US Inflation and Federal Reserve Policy💱 Forex

US Inflation Cools, Fuels Fed Rate Cut Bets & Dollar Weakness

February 13, 2026, 06:01 PM156 words10 sources
US Inflation Cools, Fuels Fed Rate Cut Bets & Dollar Weakness

Photo: Pexels / Nataliya Vaitkevich

Recent US economic data, particularly the January Consumer Price Index (CPI) report, revealed inflation below expectations, registering 2.4% year-over-year and 0.2% month-over-month. This has significantly shifted market expectations towards a more dovish Federal Reserve policy, with traders now heavily pricing in potential interest rate cuts as early as June. The weaker-than-anticipated inflation data triggered a broad decline in the US Dollar, benefiting currency pairs like EUR/USD and GBP/USD, which surged towards 1.1880 and 1.3620 respectively. While the Bank of England suggests UK inflation remains elevated, the USD’s weakness is the dominant driver. TD Securities anticipates the Fed will maintain a prolonged holding pattern, with market focus shifting to the timing and extent of future rate reductions. The Japanese Yen also strengthened, boosted by expansionary fiscal policies. Despite some caution regarding potential intervention, the overall trend points to continued USD softness as long as inflation remains subdued and the Fed signals a willingness to ease monetary policy.

Source Articles

This article is based on analysis of 15 source articles from our news database.

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