Daily Market Update
February 26, 2026EUR/USD ranged from the high 1.17’s to low 1.18’s overnight. EUR/USD rapidly leaves behind Tuesday’s hiccup, looking to clear the 1.1800 hurdle with conviction and therefore pave the way for a potential revisit to the monthly highs beyond the 1.1900 barrier sooner than later.
Meanwhile, sellers seem to have returned to the Greenback, dragging the US Dollar Index (DXY) to two-day troughs near 97.60 in tandem with declining US Treasury yields across different maturities.
The Federal Reserve (Fed) left the Fed Funds Target Range (FFTR) unchanged at 3.50% to 3.75% at its late January meeting. No surprise. Markets were fully priced for a hold.
The shift was not in the decision but in the tone.
Policymakers sounded more at ease with the economic backdrop. Growth continues to outperform earlier fears, and, crucially, the Federal Open Market Committee (FOMC) no longer views employment risks as deteriorating.
Inflation remains somewhat elevated, but the urgency has clearly softened.
The European Central Bank (ECB) also left its three key rates unchanged in a unanimous and widely expected decision.
The message was disciplined. The medium-term outlook still points to inflation returning to the 2% target, and recent data have not materially altered that assessment.
Wage pressures appear to be stabilising, though services inflation remains under close watch. The ECB continues to see a modest dip in consumer prices in 2026.
Positioning in the Euro (EUR) is intensifying.
Commodity Futures Trading Commission (CFTC) data show speculative net longs climbed to nearly 174.5K contracts in the week to February 17, the highest since September 2020.
At the same time, hedge funds and other institutional accounts lifted short exposure to around 235.8K contracts, the highest since May 2023.
When both longs and shorts rise together, it signals rising conviction on both sides rather than a clean bullish extension.
The GBP/USD pair drifts lower for the second straight day on Tuesday and drops to over a one-week low, around mid-1.3500s, during the early European session following the release of the UK jobs report.
The Office for National Statistics (ONS) reported that the ILO UK Unemployment Rate climbed to 5.2% in the three months to December, from 5.1% the prior month, marking the highest level since early 2021.
Additional details showed that the number of people claiming jobless benefits rose to 28.8K in January, pointing to continued softening in the UK labour market at the start of 2026.
Furthermore, the rate of annual wage growth also moderated during the reported period, dropping to its lowest level in almost four years.
In fact, Average Earnings Excluding Bonus increased 4.2% in the three months ended December, down from 4.6% in the previous quarter, while the gauge including bonuses slowed to 4.2% from the former reading of 4.6%.
Barring any surprises from the UK consumer inflation figures, due for release on Wednesday, the latest employment details reaffirm bets for a March interest rate cut by the Bank of England (BoE) and weigh on the British Pound (GBP).
Despite the US Federal Reserve’s (Fed) hawkish outlook, the US Dollar (USD) meets with a fresh supply as investors remain concerned about renewed turbulence over US President Donald Trump’s trade policies.
This, along with geopolitical risks, underpins demand for traditional safe-haven assets, including the Japanese Yen (JPY), and prompts some intraday selling around the USD/JPY pair.
Meanwhile, reports suggest that Japan’s Prime Minister Sanae Takaichi was apprehensive about more rate hikes in a meeting last week with the Bank of Japan (BoJ) Governor Kazuo Ueda.
Moreover, the government nominated two reflationists to join the BoJ board, forcing investors to trim expectations about the speed of interest rate hikes. This caps gains for the JPY and offers some support to the USD/JPY pair.
Source FX Street
