD/CAD

USD/CAD ~1.3640

The pair trades steadily as lower oil prices weigh on CAD.

Drivers

• WTI trades near $63.50, softening after recent gains.
• Geopolitical tensions remain elevated after the US downed an Iranian drone.
• Shutdown delays US labour data, limiting USD momentum.
• Markets await ISM Services PMI for direction.

Outlook: USD/CAD likely to remain range‑bound until US data provides clarity.

USD/CHF

USD/CHF ~0.7750

The pair trades flat as markets await US data and monitor SNB commentary.

Drivers

• DXY marginally lower near 97.30.
• ADP and ISM Services PMI expected to guide USD sentiment.
• SNB Chair Schlegel reiterates concerns about soft inflation.
• CHF remains supported by safe‑haven demand amid geopolitical uncertainty.

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

Final Summary

Markets are in a holding pattern ahead of Eurozone inflation and key US data. Sterling and the Euro remain steady ahead of Thursday’s BoE and ECB decisions, while the Australian Dollar outperforms following the RBA’s hawkish hike. The US Dollar trades cautiously as the shutdown delays key labour releases, increasing the importance of today’s ADP and ISM Services PMI. CAD and CHF remain range‑bound, driven by oil prices and safe‑haven flows respectively.