Strong US payrolls have reinforced dollar strength, pushing back expectations for near-term Fed rate cuts and reshaping short-term FX positioning. With rate expectations shifting and volatility building across major pairs, markets remain highly sensitive to upcoming inflation data and central bank signals.
Key Highlight
- Strong US payrolls data drives dollar recovery
- UK GDP data underperforms forecasts
Market Recap
The US dollar recovered strongly after a better-than-expected employment report reinforced the resilience of the US labour market. Payrolls rose by 130,000, the strongest monthly gain in over a year, and the unemployment rate edged lower, highlighting continued stability in hiring.
As a result, markets scaled back expectations for an early Federal Reserve rate cut, with pricing shifting from June towards July. The dollar, which had been softer earlier in European trading, reversed course following the release. The USD Spot Index finished around 0.3% higher, recovering from an earlier 0.4% decline.
The data suggests the Fed may have less urgency to ease policy in the near term, a dynamic that continues to underpin the dollar.
Elsewhere, the Australian dollar extended its recent gains after RBA Deputy Governor Hauser reiterated that inflation remains too elevated. His remarks reinforced the view that Australian rates may need to stay restrictive for longer, providing additional support to AUD.
Market Overview:
The US dollar-maintained support after yesterday’s stronger-than-expected payrolls data confirmed ongoing resilience in the labour market. The figures reduced expectations of imminent Federal Reserve rate cuts, prompting a recovery in the dollar after initial softness. Most G10 currencies retreated modestly against the USD, with EUR and GBP both edging lower as investors remained cautious around US data releases.
What this means:
A firm US labour market gives the Fed less urgency to ease policy, which continues to underpin the dollar in the near term.
UK Update
This morning’s UK GDP reading showed growth of just 0.1% in Q4, coming in below forecasts. Sterling reaction was relatively muted, broadly in line with its typical response to GDP data over the past year. Markets appear to be placing limited emphasis on backward-looking growth figures.
Attention now turns to next week’s inflation data — the final CPI release before the Bank of England’s March meeting. With approximately 18 basis points of rate cuts already priced in, inflation is expected to be far more influential than today’s growth miss in shaping policy expectations and GBP direction.
What this means:
Sterling is likely to be driven more by inflation trends than GDP data, particularly as rate expectations remain finely balanced.
Looking Ahead
Today’s US initial jobless claims will provide further insight into labour market conditions following the strong payrolls report. However, Friday’s US CPI release is expected to be the main driver for FX markets, offering clarity on inflation momentum and the Fed’s policy path for the remainder of the year.
Near-term USD performance, and broader G10 currency moves will likely hinge on these upcoming releases.
11th February 2026
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