13/02/2026 - 08:44 UTCThe dollar index (USDX) is trading near the 97.00 mark as markets remain in a holding pattern ahead of the pivotal January Consumer Price Index (CPI) report, which is expected to show inflation easing to 2.5%. While recent robust labor data and hawkish commentary from some Fed officials have dampened immediate expectations for rate cuts, Fed Governor Stephen Miran has suggested that passive policy tightening may soon justify lower interest rates. Despite a slight upward bias in daily trading as investors adopt a defensive stance, the USDX has overall moved approximately -0.5% lower this week as traders recalibrate long-term policy expectations against a backdrop of potential central bank leadership shifts and a projected global oil surplus.
General Asia news was dominated by a pullback in risk appetite as renewed jitters over AI valuations sparked an overnight slide in U.S. technology shares, weighing heavily on regional semiconductor and growth names. Despite the daily retreat, markets like South Korea’s KOSPI achieved fresh record highs, buoyed by Samsung’s massive weekly surge in the high-bandwidth memory sector. In Japan, the initial "Takaichi trade" euphoria cooled slightly after the index breached the 58,000-point threshold earlier in the week, with investors now turning their attention toward looming U.S. inflation data.
In China, indices faced downward pressure on Friday as the rally seen earlier in the week lost momentum, though the markets remained on track for modest weekly gains. Domestic sentiment remains cautious as traders wait for clearer signals on the Fed's policy trajectory and its impact on global liquidity. As of Friday 07:57 AM GMT, the China SSE fell -1.19%, the China SZSE dropped -1.23%, and the Hong Kong 50 declined by -1.25%.
U.S. equity markets faced heavy selling pressure on Thursday as investors rotated aggressively out of stocks and into the safety of bonds ahead of Friday's pivotal inflation data. The flight to quality sent Treasury yields lower, reflecting a market "fragile" due to conflicting economic signals. While recent labor data showed resilience, a rise in weekly jobless claims and a slump in existing home sales to levels not seen since late 2024 added to the "cloudy" outlook. In the corporate sector, a disappointing margin outlook from networking giant Cisco—driven by rising AI-related hardware costs—dragged the tech sector lower, while McDonald’s provided a rare bright spot by topping expectations through strong value promotions.
In the networking space, Cisco plummeted -12.01% after the company issued a warning that rising memory costs are significantly squeezing its margins, a development that also dragged Arista Networks down -3.86% as investors sold off the name ahead of its own post-close earnings report. Conversely, McDonald's defied the broader gloom to climb 2.72% up, bolstered by a fourth-quarter earnings beat that highlighted the resilience of its global comparable sales.
In the commodities and metals markets, the sentiment was decidedly more bearish. Gold retreated -2.78% as robust weekly employment data dampened investor hopes for imminent interest rate cuts from the Federal Reserve. Meanwhile, the energy sector faced heavy selling pressure; WTI Oil tumbled -3.15% following a revised forecast from the IEA that lowered demand expectations for 2026. This trend was mirrored in Brent crude, which fell -2.96% to settle below the $68 per barrel threshold amid reports of a sizeable global supply surplus.
Market focus now shifts decisively to Friday's January inflation report, where traders will look for confirmation of cooling price pressures to support the case for 2026 interest rate cuts. The consensus estimate for Core CPI m/m is 0.3%, up slightly from the previous 0.2%, while the broader CPI m/m is also expected to hold steady at 0.3%. On an annual basis, headline CPI y/y is forecasted to moderate to 2.5% from the prior 2.7%.
The EUR/USD pair remained firm above the 1.1850 mark during Friday’s early Asian trading session, as investors refrained from taking strong positions ahead of key economic releases from both sides of the Atlantic.
The US Dollar traded within a narrow range following a series of mixed US economic reports. December Retail Sales came in unexpectedly flat, missing expectations of a 0.4% increase and following November’s unrevised 0.6% gain, pointing to potential softness in consumer spending. In contrast, January’s Nonfarm Payrolls data surprised to the upside, underscoring continued resilience in the labor market.
Market participants are now focused on the upcoming US Consumer Price Index (CPI) report, which could offer clearer direction on the Federal Reserve’s interest rate trajectory. With conflicting signals from recent data, traders are looking for confirmation on whether inflation trends and consumer activity warrant a shift in monetary policy expectations.
On the European side, the European Central Bank kept its benchmark interest rate unchanged at 2.0% for a fifth consecutive meeting last week, in line with market expectations.
Attention now turns to the flash estimate of fourth-quarter Eurozone Gross Domestic Product. Growth is forecast at 0.3% quarter-on-quarter and 1.3% year-on-year.
Gold prices rebounded sharply during Friday’s Asian session, recovering from the previous day’s slide. The precious metal has since climbed back toward the key $5,000 psychological threshold, as investors position ahead of the latest US inflation data.
The recovery comes as traders await the release of the US Consumer Price Index (CPI), a report that could significantly influence expectations surrounding the Federal Reserve’s monetary policy path. The inflation figures are expected to shape near-term US Dollar direction and, by extension, demand for non-yielding assets such as gold.
Stronger-than-expected US Nonfarm Payrolls data led investors to scale back expectations for a March Federal Reserve rate cut, lending support to the US Dollar Index (DXY) and weighing on gold prices. However, markets still anticipate two rate reductions in 2026, capping the Dollar’s gains.
A cautious tone across global equity markets has also supported safe-haven flows into gold, providing an additional tailwind for prices. However, whether bullion can extend its rebound may depend on the outcome of the US CPI report, with many traders opting to wait for clearer signals before initiating fresh positions.
Oil prices were broadly steady in Asian trading on Friday but remained on course for weekly losses after a sharp selloff in the previous session, driven by mounting concerns over oversupply and rising inventories.
In its latest monthly report, the International Energy Agency warned that the global oil market could face a surplus of more than 3.7 million barrels per day in 2026. The agency also noted a rapid build-up in global stockpiles last year and trimmed its outlook for demand growth, citing a softer macroeconomic environment and moderating consumption, even as non-OPEC supply remains strong.
Adding to bearish sentiment, the Energy Information Administration reported an 8.53 million-barrel increase in US crude inventories — the largest build since January 2025 — signalling subdued refinery demand and ample supply in the world’s biggest oil consumer.
Geopolitical developments were also in focus after Donald Trump said negotiations over a potential nuclear deal with Iran could extend for up to a month, easing immediate fears of supply disruptions in the Middle East.
Investors now turn their attention to upcoming US consumer price index data, which may provide further clarity on the Federal Reserve’s policy outlook, particularly after strong January employment figures dampened expectations for near-term rate cuts.
US equities ended sharply lower on Thursday as investors rotated into bonds ahead of key inflation data, pushing Treasury yields down. A steep post-earnings drop in Cisco Systems further pressured the technology sector.
Markets are bracing for Friday’s Consumer Price Index (CPI) report, which is expected to provide fresh insight into the Federal Reserve’s policy outlook. Additional data on Thursday painted a mixed picture. Weekly initial jobless claims rose to 227,000, above forecasts, while continuing claims climbed to 1.862 million. Meanwhile, January existing home sales dropped to 3.91 million, the weakest level since September 2024.
Ahead of the inflation release, investors increased bond purchases, sending the US 10-year Treasury yield down to 4.099% and the 2-year yield to 3.460%.
On the corporate front, Cisco shares tumbled 12% after the company reported quarterly gross margins below expectations, citing pressures linked to higher memory chip costs amid AI-driven demand. In contrast, McDonald's rose after surpassing fourth-quarter sales and profit estimates, supported by strong promotional activity and resilient demand. Shares of Restaurant Brands International edged lower despite posting a comparable sales beat.
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