European Summary and Highlights 19 Feb

European Summary

European FX trading was subdued, with the U.S. on holiday and the market searching for direction.  Though the reduction in U.S. interest rate expectations continues to underpin the USD, FX traders are wary that this narrative is now getting mature and the Fed will likely cut three times given the inflation slowdown.  This produces a bias towards a firmer USD, but a reluctance this week to test the upside. 

Elsewhere, GBP remains in focus with the market taking the view that the UK will likely cut less than the ECB, given higher core and wage inflation.  This is producing a view that the market could drift down to test 0.8500 on EURGBP if the BOE testimonies this week temper remaining rate cut talk.