Forex Market Forecast for February 2023

Nick Ranga

forex market forecast

February kicks off with a bit of a bang. On Wednesday, February 1, we have European inflation, EU unemployment, and a US Fed interest rate decision. The following day it doesn’t get any less hectic with the BoE interest rate decision and ECB rate decision. All in all, the main data points to watch out for in February are inflation, interest rate decisions or commentary regarding a potential slowdown in hikes, and unemployment data.

  • Interest rates and any indications of potential central bank policy shifts will be key to watch in February.
  • In addition, inflation is also a vital point as if it continues to ease, central banks will be under increasing pressure to ease their interest rate hike pace.
  • Finally, keep an eye on unemployment, as a rise will indicate the economy is slowing down and could result in the start of a shift in central bank policy.

US Dollar

There are a number of factors to watch out for with the US dollar in February, starting with the aforementioned interest rate decision. But, as has been the way the last year or so, inflation data will also be key, alongside unemployment and NFP (which will be released on Friday, February 3. If employment ticks higher and inflation continues to ease, we might begin to see the Fed really starting to consider easing the pace of rate hikes.

Key Levels

  • EURUSD: Higher – 1.1100, Lower – 1.0770
  • GBPUSD: Higher – 1.2500, Lower – 1.2000
  • USDJPY: Higher – 131.58, Lower – 127.00


The key news events for the euro, like most of the other major currencies, are inflation, interest rate, and employment data, as these are the key drivers of monetary policy at the moment (inflation being the primary driver of interest rate policy). ECB President Lagarde recently warned that they will “stay the course” on interest rate rises in order to combat inflation, which despite easing, is still near highs.

Key Levels

  • EURUSD: Higher – 1.1100, Lower – 1.0770
  • EURGBP: Higher – 0.8867, Lower – 0.8660

British Pound

While the GBP is impacted by the factors mentioned for the euro and USD, inflation in the United Kingdom is higher than both, and so it may take longer for the country’s central bank, the BoE, to consider easing rate hikes. That would be the general consensus; however, BoE Governor Andrew Bailey suggested expectations of rates peaking at approximately 4.5% is more in line with the central bank’s own thinking.

Further comments on the easing of UK interest rate hikes are bound to impact the GBP, pushing it lower, as well as comments in the aftermath of its rate decision on February 2.

Key Levels

  • EURGBP: Higher – 0.8867, Lower – 0.8660
  • GBPUSD: Higher – 1.2500, Lower – 1.2000

Japanese Yen

Inflation and the BoJ’s initial lack of action to combat rising prices resulted in the yen decreasing in value in 2022. However, in December, a surprising tweak by the central bank to its bond yield control to allow long-term interest rates to rise more resulted in the yen gaining strength. As a result, the USDJPY is down more than 13% in the last three months. However, in its latest rate decision, the BoJ didn’t increase rates, so we could see the yen weaken slightly once again in February as other central banks once again (expectedly) hike rates.

Key Levels

  • USDJPY: Higher – 131.58, Lower – 127.00
  • EURJPY: Higher – 142.80, Lower – 138.00

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