Markets Today: Yen rebounds, Pound Sinks on Labour Data, Gold slides 2% as Market Focus Shifts to Diplomacy

Japan’s 10-year government bond yield dropped to a one-month low of approximately 2.12%. This decline followed a successful auction of 5-year notes, signaling that anxieties regarding the nation’s fiscal stability are beginning to subside.

Market participants are now shifting their focus toward an upcoming 20-year bond sale, which will serve as a critical gauge for long-term investor demand.

Meanwhile, Asian stock markets experienced a slight dip of 0.2% during a quiet trading session, as major hubs like China and Hong Kong remained shuttered for the Lunar New Year.

Beyond regional holidays, global sentiment is being shaped by escalating geopolitical tensions in the Middle East and ongoing speculation regarding Federal Reserve interest rate cuts following the latest inflation data.

Compounding these pressures is a burgeoning "AI panic trade"; shifting attitudes toward artificial intelligence are creating volatility that is now spilling over from the tech sector into the broader global market.

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During the final quarter of 2025, the UK unemployment rate climbed to 5.2%, surpassing the steady 5.1% figure analysts had anticipated. This uptick represents the highest jobless rate seen since early 2021, with the total number of unemployed individuals rising by 94,000 to reach 1.883 million.

This growth in joblessness was broad-based, affecting short-term, medium-term, and long-term categories alike.

Despite the rise in unemployment, the total number of people in work actually grew by 52,000 to a total of 34.244 million. However, because this growth didn't keep pace with the overall population or labor force changes, the employment rate saw a minor dip of 0.1 percentage points, landing at 75.0%.

In the margins of the report, the prevalence of second jobs fell slightly to 1.287 million, while economic inactivity decreased to 20.8%, as 38,000 previously inactive individuals moved back into the labor market.

European markets maintained a steady position on Tuesday, mirroring a broader sense of global caution as critical diplomatic discussions and shifting tech narratives took center stage.

The pan-European STOXX index held firm at 819.22 points in early trading, with the majority of sectors managing to stay in positive territory. Attention was heavily fixed on high-stakes diplomacy, specifically the indirect nuclear negotiations between the US and Iran in Geneva, alongside US-mediated peace talks between Ukraine and Russia regarding territorial disputes.

The prospect of easing geopolitical friction had a direct impact on the defense sector, with related stocks sliding 1.2% as investors speculated that a successful diplomatic resolution might dampen the immediate demand for military hardware.

Simultaneously, broader market sentiment began to stabilize after a volatile period; the "AI panic" that previously gripped the market showed signs of cooling as fears that artificial intelligence would immediately erode the margins of traditional business models started to subside.

Corporate earnings reports provided a mixed bag for individual stocks.

On the winning side, InterContinental Hotels Group (IHG) saw its shares climb 1.1% following a fourth-quarter revenue performance that outpaced market expectations.

Conversely, despite reporting a massive 52% surge in annual core profits, mining giant Antofagasta saw its stock price tumble 3.2%, weighed down by a decline in global copper prices.

On the FX front, the Japanese yen staged a notable recovery on Tuesday, rebounding by 0.50% to 152.80 against the dollar and climbing 0.52% to 180.97 against the euro. This rally effectively erased Monday's losses, fueled by investor confidence that Prime Minister Sanae Takaichi’s expansionary fiscal policies will continue to provide structural support for the currency.

In contrast, the US dollar maintained a slight upward trajectory, with the dollar index reaching 97.12 following a steady two-session gain, while the euro softened slightly to $1.1843.

The British pound faced downward pressure, sliding 0.35% to $1.3582 after fresh labor market data revealed that UK unemployment hit a five-year peak in December. This cooling of the labor market and easing wage growth has intensified speculation that the Bank of England may move toward further interest rate cuts.

Similarly, the Australian dollar edged lower to $0.7069 as recently released minutes from the Reserve Bank of Australia reflected a board divided on the necessity of future rate hikes, despite acknowledging that inflation has remained stubbornly above target for three consecutive years.

Currency Power Balance

Precious metals faced a sharp sell-off on Tuesday, with gold tumbling more than 2% as thin holiday liquidity exacerbated the impact of a strengthening US dollar and cooling geopolitical tensions.

Spot gold prices retreated 1.5% to $4,917.90 per ounce, having earlier touched a weekly low of $4,862, while US gold futures for April delivery saw a steeper decline of 2.2% to $4,936.60.

This downward trend extended across the sector: spot silver fell 2% to $75.05 per ounce, recovering slightly from an earlier 5% plunge, while platinum and palladium dropped 1.5% and 1.9% respectively.

In the energy markets, Brent crude futures drifted lower by 0.86% to $68.06 per barrel as traders weighed the potential for supply disruptions.

While Iran conducted naval exercises near the strategic Strait of Hormuz, the market remained focused on the upcoming nuclear negotiations with the US scheduled for later in the day.

Meanwhile, US West Texas Intermediate (WTI) was quoted at $63.21, reflecting a 0.51% gain; however, this figure incorporates price action from Monday, as the Presidents Day holiday in the United States prevented a formal settlement in the previous session.

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The day ahead is a quiet one in terms of EU and UK data with a host of data being released this morning.

Looking at the US session, market attention is expected to focus on today’s release of the weekly ADP payroll data, especially as market participants look for signs of recovery following a lackluster period between January 10th and 24th.

At the same time, the Empire Manufacturing index is slated for release, with consensus forecasts suggesting a dip into the low sixes, potentially indicating a slight cooling in regional industrial activity.

Given these mixed signals, a clear, unified direction for the U.S. dollar may remain elusive this week. Consequently, currency traders are likely to pivot their attention toward localized developments within the G10 nations, looking for relative value in specific regional trends rather than a broad greenback narrative.

From a technical perspective, the FTSE 100 index continues to hold comfortably above the 100-day MA.

Having printed fresh highs last week around the 10550 handle the index has seen a notable pullback before finding support at 10387.

For now though, bulls remain firmly in control even though a pullback to support around the 10440 mark cannot be ruled out.

Only a four-hour candle close below the higher low swing point at 10387 would lead to a change in structure and could lead me to reevaluate my outlook.

Immediate support rests at 10440 before the swing low at 10387 comes into focus.

Resistance to the upside at 10528 needs to be cleared if bulls are to make a run for the daily and all-time highs at 10550.

FTSE 100 Index Daily Chart, February 17, 2026

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