Tag: ECB

  • Greenback Strengthens as Euro Pulls Back and US-EU Trade Tensions Escalate

    Greenback Strengthens as Euro Pulls Back and US-EU Trade Tensions Escalate


    Dollar is staging a notable rebound as markets transition into US session, though the exact catalyst behind the move is unclear. Part of Dollar’s strength could be attributed to a broad pullback in Euro, as traders begin to take profits after this month’s strong gain. Euro’s retreat is providing the greenback with some temporary relief. However, broader geopolitical and trade tensions may also be influencing the market’s cautious sentiment.

    Trade tensions between the U.S. and Europe continue to escalate following fresh threats from US President Donald Trump. In response to the EU’s plan to impose retaliatory tariffs on American whiskey, Trump warned of a potential 200% tariff on European wine, champagne, and spirits. This marks an escalation in the ongoing trade dispute that began with Washington’s 25% tariffs on steel and aluminum imports.

    At the same time, geopolitical uncertainties are deepening as U.S. officials arrive in Moscow for ceasefire discussions over the Ukraine conflict. Russia appears to be taking a hardline stance, with Presidential Aide Yuri Ushakov dismissing the proposed truce as nothing more than a temporary reprieve for Ukraine’s military. Ushakov emphasized that Russia’s ultimate objective remains a long-term peace settlement that prioritizes its own national interests. This rigid position suggests that negotiations may not yield immediate breakthroughs.

    Against this backdrop, Dollar is emerging as the strongest performer of the day, followed by Yen and Loonie. On the other hand, Kiwi is currently the weakest performer, followed by Aussie and Euro. Sterling and the Swiss Franc are positioned in the middle.

    Technically, though, it’s way too early to conclude that Dollar is reversing its near term down trend. For example, USD/CHF’s recovery from 0.8757 is seen as a corrective pattern that should be limited below 0.8911 support turned resistance. Fall from 0.9200 is still expected to resume at a later stage.

    In Europe, at the time of writing, FTSE is up 0.07%. DAX is down -0.49%. CAC is down -0.33%. UK 10-year yield is up 0.018 at 4.698. Germany 10-year yield is flat at 2.882. Earlier in Asia, Nikkei fell 0.08%. Hong Kong HSI fell -0.58%. China Shanghai SSE fell -0.39%. Singapore Strait Times rose 0.12%. Japan 10-year JGB yield rose 0.023 to 1.547.

    US PPI at 0.0% mom, 3.2% yoy in Feb, below expectations

    US PPI for final demand as unchanged in February, coming in below expectations of 0.3% mom rise. The 0.3% mom increase in goods prices was offset by -0.2% mom decline in services.

    On an annual basis, PPI slowed to 3.2% yoy, down from January’s 3.7% yoy and missing the expected 3.3% yoy reading.

    PPI excluding food, energy, and trade services, rose 0.2% mom. Over the past 12 months, this measure advanced 3.3% yoy, maintaining a relatively steady pace.

    US intial jobless claims tick down to 220k, vs exp 224k

    US initial jobless claims fell -2k to 220k in the week ending March 8, slightly below expectation of 224k. Four-week moving average of initial claims rose 1.5k to 226k.

    Continuing claims fell -27k to 1870k in the week ending March 1. Four-week moving average of continuing claims rose 6k to 1872k.

    ECB’s Nagel: Tariffs could push Germany into recession again, but Fiscal shift provides stability

    German ECB Governing Council member Joachim Nagel warned that Germany could face a third consecutive year of economic contraction if US tariffs take full effect. Speaking to BBC, Nagel noted that without the tariffs, Germany’s economy was already expected to stagnate with minimal growth of around 0.2%. With escalating trade tensions, the risk of another recession looms large.

    Nagel sharply criticized US President Donald Trump’s tariff policies, calling them “economics from the past” and “definitely not a good idea.” He defended the EU’s decision to impose retaliatory tariffs, adding that such a response was a “necessity” rather than a choice.

    Addressing Germany’s recent shift in fiscal policy, Nagel described the decision to increase borrowing for defense and infrastructure spending as an “extraordinary measure for an extraordinary time.”

    He pointed out that the global economy is undergoing “tectonic changes,” which justify a more flexible approach to fiscal management. While Germany has traditionally maintained strict budget discipline, this shift would provide “some financial breathing room” to support recovery in the coming years, and send a “stability signal” to markets.

    Eurozone industrial production rises 0.8% mom, led by intermediate and capital goods

    Eurozone industrial production posted a solid 0.8% mom increase in January, aligning with market expectations. The gains were driven primarily by a 1.6% rise in intermediate goods output and a 0.5% increase in capital goods production. However, declines were seen in other categories, with energy production falling by -1.2%, durable consumer goods slipping -0.2%, and non-durable consumer goods dropping -3.1%.

    Across the broader European Union, industrial production rose by a more modest 0.3% mom. Among individual member states, Lithuania (+4.6%), Portugal (+3.7%), and Austria (+3.3%) recorded the strongest gains, while Malta (-12.9%), Denmark (-10.6%), and Slovakia (-7.3%) saw the sharpest declines.

    BoJ’s Ueda expects real wages to rise, boosting consumption

    BoJ Governor Kazuo Ueda signaled optimism about Japan’s economic outlook, telling the parliament today that “import-cost-driven inflation” is expected to moderate while wages continue to “rise steadily.” This shift could lead to an improvement in real wages and consumption, a critical factor for sustaining domestic demand.

    Ueda’s comments align with recent developments in Japan’s annual “shunto” wage negotiations, which have resulted in record pay hikes across major companies.

    Hitachi announced a record 6.2% rise in monthly wages, fully meeting union demands. Toyota’s key auto parts supplier, Denso, also committed to historic pay hikes, while Toyota itself stated that the overall wage increase for its manufacturing staff would match last year’s levels—the highest seen since 1999.

    Further clarity on the scale of wage hikes will come on March 14, when Rengo, Japan’s largest labor union federation representing 7 million workers, releases its preliminary report. Rengo had been seeking an average wage increase of 6.09%, up from last year’s 5.85%.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.0867; (P) 1.0897; (R1) 1.0919; More…

    Intraday bias in EUR/USD stays neutral first. Deeper retreat might be seen towards 55 4H EMA (now at 1.0762). But strong support should be seen from 38.2% retracement of 1.0358 to 1.0946 at 1.0721 to contain downside. On the upside, break of 1.0946 will resume the rally from 1.0176 to retest 1.1274 key resistance next.

    In the bigger picture, the strong break of 55 W EMA (now at 1.0675) suggests that fall from 1.1274 (2024 high) has completed as a three wave correction to 1.0176. Rise from 0.9534 is still intact, and might be ready to resume. Decisive break of 1.1274 will target 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. Also, that will send EUR/USD through a multi-decade channel resistance will carries larger bullish implication. This will now be the favored case as long as 1.0531 resistance turned support holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    00:00 AUD Consumer Inflation Expectations Mar 3.60% 4.60%
    00:01 GBP RICS Housing Price Balance Feb 11% 20% 22%
    07:30 CHF Producer and Import Prices M/M Feb 0.30% 0.20% 0.10%
    07:30 CHF Producer and Import Prices Y/Y Feb -0.10% -0.30%
    10:00 EUR Eurozone Industrial Production M/M Jan 0.80% 0.80% -1.10% -0.40%
    12:30 CAD Building Permits M/M Jan -3.20% -4.80% 11.00% 11.60%
    12:30 USD Initial Jobless Claims (Mar 7) 220K 224K 221K 222K
    12:30 USD PPI M/M Feb 0.00% 0.30% 0.40% 0.60%
    12:30 USD PPI Y/Y Feb 3.20% 3.30% 3.50% 3.70%
    12:30 USD PPI Core M/M Feb -0.10% 0.30% 0.30% 0.50%
    12:30 USD PPI Core Y/Y Feb 3.40% 3.60% 3.60% 3.80%
    14:30 USD Natural Gas Storage -46B -80B

     



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  • Dollar Struggles for Direction as Softer CPI Fails to Trigger Major Moves

    Dollar Struggles for Direction as Softer CPI Fails to Trigger Major Moves


    Dollar is struggling to find a definitive direction in early US session, even after the softer-than-expected Consumer Price Index report offered fresh evidence of easing inflation pressures. Annual core CPI now sits at its lowest level since 2021, a development that should bring some relief to both the Fed and markets. However, the data release has not sparked a substantial move in the greenback, as lingering tariff concerns keep traders in a wait-and-see mode.

    The most immediate market reactions have been more evident in equities and bonds. US stock futures are rebounding on the prospect of Fed easing sooner. Funds are flowing out of bonds, pushing the benchmark 10-year Treasury yield higher. Yet overall market caution remains elevated, with tariffs casting a shadow over trade and growth prospects.

    For now, Canadian Dollar is currently in the lead for the day, although BoC’s upcoming rate decision could quickly change that dynamic. Dollar is the second-best performer on the day, followed by the British pound. At the other end of the spectrum, Japanese Yen is faring the worst, trailed by Euro, which is digesting recent strong gains, and then Australian Dollar. New Zealand Dollar and Swiss Franc are hovering in the middle of the pack.

    Technically, USD/JPY’s rebound today is much more due to Yen’s pullback then Dollar’s strength. Price actions from 146.52 are still viewed as a corrective pattern. Upside should be limited by 150.92 support turned resistance. Fall from 158.86 is expected to resume through 146.52 after the corrective pattern completes.

    In Europe, at the time of writing, FTSE is up 0.50%. DAX is up 1.87%. CAC is up 1.35%. UK 10-year yield is up 0.054 at 4.684. Germany 10-year yield is up 0.038 at 2.934. Earlier in Asia, Nikkei rose 0.07%. Hong Kong HSI fell -0.76%. China Shanghai SSE fell -0.23%. Singapore Strait Times rose 0.19%. Japan 10-year JGB yield rose 0.017 to 1.524.

    US core CPI falls to 3.1%, lowest since 2021

    US consumer inflation slowed more than expected in February. Headline CPI rose just 0.2% mom, below forecasts of 0.3% mom. Core CPI, which excludes food and energy, also increased by 0.2% mom, missing expectations of 0.3% mom.

    On an annual basis, inflation eased to 2.8% yoy from 3.0% yoy in January. Core CPI fell from 3.3% yoy to 3.1% yoy, the lowest level since April 2021. The deceleration in price pressures suggests that disinflationary momentum is gradually resuming after months of stubbornly high core readings.

    ECB’s Lagarde stresses commitment to price stability amid exceptional high uncertainty

    ECB President Christine Lagarde highlighted the “exceptionally high” level of global uncertainty in her speech today, highlighting the challenges posed by trade policy shifts and geopolitical tensions.

    She noted that an index measuring trade policy uncertainty is now close to 350—more than six times its average value since 2021. Geopolitical risk indicators are at levels unseen since the Cold War, aside from periods of war and major terrorist attacks.

    Against this backdrop, Lagarde emphasized that ECB’s primary focus remains on maintaining price stability over the medium term, stressing that this commitment is “more important than ever” in an unpredictable economic environment.

    To achieve this, Lagarde stressed the need for “agility to respond to new shocks” while maintaining a structured policy framework that prevents “short-sighted reactions and unbridled discretion”.

    She also noted the importance of combining agility with clarity, stating that while the ECB may not always be able to provide certainty about the exact path of interest rates, it can ensure “clarity about our reaction function”.

    BoJ’s Ueda acknowledges rising yields as market bets on policy shift

    BoJ Governor Kazuo Ueda addressed the recent rise in bond yields, and noted, “I don’t see a big divergence between our view and that of markets”.

    Speaking to parliament, Ueda emphasized the “biggest determinant” of long-term interest rates is market expectations regarding the central bank’s short-term policy rate.

    He added, it is “natural for long-term rates to move in a way that reflects such market forecasts”. His comments come as Japan’s benchmark 10-year bond yield surged to a 16-year high of 1.575% on Monday.

    Separately, Japan’s latest inflation data showed that annual wholesale inflation slowed slightly in February. Corporate goods price index , which tracks the prices businesses charge each other for goods and services, rose 4.0% yoy, in line with market expectations, down from January’s 4.2% yoy increase.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.0849; (P) 1.0898; (R1) 1.0968; More…

    While EUR/USD continues to lose momentum as seen in 4H MACD, there is no clear sign that a correction is imminent yet. Further rise is in favor as long as 1.0804 support holds. Sustained trading above 161.8% projection of 1.0176 to 1.0531 from 1.0358 at 1.0932 will target 261.8% projection at 1.1287, which is slightly above 1.1274 key resistance. Nevertheless, firm break of 1.0804 should now indicate short term topping, and bring deeper pullback.

    In the bigger picture, the strong break of 55 W EMA (now at 1.0675) suggests that fall from 1.1274 (2024 high) has completed as a three wave correction to 1.0176. Rise from 0.9534 is still intact, and might be ready to resume. Decisive break of 1.1274 will target 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. Also, that will send EUR/USD through a multi-decade channel resistance will carries larger bullish implication. This will now be the favored case as long as 1.0531 resistance turned support holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY PPI Y/Y Feb 4.00% 4.00% 4.20%
    23:50 JPY BSI Large Manufacturing Q1 -2.4 -2.4 6.3
    12:30 USD CPI M/M Feb 0.20% 0.30% 0.50%
    12:30 USD CPI Y/Y Feb 2.80% 2.90% 3.00%
    12:30 USD CPI Core M/M Feb 0.20% 0.30% 0.40%
    12:30 USD CPI Core Y/Y Feb 3.10% 3.20% 3.30%
    13:45 CAD BoC Interest Rate Decision 2.75% 3.00%
    14:30 CAD BoC Press Conference
    14:30 USD Crude Oil Inventories 2.1M 3.6M

     



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  • Euro Rally Extends as German Greens Eye Defense Spending Deal This Week

    Euro Rally Extends as German Greens Eye Defense Spending Deal This Week


    Euro’s rally continues after a brief pause, boosted by signs of political breakthrough in Germany over major defense and infrastructure spending. Consensus appears to be emerging around the large-scale funding deal, a game-changer toward bolstering Europe’s economic and defense resilience, especially amid ongoing geopolitical conflicts in Ukraine.

    Germany’s Green party is reportedly prepared to reach an agreement as early as this week with prospective Chancellor Friedrich Merz of CDU/CSU. Greens co-leader Franziska Brantner indicated in a Bloomberg TV interview that negotiations could move quickly, citing the urgent need for Europe to “speed up” its defense capabilities given the “dire” situation in Ukraine. An influx of hundreds of billions of Euros in spending could act as a significant stimulus for the German economy, thereby supporting the broader Eurozone.

    On the other hand, Dollar is generally weaker against European majors, reflecting a cautious mood. US futures are also sluggish, reversing earlier recovery and struggling to find direction in a narrow trading range. Many investors appear to be sidelined, waiting for tomorrow’s CPI release to guide the next market move.

    Expectations point to core CPI remaining sticky, albeit with a modest decrease from 3.3% to 3.2%. The pace of disinflation has clearly lost momentum in recent months, suggesting that inflationary pressures are far from fully contained. Should the data confirm a slow decline in inflation, it would solidify Fed’s case to hold rates steady at the upcoming March 19 meeting.

    Even so, market participants are increasingly betting that Fed will need to ease policy in Q2, as the economic impact of tariffs and weaker sentiment gradually translate into weaker hard data. The uncertainty surrounding trade policy, coupled with signs of slowing economic momentum, has kept Dollar on the back foot.

    Looking at weekly performance, Euro remains the strongest currency so far. British Pound and Yen are also holding up well. On the other end of the spectrum, Canadian Dollar is the worst performer this week, followed by Australian and New Zealand Dollars, as risk sentiment remains weak and commodity-linked currencies struggle. Dollar and Yen are currently positioned in the middle of the pack.

    In Europe, at the time of writing, FTSE is down -0.09%. DAX is up 0.21%. CAC is up 0.03%. UK 10-year yield is up 0.024 at 4.626. Germany 10-year yield is up 0.046 at 2.883. Earlier in Asia, Nikkei fell -0.64%. Hong Kong HSI fell -0.01%. China Shanghai SSE rose 0.41%. Singapore Strait Times fell -1.88%. Japan 10-year JGB yield fell -0.065 to 1.506.

    ECB’s Rehn warns US tariffs could cut global output by 0.5% in both 2025 and 2026

    In a speech today, Finnish ECB Governing Council member Olli Rehn highlighted the potential damage that US tariffs could inflict on global economic activity.

    According to Bank of Finland estimates, import tariffs of 25% on US imports from the Eurozone and 20% on imports from China, along with reciprocal measures by those regions, would shave more than 0.5% off global output this year and next

    Rehn stressed that this looming trade conflict would carry both deflationary and inflationary implications for Europe. “It’s worth recalling that if growth were to slow down in the world economy and euro area economy compared to forecasts, that would weigh on inflation downwards,” Rehn said.

    Given this uncertainty, he noted that ECB will assess fresh economic data ahead of its April meeting before committing to additional rate cuts or a pause.

    Australia Westpac consumer sentiment jumps to 95.9, soft landing achieved

    Australian consumer sentiment saw a strong rebound in March, with Westpac Consumer Sentiment Index jumping 4.0% mom to 95.9, the highest level in three years and not far from neutral 100 mark.

    Westpac attributed the improvement to slowing inflation and February’s RBA interest rate cut which have lifted confidence across households. positive views on job security suggest that “soft landing has been achieved”. Nevertheless, “unsettling overseas news” continues to weigh on the broader economic outlook.

    Looking ahead to RBA’s upcoming meeting on March 31-April 1, Westpac expects the central bank to keep the cash rate unchanged. RBA was clear that the 25bps cut in February “did not mean further reductions could be expected at subsequent meetings.”

    Westpac added, “further slowing in inflation will give the RBA sufficient confidence to deliver more rate cuts this year with the next move coming at the May meeting”.

    Australia’s NAB business confidence slips back into negative as cost pressures persist

    Australia’s NAB Business Confidence fell from 5 to -1 in February, erasing last month’s gain and returning to below-average levels. While business conditions improved slightly from 3 to 4, the decline in confidence suggests that businesses remain cautious despite RBA’s recent rate cut and positive Q4 GDP data.

    NAB Chief Economist Alan Oster noted that the lift in sentiment seen in January was not sustained, signaling ongoing uncertainty in the business environment. Persistent cost pressures and subdued profitability appear to be key factors weighing on sentiment, keeping confidence below long-term norms.

    Within business conditions, trading conditions ticked up from 7 to 8, and profitability conditions rose slightly from -2 to -1, though still remaining in negative territory. Employment conditions, however, weakened from 5 to 4.

    Cost pressures remain a concern, with purchase cost growth accelerating from 1.1% to 1.5% in quarterly equivalent terms. On the positive side, labor cost growth eased from 1.7% to 1.5%, indicating that wage price pressures are gradually cooling. Meanwhile, final product price growth slowed from 0.8% to 0.5%, though retail price inflation held steady at 1.0%.

    EUR/JPY Mid-Day Outlook

    Daily Pivots: (S1) 158.86; (P) 159.62; (R1) 160.35; More…

    EUR/JPY’s rally resumed by breaking through 161.25 temporary top and intraday bias is back on the upside. Rise from 154.77 is seen as another rising leg in the consolidation pattern from 154.40. Next target is 164.89 resistance. For now, further rise is expected as long as 158.87 support holds, in case of retreat.

    In the bigger picture, price actions from 175.41 are seen as correction to rally from 114.42 (2020 low). Strong support should be seen from 38.2% retracement of 114.42 to 175.41 at 152.11 to contain downside. However, sustained break of 152.11 will bring deeper fall even still as a correction.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:45 NZD Manufacturing Sales Q4 2.60% -1.20% 0.20%
    23:30 AUD Westpac Consumer Confidence Mar 4.00% 0.10%
    23:30 JPY Overall Household Spending Y/Y Jan 0.80% 3.60% 2.70%
    23:50 JPY GDP Q/Q Q4 F 0.60% 0.70% 0.70%
    23:50 JPY GDP Deflator Y/Y Q4 F 2.90% 2.80% 2.80%
    23:50 JPY Money Supply M2+CD Y/Y Feb 1.20% 1.40% 1.30%
    00:30 AUD NAB Business Confidence Feb -1 4 5
    00:30 AUD NAB Business Conditions Feb 4 3
    06:00 JPY Machine Tool Orders Y/Y Feb P 3.50% 4.70%
    10:00 USD NFIB Business Optimism Index Feb 100.7 101 102.8

     



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  • Risk Sentiment Dips in Europe But Euro Holds Steady

    Risk Sentiment Dips in Europe But Euro Holds Steady


    Risk sentiment took a mild turn to the downside in European markets today, with DAX pulling back from last week’s solid gains. Investors are watching developments in Germany’s political arena, where Greens have voiced opposition to proposals by CDU’s Friedrich Merz for a sweeping overhaul of debt rules, including a massive increase in state borrowing and a EUR 500B infrastructure fund.

    While this move appears to have dampened market confidence temporarily, the broader reaction remains measured, suggesting that investors are just waiting for more clarity on any subsequent political negotiations.

    Despite initially rejecting Merz’s plans, Greens have indicated they will present their own ideas and hold further talks with both conservative CDU/CSU and SPD. This could be a strategic negotiation tactic aimed at extracting additional concessions for climate protection measures or other political agenda.

    Meanwhile, Euro is largely unfazed, holding steady in tight range against Dollar. Supporting Euro’s relative resilience, strong investor confidence data in both the Eurozone and Germany stand in stark contrast to deteriorating sentiment in the US.

    Elsewhere, Canadian Dollar lingers as the day’s worst performer, finding little support even after former BoC and BoE Governor Mark Carney emerged as Canada’s next Prime Minister, replacing Justin Trudeau. However, uncertainties loom over Canada’s political and economic future. His Liberal Party has recently gained ground, fueled by renewed sense of national unity against US tariffs. Yet, the party still faces tough challenges from the opposition Conservatives, who have consistently led in the polls for months—often by double digits.

    Carney is expected to call an election soon in an effort to capitalize on the momentum and strengthen the Liberal Party’s position. However, it is clearly an uphill battle as the Conservatives remain well-positioned to challenge for power. While Carney’s track record in central banking has earned him global respect, translating that expertise into electoral momentum could prove challenging.

    Overall in the forex markets, Yen is topping the performance chart today, followed by Kiwi and Swiss Franc, reflecting a slight tilt toward safer assets. At the other end of the spectrum, Loonie is the weakest, with Dollar and Sterling also lagging. Euro and Aussie find themselves in the middle of the pack.

    Technically, EUR/CAD is now eyeing 161.8% projection of 1.4483 to 1.5058 from 1.4740 at 1.5670 after recent strong rally. Firm break of 1.5670 will push the cross further to 200% projection at 1.5890, where it could find strong resistance for short term topping. Or, break of 1.5401 support will argue that a consolidation phase has already started.

    In Europe, at the time of writing, FTSE is down -0.92%. DAX is down -1.25%. CAC is down -0.42%. UK 10-year yield is down -0.007 at 4.596. Germany 10-year yield is down -0.029 at 2.815. Earlier in Asia, Nikkei rose 0.57%. Hong Kong HSI fell -1.57%. China Shanghai SSE fell -0.38%. Singapore Strait Times fell -0.21%. Japan 10-year JGB yield rose 0.063 to 1.587.

    ECB’s Kazimir: No automatic decisions or rushing

    Slovak ECB Governing Council member Peter Kazimir emphasized the need for flexibility in monetary policy, cautioning against premature decisions on interest rate cuts.

    In a blog post, he highlighted that inflation risks remain “tilted to the upside”. He added that historical precedent showing that tariffs tend to slow economic growth while simultaneously pushing prices higher—precisely the scenario ECB seeks to avoid.

    Given these uncertainties, Kazimir reinforced the importance of keeping “all options open,” suggesting that the ECB could either proceed with further rate cuts or pause.

    He made it clear that he is still seeking “undeniable confirmation” that the current disinflation trend will persist before endorsing any easing measures.

    With inflation dynamics remaining complex, he stressed that “now is not the time for automatic decisions or rushing.”

    Eurozone Sentix investor confidence jumps to -2.9, Germany feeling downright euphoric

    Eurozone Sentix Investor Confidence index jumped from -12.7 to -2.9, far exceeding market expectations of -10 and reaching its highest level since June 2024. Current Situation Index improved relatively modestly from -25.5 to -21.8. Expectations Index soared from 1.0 to 18.0, marking its third consecutive increase and the highest reading since July 2021. This month’s surge in expectations represents the largest monthly increase since 2012, signaling a dramatic shift in sentiment among investors.

    Germany saw an even more impressive turnaround. The Invest Confidence index rose from -29.7 to -12.5, its best level since April 2023. Current Situation Index climbed from -50.8 to -40.5, the highest since July 2024. Meanwhile, Expectations surged from -5.8 to 20.5, marking the highest level since July 2021.

    According to Sentix, much of this optimism is rooted in expectations for increased investment in the EU’s armaments sector and Germany’s infrastructure, which has left investors feeling “downright euphoric” about future prospects.

    In contrast, investor sentiment in the US deteriorated significantly. The Sentix Investor Confidence Index plunged from 21.2 to -2.7, its lowest level since 2023. The Current Situation Index dropped from 35.3 to 13.5, the weakest reading since September 2024, while the Expectations Index tumbled from 8.0 to -7.8, its lowest since November 2022.

    Sentix described this downturn as a “historic turning point,” with such a sharp simultaneous decline in both current and expected values only observed once before—during the 2008 financial crisis.

    Japan’s nominal wages rises 2.8% yoy in Jan, real wages fall -1.8% yoy

    Japan’s labor cash earnings rose 2.8% yoy in January, falling short of market expectations of 3.2% yoy. Nominal wage growth remained positive for the 37th month.

    Real wages, adjusted for inflation, fell -1.8% yoy, reversing two months of slight gains. The decline was largely driven by a sharp rise in consumer inflation.

    The inflation rate used by the Ministry of Health, Labor and Welfare to calculate real wages—which includes fresh food prices but excludes rent—accelerated to 4.7% yoy, its highest level since January 2023.

    Regular pay, or base salary, rose 3.1% yoy, the largest gain since 1992. This was overshadowed by a sharp -3.7% yoy decline in special payments, which consist largely of one-off bonuses.

    China’s inflation turns negative, but seasonal factors skew the picture

    Released over the weekend, China’s consumer inflation dipped into negative territory for the first time in over a year, with February’s CPI coming in at -0.7% yoy, weaker than the expected -0.5% yoy, and a sharp reversal from January’s 0.5% yoy gain.

    Core CPI, which strips out food and energy prices, also slipped by -0.1% yoy—its first decline since January 2021—signaling weak underlying demand.

    On a month-over-month basis, consumer prices fell -0.2%, more than the expected -0.1%, reversing some of January’s 0.7% increase.

    While the decline may raise concerns about deflationary pressures, NBS attributed much of the drop to seasonal distortions tied to the timing of the Lunar New Year. Stripping out this factor, NBS estimates that CPI actually rose 0.1% yoy.

    Given these distortions, a clearer picture of China’s inflation trajectory will likely emerge in March when seasonal effects fade.

    Meanwhile, producer prices remained in contraction for the 29th consecutive month, with PPU declining -2.2% yoy, slightly better than January’s -2.3% yoy but still below expectations of -2.1% yoy.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.0780; (P) 1.0834; (R1) 1.0888; More…

    While further rise could be seen in EUR/USD, loss of momentum as seen in 4H MACD could limit upside to bring retreat. On the downside, break of 1.0764 minor support will with bias neutral for consolidations first, before staging another rally. Nevertheless, firm break of 1.0932 will pave the way back to 1.1274 key resistance next.+

    In the bigger picture, the strong break of 55 W EMA (now at 1.0675) suggests that fall from 1.1274 (2024 high) has completed as a three wave correction to 1.0176. Rise from 0.9534 is still intact, and might be ready to resume. Decisive break of 1.1274 will target 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. Also, that will send EUR/USD through a multi-decade channel resistance will carries larger bullish implication. This will now be the favored case as long as 1.0531 resistance turned support holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:30 JPY Labor Cash Earnings Y/Y Jan 2.80% 3.20% 4.80% 4.40%
    23:50 JPY Bank Lending Y/Y Feb 3.10% 3.10% 3% 2.90%
    23:50 JPY Current Account (JPY) Jan 1.94T 1.99T 2.73T
    05:00 JPY Leading Economic Index Jan P 108 108.1 108.4 108.3
    06:00 JPY Eco Watchers Survey: Current Feb 45.6 48.5 48.6
    07:00 EUR Germany Industrial Production M/M Jan 2.00% 1.50% -2.40% -1.50%
    07:00 EUR Germany Trade Balance (EUR) Jan 16.0B 21.2B 20.7B
    09:30 EUR Eurozone Sentix Investor Confidence Mar -2.9 -10 -12.7

     



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  • A Multi-Decade Trend Reversal Underway in EUR/USD?

    A Multi-Decade Trend Reversal Underway in EUR/USD?


    The sharp contrast between Europe’s newfound unity and the ongoing tariff chaos in the US has been a defining theme in the financial markets. Euro’s extraordinary strength last week reflected growing investor confidence in the region’s strategic shift toward fiscal expansion and defense spending. From the formation of the “Coalition of the Willing” to the ReArm Europe initiative, they highlighted a strong, coordinated response to challenges, be it geopolitical or economic. That could set the stage for a long-term structural shift in European markets.

    Meanwhile, the US continued to grapple with trade policy uncertainty, with tariffs now more seen as a drag on sentiment and economic growth rather than a source of inflationary pressure. The recent exemptions granted to Canada and Mexico only reinforced the perception of inconsistency in Washington’s trade strategy. The lack of clarity on future policy moves has started to weigh on investor sentiment. That, if persists, could lead to a outflow of capital from the US and weakening the Dollar further.

    From a technical points of view, EUR/USD has shown clear signs of a potential long-term bullish reversal. The pair’s strong surge last week suggests that the multi-year downtrend may have bottomed out, with further upside potential if Europe successfully executes its ambitious fiscal and defense spending plans. However, challenges remain, including implementation risks and the broader impact of trade tensions on European exports.

    Currency market performance last week reflected the shifting sentiment. Euro ended as the strongest performer, followed by Sterling and Swiss Franc, which also benefited from Europe’s renewed economic confidence.

    On the other hand, Dollar closed as the worst performer, struggling under the weight of investor skepticism and diminishing safe-haven appeal. Elsewhere, Canadian Dollar and Australian Dollar also underperformed, indicating that risk-off sentiment remains present, particularly in the US. Yen and Kiwi positioned themselves in the middle of the performance spectrum.

    Europe’s Bold Shift Ignites Market Optimism

    Last week brought a seismic shift in Europe’s geopolitical, defense, and fiscal policies. In a move not seen in decades, the region is asserting greater strategic independence while ramping up economic stimulus. The changes were embraced by investors with enthusiasm, fueling rallies in European assets, particularly in Euro and German equities.

    Euro surged 4.4% against Dollar, its best weekly performance since 2009. Meanwhile, Germany’s 10-year yield posted its biggest jump since the fall of the Berlin Wall. DAX hit fresh record highs, with cyclical and defense-related stocks leading the charge.

    At the heart of this shift is the “ReArm Europe” initiative, which commits the EU to a significant defense buildup. European Commission President Ursula von der Leyen has proposed mechanisms to mobilize up to EUR 800B in special funds. This landmark decision not only strengthens military readiness, but also reduces reliance on external allies.

    Further reinforcing this new direction, EU leaders took a bold stand against Hungarian Prime Minister Viktor Orbán, overriding his veto on aid to Ukraine. In an unusual move, member states issued a separate statement reaffirming their unified support for Kyiv.

    Meanwhile, in Germany, despite ongoing coalition talks, CDU leader Friedrich Merz wasted no time aligning with the SPD to push for loosening of the “debt brake”, which would unlock EUR 500B for infrastructure projects. Additionally, defense spending above 1% of GDP will be permanently exempt from fiscal constraints. Over the next decade, these measures could increase government spending by a staggering 20% of GDP. The scale surpasses even that seen after German reunification in the 1990s.

    This massive fiscal shift in Germany carries significant upside potential for both domestic and Eurozone growth. With a sharp boost in public spending, it could also act as a buffer against potential US tariffs. For years, European growth has been held back by fiscal conservatism—but now, these bold new policies could reshape the region’s economic future for years to come.

    Technically, DAX might be rebuilding upside momentum as seen in D MACD. Current up trend should head to take on 161.8% projection of 14630.21 to 18892.92 from 17024.82 at 23921.87. Decisive break there would target 200% projection at 25550.22 next. Nevertheless, firm break of 22226.34 support will suggest DAX has topped for the near term at least, and consolidations should follow first.

    Is Euro Entering a Long-Term Bull Cycle?

    As Europe embarks on a new era of fiscal expansion and policy coordination, Euro’s looks well-positioned for a prolonged rally and with prospects of long term bullish trend reversal.

    Another key factor supporting Euro is the growing belief that ECB is nearing a pause in its policy easing cycle. With monetary policy now “meaningfully less restrictive”, as described by President Christine Lagarde, a pause could start as soon as in April. ECB could opt for a wait-and-see approach, to assess how trade policy, fiscal initiatives, and broader geopolitical risks play out.

    However, key risks remain, including escalation in trade disputes with the US, as well as how effectively Europe executes its ambitious spending plans. The coming months will be crucial in determining whether this historic shift translates into sustained economic momentum or if internal and external headwinds slow down the Euro’s resurgence.

    Technically, EUR/USD’s strong rally suggests that fall from 1.1274 (2023 high) has completed as a correction, with three waves down to 1.0176. Firm break of 1.1274 would resume larger rally from 0.9534 (2022 low), to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916.

    More significantly, if the bullish case is realized, that would push EUR/USD through the two-decade falling channel resistance, which could be an important sign of long term trend reversal.

    US Stocks at Risk of Bearish Trend Reversal Amid Tariff Chaos

    US stocks endured a turbulent week as investors wrestled with the unpredictable nature of President Donald Trump’s trade policies. The volatility has taken a clear toll on market sentiment, with technical indicators increasingly pointing to bearish trend reversal in major indexes. The coming weeks could prove decisive in determining whether the strong uptrend that has defined the past few months has reversed or if equities can regain their footing.

    S&P 500 logged its worst week since September, falling -3.1%, while DOW dropped -2.4%. NASDAQ was hit hardest, tumbling -3.5%.

    The implementation of 25% tariffs on Canadian and Mexican imports on March 4, had initially sent markets into a tailspin. However, Trump’s decision on Thursday to pause tariffs on USMCA-covered goods for another month only added to the confusion, as investors struggled to decipher the long-term direction of trade policy.

    This chaotic cycle of tariff imposition followed by temporary reversals has created an uncertain and fragile investment environment. Businesses remain hesitant to make forward-looking decisions, while consumer confidence is showing signs of strain. The erratic nature of US trade policy has left markets with little clarity, and the risk of further deterioration in sentiment remains high.

    Nevertheless, Friday’s non-farm payroll report provided some relief, as job growth remained near its recent average, unemployment stayed within its recent range, and wage growth held robust. The data suggested that, at least for now, the feared economic fallout from tariffs has not yet materialized in a meaningful way. However, lingering uncertainty around trade and global economic conditions continues to weigh on sentiment.

    Meanwhile, Fed Chair Jerome Powell reiterated on Friday that the central bank is in no rush to cut rates, stating that the Fed is “well-positioned to wait for clarity.” Powell’s cautious stance contrasts with growing market expectations for rate cuts, as investors bet on economic weakness forcing the Fed’s hand.

    While a hold in March remains the base case, with 88% odds, Fed fund futures now price in a 52% probability of a 25bps rate cut in May, up sharply from 33% a week ago and 26% a month ago. This suggests that investors are bracing for the possibility of further economic softening, with Fed being forced to act sooner than its current guidance suggests.

    Technically, DOW’s up trend should still be intact as long as 41844.89 support holds. However, firm break there will argues that it’s already in correction to the up trend from 28660.93 (2022 low). Sustained trading below 55 W EMA (now at 41332.86) will further solidify this bearish case. Next target will be 38.2% retracement of 28660.94 to 45087.75 at 38812.71.

    As for NASDAQ, it’s now pressing 55 W EMA (at 17878.67). Sustained break there will also indicate that it’s already correcting the up trend from 10088.82 (2022 low). Next target is 38.2% retracement of 10088.82 to 20204.58 at 16340.36.

    As for Dollar Index, last week’s steep decline and strong break of 55 W EMA (now at 105.31) argues that corrective pattern from 99.57 (2023 low) has completed with three waves up to 110.17. Near term risk will now stay on the downside as long as 55 D EMA (now at 106.91) holds. Further downside acceleration will raise the chance that Dollar Index is indeed resuming the whole down trend from 114.77 (2022 high) .

    While it’s still too early to confirm the bearish case, firm break of 100.15 support could set up further medium term fall to 100% projection of 114.77 to 99.57 from 110.17 at 94.97.

    The challenge for Dollar is that risk aversion no longer seems to be offering support. Tariffs are providing little help unlike what it did this year. Meanwhile, Fed appears poised to resume rate cuts sooner than expected. With these factors in play, it’s unclear what could drive a rebound for the greenback, other then implosion of Euro and other currencies

    EUR/CHF Weekly Outlook

    EUR/CHF surged to as high as 0.9634 last week but faced strong resistance from long term falling channel and retreated. Initial bias stays neutral this week first and some more consolidations could be seen. Further rally will be expected as long as 55 4H EMA (now at 0.9467) holds. On the upside, above 0.9634, and sustained trading above 0.9651 fibonacci level will pave the way back to 0.9928 key resistance next.

    In the bigger picture, the strong break of 55 W EMA (now at 0.9482) is a medium term bullish sign. Sustained break trading above long-term falling channel resistance (at around 0.9620) would suggest that the downtrend from 1.2004 (2018 high) has bottomed at 0.9204. Stronger rally should then be see to 0.9928 key resistance at least.

    In the long term picture, bullish signs are emerging. However, the important hurdle at 0.9928 resistance, which is close to 55 M EMA (now at 0.9960), is needed to be taken out decisively before considering long term trend reversal. Otherwise, outlook is neutral at best.



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  • Euro Holds Gains After ECB Cut, Yen Rallies on Higher JGB Yields

    Euro Holds Gains After ECB Cut, Yen Rallies on Higher JGB Yields


    Euro remained firm following ECB’s decision to cut interest rates, a widely anticipated move. During the subsequent press conference, President Christine Lagarde emphasized a shift to “more evolutionary approach” to policy, now that monetary conditions have become “meaningfully less restrictive.” She also acknowledged the high levels of uncertainty, noting that “risks are all over.”

    Lagarde welcomed Germany and the EU’s proposed defense and infrastructure investments, highlighting that they could offer broad support for European growth. However, she also cautioned that increased government spending might push inflation higher via rising aggregate demand. At the same time, ECB recognizes downside risks to the economy, particularly if trade tensions escalate, thereby dampening exports and threatening global growth.

    Meanwhile, Yen resumed its recent rally against Dollar and recovered against European majors. Support for Yen came from an upswing in Japan’s 10-year JGB yield, which briefly touched 1.515%, its highest level since June 2009. Expectations of another BoJ rate hike this year have fueled speculation, while Germany’s surging benchmark yield also exerts upward pressure on Japan’s yield.

    In contrast, U.S. yields are struggling under the weight of growing worries about a “Trumpcession.” Investors fear that the administration’s trade policies could tip the economy toward recession, softening expectations for robust growth and keeping Treasury yields in check. This dynamic contrasts sharply with Europe and Japan, where yields jumped notably this week.

    Against this backdrop, Yen stands as the strongest performer for the day so far, followed by Swiss franc and then Euro. Canadian Dollar has taken the opposite position, emerging as the worst performer, trailed by Sterling and Dollar. Australian and New Zealand Dollars are in the middle of the pack.

    In Europe, at the time of writing, FTSE is down 01.05%. DAX is up 0.63%. CAC is down -0.30%. UK 10-year yield is up 0.008 at 4.656. Germany 10-year yield up 0.101 at 2.892. Earlier in Asia, Nikkei rose 0.82%. Hong Kong HSI rise 2.47%. China Shanghai SSE rose 0.78%. Singapore Strait Times rose 0.66%. Japan 10-year JGB yield rose 0.053 to 1.499.

    US initial jobless claims fall to 221k, vs exp 236k

    US initial jobless claims fell -21k to 221k in the week ending March 1, below expectation of 236k. Four-week moving average of initial claims rose 250 to 224k.

    Continuing claims rose 42k to 1897k in the week ending February 22. Four-week moving average of continuing claims rose 3k to 1866k.

    ECB cuts 25bps as expected, not pre-committing to rate path

    ECB cut its deposit rate by 25bps to 2.50% as expected. It maintains a data-dependent stance and stressing it is “not pre-committing to a particular rate path” amid rising uncertainty.

    ECB noted that disinflation process remains on track, with inflation upgrade reflects stronger energy prices. Growth forecasts for 2025 and 2026 were downgraded due to weaker exports and investment, driven partly by trade and broader policy uncertainty.

    In the new economic projections:

    • Headline inflation to average 2.3% in 2025, 1.9% in 2026, and 2.0% in 2027.
    • Core inflation to average 2.2% in 2025, 2.0% in 2026, and 1.9% in 2027.
    • GDP to grow 0.9% in 2025, 1.2% In 2026, and 1.3% in 2027.

    Eurozone retail sales fall -0.3% mom in Jan, EU down -0.2% mom

    Eurozone retail sales volume dropped by -0.3% mom in January, missing expectations of a modest 0.1% mom increase. The decline was driven by weaker demand for non-food products, which fell -0.7% mom, while sales of automotive fuel also slipped by -0.3% mom. In contrast, spending on food, drinks, and tobacco rose by 0.6% mom, offering a slight offset to the overall decline.

    Meanwhile, retail sales across the broader EU fell -0.2% mom on the month. Among individual EU, Slovakia saw the sharpest contraction, with retail trade volume plunging -9.0%, followed by Lithuania (-4.8%) and Cyprus (-2.2%). On the other hand, Slovenia (+2.3%), Hungary (+2.2%), and the Netherlands (+1.6%) recorded the strongest increases.

    USD/JPY Mid-Day Outlook

    Daily Pivots: (S1) 148.12; (P) 149.15; (R1) 149.91; More…

    Intraday bias in USD/JPY is back on the downside with break of 148.08 temporary low. Fall from 158.86, as the third leg of the corrective pattern from 161.94 high, has resumed. Sustained break of 61.8% retracement of 139.57 to 158.86 at 146.32 will pave the way back to 139.57 low. On the upside, 149.32 minor resistance will turn intraday bias neutral and bring consolidations again, before staging another fall.

    In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). In case of another fall, strong support should be seen from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound. However, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    00:30 AUD Building Permits M/M Jan 6.30% -0.10% 0.70% 1.70%
    00:30 AUD Trade Balance (AUD) Jan 5.62B 5.68B 5.09B 4.92B
    06:45 CHF Unemployment Rate Feb 2.70% 2.70% 2.70%
    09:30 GBP Construction PMI Feb 44.6 49.8 48.1
    10:00 EUR Eurozone Retail Sales M/M Jan -0.30% 0.10% -0.20% 0.00%
    12:30 USD Challenger Job Cuts Y/Y Feb 103.20% -39.50%
    13:15 EUR ECB Deposit Rate 2.50% 2.50% 2.75%
    13:15 EUR ECB Main Refinancing Rate 2.65% 2.65% 2.90%
    13:30 CAD Trade Balance (CAD) Jan 4.0B 1.4B 0.7B 1.7B
    13:30 USD Initial Jobless Claims (Feb 28) 221K 236K 242K
    13:30 USD Trade Balance (USD) Jan -131.4B -93.1B -98.4B -98.1B
    13:30 USD Nonfarm Productivity Q4 1.50% 1.20% 1.20%
    13:30 USD Unit Labor Costs Q4 2.20% 3% 3%
    13:45 EUR ECB Press Conference
    15:00 USD Wholesale Inventories Jan F 0.70% 0.70%
    15:00 CAD Ivey PMI Feb 50.6 47.1
    15:30 USD Natural Gas Storage -96B -261B

     



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  • Tariff Pause for Automakers Soothes Markets, Euro Stands Tall Ahead of ECB Cut

    Tariff Pause for Automakers Soothes Markets, Euro Stands Tall Ahead of ECB Cut


    Risk sentiment is mildly positive in Asian session today, as investors digest the latest developments in US trade policy and Chinese economic measures. Markets welcomed the news that the US has granted a one-month exemption for imports from Mexico and Canada for auto makers. The decision came after US President Donald Trump met with executives from Ford, General Motors, and Stellantis, who urged him to delay the levies to avoid disruptions in the industry.

    Meanwhile, Hong Kong stocks surged to a three-month high, with optimism fueled by hints from China’s National People’s Congress about looser monetary policies, along with expectations for further stimulus. Adding to the bullish momentum, tech giant Alibaba saw its stock soar after unveiling a new AI model, which it claims is competitive with DeepSeek, a major player in the artificial intelligence race. The rally in Chinese markets is adding to overall risk appetite in Asia, though uncertainties remain around US-China trade tensions.

    In the currency markets, Euro continues to lead gains for the week as investors anticipate today’s ECB policy decision. The central bank is widely expected to deliver a 25-basis-point rate cut, but the outlook for further easing is more uncertain than ever. A trade war with the US is adding downside risks to growth, while Europe’s major economies are making historic shifts in fiscal policy, particularly in Germany, where new spending initiatives could support economic expansion. These conflicting factors make it challenging to predict ECB’s path beyond today’s meeting.

    ECB President Christine Lagarde’s press conference is unlikely to provide strong forward guidance, as policymakers will want to maintain flexibility amid rising geopolitical and trade uncertainties. However, despite the upcoming rate cut, Euro’s rally looks well-supported in the near term, particularly as markets focus on Europe’s growing fiscal momentum and rearmament plans.

    Sterling is the second strongest performer, followed by New Zealand Dollar. In contrast, Dollar remains at the bottom of the performance ladder, looking increasingly vulnerable ahead of tomorrow’s Non-Farm Payrolls report. Canadian Dollar is the second-worst performer of the week and Japanese Yen is also under pressure. Swiss Franc and Australian Dollar are positioned in the middle of the pack.

    In Asia, at the time of writing, Nikkei is up 0.82%. Hong Kong HSI is up 3.03%. China Shanghai SSE is up 0.78%. Singapore Strait Times is up 0.72%. Japan 10-year JGB yield is up 0.053 at 1.499, hitting a 16-year high. Overnight, DOW rose 1.14%. S&P 500 rose 1.12%. NASDAQ rose 1.46%. 10-year yield rose 0.055 to 4.265.

    ECB to cut rates, but trade war and fiscal shifts cloud outlook

    ECB is widely expected to continue its “regular, gradual” easing cycle today, reducing the deposit rate by 25bps to 2.50%. Markets are still pricing in two more cuts this year, but the path forward has become murkier in light of recent geopolitical and economic shifts. Also, interest rates are approaching neutral levels, making further easing a more delicate decision.

    On one hand, trade tensions with the US loom large, and the fallout from fresh tariffs and retaliatory measures could weigh on Eurozone’s already fragile economic recovery. On the other hand, the announcement of transformational fiscal changes in both Germany and at the European Commission level—aimed at boosting defense and infrastructure spending—could have a significant long-term impact on growth, partially offsetting the headwinds from a trade war.

    ECB’s new economic projections, to be released alongside today’s decision, are expected to show weaker growth and marginally higher inflation. However, data collection for these forecasts took place weeks ago, rendering them less reflective of the rapidly evolving environment. Thus, their usefulness for predicting medium-term policy moves may be limited, with markets keeping an even closer eye on the ECB’s forward guidance instead.

    Euro has been exceptionally strong this week, with recent optimism boosted by developments in European fiscal policy. It’s rally is unlikely to be deter by today’s ECB outcome.

    Technically, EUR/CHF has surged aggressively, now pressing long-term falling channel resistance (at around 0.9620), after decisively breaking above 55 W EMA. Sustained break above this resistance would suggest that the downtrend from 1.2004 (2018 high) has finally bottomed at 0.9204.

    Sustained trading above the channel resistance will be argue that whole down trend from 1.2004 (2018 high) has completed at 0.9204, on bullish convergence condition in W MACD.

    In this bullish case, further rise should be seen to 0.9928 structural resistance at least, with prospect of stronger rally, even still as a medium term corrective move.

    Fed’s Beige Book: Modest growth, rising price pressures, and tariff concerns

    Fed’s Beige Book report indicated that “economic activity rose slightly” since mid-January, with mixed regional performances. While four Districts saw modest or moderate growth, six reported no change, and two experienced slight contractions.

    Consumer spending was generally lower, with essential goods seeing steady demand but discretionary spending weakening, particularly among lower-income consumers. However, business expectations remained “slightly optimistic” for the coming months.

    On the labor front, employment “nudged slightly higher” overall, though wage growth slowed modestly compared to the previous report.

    While price pressures remained moderate, several Districts noted an uptick in the pace of increase, particularly in manufacturing and construction. Many firms struggled to pass higher input costs onto customers, but expectations of tariffs on imports were already prompting preemptive price hikes in some sectors.

    On the data front

    Swiss unemployment rate, UK PMI construction and Eurozone retail sales will be released in European session. Later in the day, Canada will release trade balance and Ivey PMI. US will publish jobless claims, trade balance, and non-farm productivity.

    EUR/USD Daily Outlook

    Daily Pivots: (S1) 1.0662; (P) 1.0729; (R1) 1.0857; More…

    Intraday bias in EUR/USD remains on the upside as current rally from 1.0176 is still in progress. Next target is 161.8% projection of 1.0176 to 1.0531 from 1.0358 at 1.0932 On the downside, below 1.0721 minor support will turn intraday bias neutral and bring consolidations first, before staging another rise.

    In the bigger picture, the strong break of 55 W EMA (now at 1.0668) suggests that fall from 1.1274 (2024 high) has completed as a three wave correction to 1.0176. That came after drawing support from 0.9534 (2022 low) to 1.1274 at 1.0199. Rise from 0.9534 is still intact, and might be ready to resume through 1.1274. This will now be the favored case as long as 1.0531 resistance turned support holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    00:30 AUD Building Permits M/M Jan 6.30% -0.10% 0.70% 1.70%
    00:30 AUD Trade Balance (AUD) Jan 5.62B 5.68B 5.09B 4.92B
    06:45 CHF Unemployment Rate Feb 2.70% 2.70%
    09:30 GBP Construction PMI Feb 49.8 48.1
    10:00 EUR Eurozone Retail Sales M/M Jan 0.10% -0.20%
    12:30 USD Challenger Job Cuts Y/Y Feb -39.50%
    13:15 EUR ECB Deposit Rate 2.50% 2.75%
    13:15 EUR ECB Main Refinancing Rate 2.65% 2.90%
    13:30 CAD Trade Balance (CAD) Jan 1.4B 0.7B
    13:30 USD Initial Jobless Claims (Feb 28) 236K 242K
    13:30 USD Trade Balance (USD) Jan -93.1B -98.4B
    13:30 USD Nonfarm Productivity Q4 1.20% 1.20%
    13:30 USD Unit Labor Costs Q4 3% 3%
    13:45 EUR ECB Press Conference
    15:00 USD Wholesale Inventories Jan F 0.70% 0.70%
    15:00 CAD Ivey PMI Feb 50.6 47.1
    15:30 USD Natural Gas Storage -96B -261B

     



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  • EUR/JPY extends upside above 161.00 ahead of ECB rate decision

    EUR/JPY extends upside above 161.00 ahead of ECB rate decision


    • UR/JPY gains momentum to near 161.15 in Thursday’s early European session.
    • The concerns over tariff risks on Japan might contribute to the JPY.
    • The ECB is anticipated to cut interest rates at the March meeting on Thursday.

    The EUR/JPY cross extends the rally to around 161.15 during the early European session. The Japanese Yen (JPY) weakens against the Euro (EUR) amid the risk-on mood after US President Donald Trump will delay Canada and Mexico tariffs on autos for one month.

    The White House announced a one-month delay for US automakers to comply with the US-Mexico-Canada Agreement from the tariffs imposed on Mexico and Canada. White House spokesperson Karoline Leavitt also said that Trump was “open” to extra tariff exemptions beyond the pause on auto levies. This, in turn, boost investors’ appetite for riskier assets and drags the safe-haven currency like the Japanese Yen lower.

    The growing concerns over tariff risks in Japan might contribute to the JPY’s downside. US President Donald Trump said that Japan and China are keeping their currencies down, signaling that he may impose fresh tariffs on imports if this does not stop.

    However, the upside for the cross might be limited amid rising speculation of further hike from the Bank of Japan (BoJ). The BoJ is widely anticipated to continue hiking this year, supported by improving economic conditions, rising prices, and stronger wage growth, which align with the Japanese central bank’s policy normalization efforts.

    On the Euro front, the European Central Bank (ECB) is expected to cut interest rates for the second time this year at its March meeting on Thursday. The markets are now fully priced in a quarter-point rate cut for the March meeting, taking the ECB’s key rate to 2.5% . A further reduction to 2% by the end of the year was also priced in.

    ECB FAQs

    The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

    In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.

    Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.

     

     



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  • No surprises expected at the ECB meeting

    No surprises expected at the ECB meeting


    The downtrend in the US Dollar gathered extra steam on Wednesday, fuelled by concerns over the US economy and some renewed hopes that the Trump administration could delay some planned tariffs.

    Here is what you need to know on Thursday, March 6:

    The US Dollar Index (DXY) broke below the 105.00 support, reaching news four-month lows amid further concerns over the US economy. The January Balance of Trade results are due, seconded by Challenger Job Cuts, the usual weekly Initial Jobless Claims, and Unit Labor Costs. In addition, the Fed’s. Waller and Harker are due to speak.

    EUR/USD extended its solid performance to the vicinity of the 1.0800 barrier, or new four-month peaks. The ECB’s interest rate decision will take centre stage, along with Lagarde’s press conference. Data wise, the HCOB Construction PMI in Germany and the euro area will be released along with Retail Sales in the whole bloc.

    GBP/USD climbed to just pips away from the key barrier at 1.2900 the figure, or multi-month tops. The S&P Global Construction PMI will be the sole release across the Channel, followed by the speech by the BoE’s Mann.

    USD/JPY resumed its downtrend and revisited the low-148.00s following the sharp pullback in the Greenback. The weekly Foreign Bond Investment figures will be published.

    AUD/USD rose markedly, advancing for the third straight day and reclaiming the area beyond the 0.6300 hurdle. The Balance of Trade results are expected, seconded by flash prints of Building Permits and Private House Approvals.

    Prices of the barrel of WTI dropped to new lows near the $65.00 mark in response to an increased in US crude oil supplies, tariff concerns and the expected OPEC+ intention to increase the oil output in April.

    Gold prices hit their third straight day of gains, retesting the $2,920 zone following the sharp decline in the US Dollar. Silver prices rallied further north of the $32.00 mark per ounce, flirting with eight-day highs.



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  • Bitcoin Roars Back as Trump Plans Strategic Crypto Reserve; Tariffs, Geopolitics, NFP and ECB to Move Markets

    Bitcoin Roars Back as Trump Plans Strategic Crypto Reserve; Tariffs, Geopolitics, NFP and ECB to Move Markets


    Bitcoin led the charge in an otherwise quiet Asian session, rebounding over 20% from last week’s low after a major announcement from US President Donald Trump. The cryptocurrency sector saw dramatic relief from its steep selloff last week, as Trump revealed the creation of a strategic crypto reserve, including Bitcoin, Solana, XRP, and other digital assets.

    The wording of the post also drew attention, with Trump emphasizing that BTC and ETH would be at the “heart of the reserve.” Unlike a simple stockpile, which implies holding onto existing government-owned crypto assets, a reserve suggests active purchases in regular installments.

    However, the move has not been without criticism. Crypto purists argue that Bitcoin and other decentralized assets were created to exist outside government control, and they reject the notion of a nation-state amassing a large share of the market. Some others see the announcement as politically motivated rather than a structural shift in policy, raising concerns about long-term regulatory implications.

    Technically, Bitcoin’s strong rebound ahead of 73812 cluster zone (38.2% retracement of 15452 to 109571 at 73617) suggests that price actions from 10957 are likely forming a medium term consolidation pattern only, rather than bearish trend reversal. Sustained trading above 55 D EMA (now at 95271) will solidify this bullish case, and extend range trading below 109571 for a while before eventual upside breakout.

    Meanwhile, in the currency markets, Euro is leading gains, followed by Sterling and Aussie. Dollar is the worst performer, trailed by Kiwi and Yen. Swiss Franc and Loonie are positioning in the middle.

    Looking ahead, multiple US tariffs on Canada, Mexico, and China are set to take effect on Tuesday, March 4, and speculation is mounting over retaliatory measures. China has already hinted at countermeasures, including tariffs on U.S. agricultural products and non-tariff barriers.

    On the geopolitical front, all eyes will be on the US response to a new UK-EU effort to draft a Ukraine peace plan, a move coming on the heels of President Volodymyr Zelenskiy’s high-profile clash with Trump at the Oval Office just two days ago.

    In addition, crucial US economic data, including non-farm payrolls and ISM manufacturing and services indexes, will be closely watched. Across the Atlantic, ECB is expected to cut interest rates again this week, continuing its “regular, gradual” easing.

    In Asia, at the time of writing, Nikkei is up 1.70%. Hong Kong HSI is up 1.30%. China Shanghai SSE is up 0.32%. Singapore Strait Times is up 0.47%. Japan 10-year JGB yield is up 0.029 at 1.405.

    Japan’s PMI manufacturing finalized at 49 in Feb, modest improvement but outlook remains weak

    Japan’s manufacturing sector showed slight improvement in February, with PMI finalized at 49.0, up from 48.7 in January. However, the sector remains in contraction territory, reflecting ongoing struggles with weak demand.

    According to Usamah Bhatti at S&P Global Market Intelligence, manufacturers cited soft global and domestic demand, with “muted conditions” in key markets such as the US, Europe, and China. Additionally, purchasing activity saw a solid and sustained decline.

    The “near-term outlook remains clouded”. Business confidence fell to its lowest level since mid-2020, driven by growing concerns over the impact of US trade policies and a slower-than-expected global economic recovery.

    China’s Caixin PMI manufacturing rises to 50.8, but employment remains a concern

    China’s Caixin PMI Manufacturing climbed to 50.8 in February, up from 50.1, exceeding expectations of 50.3.

    Wang Zhe, Senior Economist at Caixin Insight Group, noted that new export orders rebounded, corporate purchasing increased, and logistics remained smooth. However, employment continued to decline, and output prices stayed weak.

    Additionally, official PMI data released over the weekend further reinforced signs of recovery. The official PMI Manufacturing rebounded from 49.1 to 50.2, marking its highest level since November and moving back into expansionary territory. Additionally, the non-manufacturing PMI, which covers services and construction, ticked up to 50.4 from 50.2.

    Market sentiment hinges on US NFP, ECB cut and other data to watch

    While trade war and geopolitics might continue to dominate headlines, key economic events this week could also inject extra volatility into the markets.

    The week’s most significant market-moving event could come from the US. February non-farm payrolls report will be a crucial test for investor sentiment, particularly after recent economic data—including consumer confidence, business activity, and retail sales—showed signs of weakness. Additionally, ISM manufacturing and services data will provide further insight into business conditions. The impact of tariffs on the economy is beginning to surface in economic data, and a set of disappointing data could amplify the emerging concerns.

    It should noted that while a softer NFP print could bring forward expectations for a Fed rate cut, optimism about policy easing may be overshadowed by broader economic worries, which would drive further volatility across asset classes. The key is whether the job market can hold up against growing uncertainty, or if fears of a sharper slowdown will escalate.

    ECB is widely anticipated to proceed with its “regular, gradual” approach to policy easing at its meeting this week, with a 25bps cut to the deposit rate, bringing it down to 2.50%. The latest Economic Bulletin suggests policymakers see neutral rate in the range of 1.75%-2.25%, implying that further rate reductions beyond this week’s move will be calculated cautiously.

    Analysts largely expect two more 25bps cuts by ECB in Q2 to bring an end to the cycle. But the outcome could vary depending on economic growth and inflation developments. Markets will closely analyze ECB’s updated economic projections hints on the central bank’s view, at least the base case.

    Eurozone inflation data will also be in the spotlight. February’s flash CPI is expected to show headline inflation falling to 2.3%, following four consecutive months of increases. Core inflation, which has remained at 2.7% for five straight months, is projected to ease to 2.5%.

    Beyond the US and Eurozone, Australia will also be in focus. Although RBA initiated its easing cycle in February, policymakers have remained cautious about further cuts. RBA meeting minutes will provide more details on the board’s thinking regarding the next steps. Additionally, Australia’s Q4 GDP and January retail sales data will offer insight into whether more imminent easing is necessary.

    Other key data releases include Canada’s employment report and China’s Caixin PMIs.

    Here are some highlights for the week

    • Monday: Japan PMI manufacturing final; China Caixin PMI manufacturing; Swiss PMI manufacturing; Eurozone CPI flash, PMI manufacturing final; UK PMI manufacturing final; Canada PMI manufacturing; US ISM manufacturing, construction spending.
    • Tuesday: New Zealand building permits; Japan unemployment rate, capital spending, monetary base, consumer confidence; Australia RBA minutes, retail sales; Eurozone unemployment rate.
    • Wednesday: Australia GDP; China Caxin PMI services; Eurozone PMI services final, PPI; UK PMI services final; US ADP employment, ISM services, factory orders, Fed’s Beige Book report.
    • Thursday: Australia building permits, goods trade balance; Swiss unemployment rate; UK PMI construction; Eurozone retail sales, ECB rate decision, US jobless claims, trade balance; Canada Ivey PMI.
    • Friday: China trade balance; Germany factory orders; Swiss foreign currency reserves; Eurozone GDP revision; Canada employment; US non-farm payrolls.

    EUR/AUD Daily Outlook

    Daily Pivots: (S1) 1.6660; (P) 1.6717; (R1) 1.6768; More…

    Intraday bias in EUR/AUD stays on the upside for the moment. As noted before, consolidation from 1.6800 should have already completed with three waves down to 1.6355. Firm break of 1.6800 resume the rise from 1.5963 to 61.8% projection of 1.5963 to 136800 from 1.6355 at 1.6872, and then 100% projection at 1.7192, which is close to 1.7180 high. On the downside, below 1.6657 minor support will delay the bullish case and turn intraday bias neutral again first.

    In the bigger picture, with 1.5996 key support (2024 low) intact, larger up trend from 1.4281 (2022 low) is still in favor to resume through 1.7180 at a later stage. Nevertheless, sustained break of 1.5996 will indicate that such up trend has completed and deeper decline would be seen.

    D

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:45 NZD Terms of Trade Index Q4 3.10% 1.50% 2.40% 2.50%
    00:00 AUD TD-MI Inflation Gauge M/M Feb -0.20% 0.10%
    00:30 JPY Manufacturing PMI Feb F 49 48.9 48.9
    01:45 CNY Caixin Manufacturing PMI Feb 50.8 50.3 50.1
    08:30 CHF Manufacturing PMI Feb 48.4 47.5
    08:50 EUR France Manufacturing PMI Feb F 45.5 45.5
    08:55 EUR Germany Manufacturing PMI Feb F 46.1 46.1
    09:00 EUR Eurozone Manufacturing PMI Feb F 47.3 47.3
    09:30 GBP Manufacturing PMI Feb F 46.4 46.4
    09:30 GBP Mortgage Approvals Jan 66K 67K
    09:30 GBP M4 Money Supply M/M Jan 0.20% 0.10%
    10:00 EUR Eurozone CPI Y/Y Feb P 2.30% 2.50%
    10:00 EUR Eurozone CPI Core Y/Y Feb P 2.50% 2.70%
    14:30 CAD Manufacturing PMI Feb 51.6
    14:45 USD Manufacturing PMI Feb F 51.6 51.6
    15:00 USD ISM Manufacturing PMI Feb 50.8 50.9
    15:00 USD ISM Manufacturing Prices Paid Feb 56.2 54.9
    15:00 USD ISM Manufacturing Employment Feb 50.3
    15:00 USD Construction Spending M/M Jan -0.10% 0.50%

     



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  • Dollar Surges as Trump Confirms Tariff Plans, Euro Looks Vulnerable

    Dollar Surges as Trump Confirms Tariff Plans, Euro Looks Vulnerable


    Dollar surged sharply across the board in early US session trading after US President Donald Trump reinforced his tariff plans, clarifying uncertainties that had lingered in the market. In a Truth Social post, Trump confirmed that the tariffs on Canada and Mexico will “go into effect, as scheduled” on March 4. Additionally, China will face an extra 10% tariff on the same date. The April 2 reciprocal tariff announcement will also remain “in full force and effect,” he stated.

    Market reaction was swift, with the greenback rallying against all major peers, even as incoming US economic data provided a mixed picture. January durable goods orders came in stronger than expected, but only driven largely by transportation equipment. Also, the labor market flashed a potential warning sign, as initial jobless claims surged to their highest level since December.

    Yen and Swiss Franc are on the softer side today as US and European benchmark yields rebounded. However, neither currency showed a strong directional push. Euro, on the other hand, appears increasingly vulnerable, particularly against the British Pound. The latest selloff in EUR/GBP looks poised to gain further traction, as Eurozone fundamentals remain weak and tariff threats linger.

    For the week so far, Dollar is now the strongest one with today’s rally. Sterling is sitting as the second, followed by Yen. Kiwi and Aussie are the worst performers for now, followed by Loonie. Euro and Swiss Franc are mixed in the middle.

    Technically, USD/CAD’s strong break of 1.4378 resistance suggests that corrective pullback from 1.4791 has already completed at 1.4150. Further rise is expected as long as 55 4H EMA (now at 1.4275) holds, for retesting 1.4791 high. Strong resistance might be seen there to limit upside on first attempt.

    However, the final implementation of tariffs on Canada might provided the needed fuel to power USD/CAD through 1.4791 to resume the larger up trend.

    In Europe, at the time of writing, FTSE is up 0.04%. DAX is down -1.20%. CAC is down -0.77%. UK 10-year yield is up 0.014 at 4.520. Germany 10-year yield is up 0.002 at 2.438. Earlier in Asia, Nikkei rose 0.30%. Hong Kong HSI fell -0.29%. China Shanghai SSE rose 0.23%. Singapore Strait Times rose 0.34%. Japan 10-year JGB yield rose 0.003 to 1.396.

    US durable goods orders rise 3.1% mom, led by transportation equipment

    US durable goods orders rose 3.1% mom to USD 286.0B in January, well above expectation of 2.0% mom. Transportation equipment led the increase by 9.8% to USD 96.5B.

    Ex-transport orders was flat at 189.5B, below expectation of 0.4% mom. Ex-defense orders rose 3.5% mom to USD 268.7B.

    US initial jobless claims jump to 242k, above expectation 220k

    US initial jobless claims rose 22k to 242k in the week ending February 22, above expectation of 220k. Four-week moving average of initial claims rose 8.5k to 224k.

    Continuing claims fell -5k to 1862k in the week ending February 15. Four-week moving average of continuing claims rose 3k to 1865k.

    ECB Minutes: No room for forward guidance as caution prevails

    ECB’s January 29-30 meeting account revealed that policymakers saw a “clear case” for a 25bps rate cut. Members agreed that disinflation is “well on track”, and confidence in inflation converging to target has grown.

    However, the accounts highlighted several lingering uncertainties that warranted a cautious approach going forward. Policymakers emphasized the need to maintain a data-dependent stance, with “no room for forward guidance” at this stage.

    Upside risks to inflation remained from elevated energy and food prices, strong wage growth, and persistent services inflation.

    ECB also flagged geopolitical tensions, fiscal policy concerns within Eurozone, and global trade uncertainties as downside risks to growth, “which typically also implied downside risks to inflation over longer horizons.”

    Swiss GDP expands 0.2% qoq in Q4, driven by domestic demand

    Switzerland’s economy maintained steady growth in Q4, with GDP expanding 0.5% qoq when adjusted for sporting events. Without the adjustment, GDP rose 0.2% qoq, in-line with expectations.

    Private consumption increased by 0.5%, supported by higher spending on health, recreation, and culture. Government consumption also grew at the same pace, slightly exceeding historical trends.

    Investment in equipment rebounded 1.0%, breaking a two-quarter decline, largely due to higher spending on aircraft and other volatile categories.

    The increase in domestic demand also led to a 0.9% rise in imports of goods and services, with foreign trade contributing positively to GDP growth.

    RBA’s Hauser: Global uncertainty justifies rate cut, but more easing depends on disnflation evidence

    RBA Deputy Governor Andrew Hauser told the parliament today that mounting global uncertainty had a chilling effect on economic activity, which played a role in the board’s decision to cut the cash rate by 25 bps this month.

    He noted that businesses are becoming increasingly cautious, delaying investment projects and expansion plans as they wait for clearer economic signals, “just to see how things pan out.”

    This hesitation, he suggested, made a slight easing of monetary policy a “sensible” response to support economic stability.

    However, Hauser emphasized that further rate cuts are not guaranteed and will depend on incoming inflation data. Policymakers remain optimistic about further disinflation but need to see clear evidence before committing to additional policy easing.

    NZ ANZ business confidence rises to 58.4, on the path to recovery

    New Zealand’s ANZ Business Confidence rose from 54.4 to 58.4 in February. However, the Own Activity Outlook, slipped slightly from 45.8 to 45.1, highlighting that while sentiment is improving, actual activity remains uncertain.

    Pricing and cost indicators painted a mixed picture. Inflation expectations for the next year eased from 2.67% to 2.53% and cost expectations fell from 73.6 to 71.3. But wage expectations remained elevated at 79.2 despite fall from 83.1, and pricing intentions ticked up from 45.7 to 46.2.

    ANZ noted that the economy is on the “path to recovery,” supported by lower interest rates and stronger-than-expected commodity export prices. However, the bank cautioned that the next phase of growth remains “a point of debate.”

    The pace of expansion will depend on how households perceive current interest rates, the extent to which global uncertainty influences business investment, and whether firms push forward despite challenges. Additionally, potential labor shortages could emerge as a key constraint on further growth.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.0464; (P) 1.0496; (R1) 1.0518; More…

    EUR/USD dips notably in early US session but stays above 1.0400 support. Intraday bias stays neutral first. Firm break of 1.0400 should indicate that corrective pattern from 1.0400 has completed. Intraday bias will be back on the downside for retesting 1.0176/0210 support zone. Overall, near term outlook will stay bearish as long as 38.2% retracement of 1.1213 to 1.0176 at 1.0572 holds in case of another recovery.

    In the bigger picture, immediate focus is on 61.8 retracement of 0.9534 (2022 low) to 1.1274 (2024 high) at 1.0199. Sustained break there will solidify the case of medium term bearish trend reversal, and pave the way back to 0.9534. However, reversal from 1.0199 will argue that price actions from 1.1274 are merely a corrective pattern, and has already completed.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    00:00 NZD ANZ Business Confidence Feb 58.4 54.4
    00:30 AUD Private Capital Expenditure Q4 -0.20% 0.60% 1.10% 1.60%
    08:00 CHF GDP Q/Q Q4 0.20% 0.20% 0.40%
    09:00 EUR Eurozone M3 Money Supply Y/Y Jan 3.60% 3.80% 3.50% 3.40%
    10:00 EUR Eurozone Economic Sentiment Feb 96.3 96 95.2 95.3
    10:00 EUR Eurozone Industrial Confidence Feb -11.4 -12 -12.9 -12.7
    10:00 EUR Eurozone Services Sentiment Feb 6.2 6.8 6.6 6.7
    10:00 EUR Eurozone Consumer Confidence Feb F -13.6 -13.6 -13.6
    12:30 EUR ECB Meeting Accounts
    13:30 CAD Current Account (CAD) Q4 -5.0B -3.2B -3.2B -3.6B
    13:30 USD Initial Jobless Claims (Feb 21) 242K 220K 219K 220K
    13:30 USD GDP Annualized Q4 P 2.30% 2.30% 2.30%
    13:30 USD GDP Price Index Q4 P 4.20% 2.20% 2.20%
    13:30 USD Durable Goods Orders Jan 3.10% 2.00% -2.20%
    13:30 USD Durable Goods Orders ex Transport Jan 0.00% 0.40% 0.30%
    15:00 USD Pending Home Sales M/M Jan -1.30% -5.50%
    15:30 USD Natural Gas Storage -276B -196B

     



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  • Greenback Drops Ahead of Consumer Data, Risk Sentiment in Focus

    Greenback Drops Ahead of Consumer Data, Risk Sentiment in Focus


    Dollar weakened notably against European majors and Yen as markets transitioned into US session, despite subdued overall trading activity. The decline was largely driven by extended fall in US 10-year Treasury yield, which hit its lowest level since mid-December.

    Beyond geopolitical and trade war concerns, market focus has turned toward whether slowing US consumption and softer economic data could force Fed to resume rate cuts sooner than expected, even as inflation remains elevated. Fed funds futures now price in a near 65% chance of a 25bps rate cut in June, a notable increase from 45% just a week ago.

    The next catalyst for Dollar’s direction will be consumer confidence report, set for release shortly. However, Dollar’s next moves may not be straightforward, as risk aversion—if it intensifies—could provide some support due to safe-haven demand. US stocks, particularly the tech-heavy NASDAQ, could be vulnerable on the upcoming Nvidia earnings report later in the week.

    For now, commodity currencies are under the most pressure, with Kiwi leading the declines. On the other hand, Swiss Franc is the strongest performer, followed closely by Sterling and Euro. Dollar and Yen are positioned in the middle.

    Looking ahead to the Asian session, Australia’s monthly CPI reading will draw attention. Consensus suggests inflation might edge up from 2.5% to 2.6% in January, supporting RBA’s cautious stance even after it initiated its easing cycle earlier this month. Still, a downside surprise would provide RBA with added confidence to proceed with additional rate cuts if economic conditions worsen.

    Technically, EUR/AUD’s rebound is gaining some momentum today. Firm break of 1.6631 resistance will argue that the corrective pattern from 1.6800 has completed, and larger rise from 01.5963 is finally ready to resume through 1.6800.

    In Europe, at the time of writing, FTSE is up 0.47%. DAX is up 0.43%. CAC is up 0.04%. UK 10-year yield is down -0.0475 at 4.525. Germany 10-year yield is down -0.0012 at 2.479. Earlier in Asia, Nikkei fell -1.39%. Hong Kong HSI fell -1.32%. China Shanghai SSE fell -0.80%. Singapore Strait Times fell -0.30%. Japan 10-year JGB yield fell -0.0511 to 1.376.

    ECB’s Nagel expects more rate cuts Amid encouraging price trends

    German ECB Governing Council member Joachim Nagel indicated that incoming data suggests the central bank is on track to achieve its inflation target this year, opening the door for further rate cuts.

    Speaking today, Nagel stated, “This would allow us on the Governing Council to lower the key interest rates further,” reinforcing expectations that ECB will continue its gradual easing cycle.

    However, Nagel also cautioned against premature optimism, highlighting “persistently elevated core inflation and the undiminished strength of services inflation.”

    Bitcoin breaches 90K, double top breakdown could trigger deep correction

    Bitcoin’s selloff intensified today, plunging below the 90k mark and hitting its lowest level since November. The immediate catalyst appears to be last week’s massive hack of USD 1.5B worth of Ether from cryptoexchange Bybit—an incident researchers have labeled the biggest crypto heist on record.

    Although Bybit has announced that it fully restored the stolen Ether, market sentiment remains firmly negative, as traders grow wary of systemic risks and question the exchange’s ability to prevent future breaches.

    Technically, Bitcoin now hovers at a critical juncture. The key 89,127 support level is under heavy pressure, and decisive break there would complete a double top pattern (108368, 108571). Such a development would strongly indicate that a larger-scale correction is underway.

    In the bearish scenario, Bitcoin could be entering a correction of the entire rally from 15,452 (2022 low). The correction could target 73,812 cluster support (38.2% retracement of 15,452 to 109,571 at 73,617) before completion.

    GBP/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.2594; (P) 1.2643; (R1) 1.2673; More…

    Intraday bias in GBP/USD stays neutral at this point. Further rise will remain in favor as long as 1.2522 resistance turned support holds. Above 1.2689 will resume the rally from 1.2099 to 1.2810 resistance next. However, firm break below 1.2522 will argue that the rebound might have completed, and bring deeper fall to 1.2331 support.

    In the bigger picture, rise from 1.0351 (2022 low) should have already completed at 1.3433 (2024 high), and the trend has reversed. Further fall is now expected as long as 1.2810 resistance holds. Deeper decline should be seen to 61.8% retracement of 1.0351 to 1.3433 at 1.1528, even as a corrective move. However, firm break of 1.2810 will dampen this bearish view and bring retest of 1.3433 high instead.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY Corporate Service Price Index Y/Y Jan 3.10% 2.90% 2.90% 3.00%
    07:00 EUR Germany GDP Q/Q Q4 F -0.20% -0.20% -0.20%
    14:00 USD S&P/CS Composite-20 HPI Y/Y Dec 4.30% 4.30%
    14:00 USD Housing Price Index M/M Dec 0.20% 0.30%
    15:00 USD Consumer Confidence Feb 103.3 104.1

     



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  • Sterling Unmoved by CPI Surprise, Gold to Try 3000 Again ahead of FOMC Minutes

    Sterling Unmoved by CPI Surprise, Gold to Try 3000 Again ahead of FOMC Minutes


    The forex markets remain rather indecisive today. Traders are paring back expectations for BoE rate cuts after UK inflation surged to a 10-month high. A March rate cut is now off the table, and markets are no longer fully pricing in two BoE cuts this year. However, this shift has provided only minimal support for the British pound, as broader market sentiment remains cautious.

    Meanwhile, Dollar is mildly firmer but lacks strong upside momentum. Traders are now focused on FOMC minutes, which are expected to reaffirm that Fed is in no rush to cut rates. Current Fed funds futures show a 55% probability that rates will remain at 4.25-4.50% through the first half of 2025, a view that is unlikely to change much without further clarity on President Donald Trump’s fiscal and trade policies.

    In the commodities market, Gold surged to a record high, approaching the critical 3000 psychological level for another attempt. This marks a key inflection point—a decisive break above 3,000 could pave the way to 61.8% projection of 1810.26 to 2789.92 from 2584.24 at 3189.66.

    However, failure to sustain gains above 3000 could lead to deeper pullback. Firm break 2876.93 support should set up correction back towards 2789.92 resistance turned support instead.

    In Europe, at the time of writing, FTSE is down -0.61%. DAX is down -1.16%. CAC is down -0.84%. UK 10-year yield is up 0.0696 at 4.629. Germany 10-year yield is up 0.058 at 2.558. Earlier in Asia, Nikkei fell -0.27%. Hong Kong HSI fell -0.14%. China Shanghai SSE rose 0.81%. Singapore Strait Times rose 0.22%. Japan 10-year JGB yield rose 0.0038 to 1.440.

    ECB’s Schnabel: Rate Cut Pause May Be Approaching

    ECB Executive Board member Isabel Schnabel suggested in an FT interview that the central bank is approaching a point where it “may have to pause or halt” rate cuts.

    While she refrained from making a firm prediction for upcoming policy meetings, she acknowledged that the ECB needs to “start that discussion”.

    Schnabel highlighted that the degree of monetary restriction “has come down significantly”, to the extent that policymakers can “no longer say with confidence” that ECB’s stance remains restrictive.

    She defended the ECB’s gradual and cautious approach, arguing that domestic inflation remains high, wage growth is still elevated, and energy price shocks continue to impact inflation expectations.

    ECB’s Panetta: Eurozone economic weakness more persistent than expected

    Italian ECB Governing Council member Fabio Panetta acknowledged that economic weakness in the Eurozone is proving “more persistent than we expected”, as the long-anticipated consumption-driven recovery has yet to materialize.

    After two consecutive quarters of stagnation, he noted that “tensions in the manufacturing sector, employment is giving signs of weakening”

    Panetta also highlighted the downside risks to inflation stemming from weak growth. However, he also noted that upside inflation risks remain, primarily from energy costs.

    UK CPI surges to 3.0%, highest since March 2024

    UK headline CPI accelerated to 3.0% yoy in January, up from 2.5% yoy and exceeding market expectations of 2.8% yoy. This marks the highest inflation level since March 2024, reinforcing concerns that price pressures remain persistent.

    Core inflation also surged, with CPI excluding energy, food, alcohol, and tobacco rising to 3.7% yoy, up from 3.2% yoy in December.

    Meanwhile, CPI goods inflation edged higher from 0.7% yoy to 1.0% yoy, while CPI services inflation climbed from 4.4% yoy to 5.0% yoy.

    RBNZ cuts by 50bps, signals further easing through 2025

    RBNZ cut the Official Cash Rate (OCR) by 50bps to 3.75%, as widely expected, while maintaining a clear easing bias.

    The central bank stated that “if economic conditions continue to evolve as projected, the Committee has scope to lower the OCR further through 2025.” According to the latest projections, the OCR is expected to decline to 3.1% by year-end and remain at that level until early 2028.

    RBNZ acknowledged that economic activity remains subdued, though it expects growth to recover in 2025, driven by lower interest rates encouraging spending. However, elevated global economic uncertainty is likely to weigh on business investment. The bank also noted that inflation is expected to be volatile in the near term, influenced by a weaker exchange rate and higher petrol prices.

    Regarding global risks, the RBNZ flagged concerns and warned that higher global tariffs could slow growth in key trading partners, dampening demand for New Zealand exports and weakening domestic economic momentum over the medium term.

    However, the impact on inflation is “ambiguous”, depending on factors such as trade diversion, supply-chain adjustments, and financial market reactions.

    Australian wages growth slow 0.7% qoq, pressures easing

    Australia’s wage price index rose 0.7% qoq in Q4, marking a slowdown from 0.9% qoq and missing expectations of 0.8% qoq. This matches the lowest quarterly growth since March 2022, reinforcing signs that wage pressures are easing, albeit still elevated.

    On an annual basis, wages increased 3.2% yoy, making it the slowest pace since Q3 2022. Private sector wage growth came in at 3.3% yoy, the weakest since Q2 2022. Public sector wages rose 2.8% yoy, falling below 3% for the first time since Q2 2023.

    BoJ’s Takata: Gradual policy shifts should continue beyond January hike

    BoJ Board Member Hajime Takata emphasized the need for the central bank to continue to “implement gear shifts gradually, even after the additional rate hike decided in January 2025”, to mitigate the risk of rising prices and financial market overheating.

    Takata noted in a speech today that as “positive corporate behavior” persists, BoJ should consider a “further gear shift” in policy.

    He highlighted three key risks that could drive prices above BoJ’s baseline scenario: a stronger wage-price cycle, inflationary pressures from domestic factors, and market volatility, especially in the exchange rates, stemming from a recovery in the US economy.

    Nevertheless, due to uncertainties surrounding the US economy and the challenge of identifying the neutral interest rate, Takata advocated for a “vigilant approach”.

    Japan’s trade deficit widens as imports surge, exports to China drop

    Japan’s trade deficit expanded sharply in January, reaching JPY -2.759T, the largest shortfall in two years, as imports surged 16.7% yoy, far exceeding the expected 9.3% yoy gain.

    Meanwhile, exports rose 7.2% yoy, falling slightly short of the 7.7% yoy forecast, with strong shipments to the U.S. (+18.1% yoy) offset by a -6.2% yoy decline in exports to China.

    On a seasonally adjusted basis, exports declined -2.0% mom to JPY 9.253T, while imports climbed 4.7% mom to JPY 10.109T, leading to a JPY -857B trade deficit.

    GBP/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.2587; (P) 1.2609; (R1) 1.2637; More…

    GBP/USD dips mildly today but stays in established tight range. Intraday bias remains neutral, and focus stays on 38.2% retracement of 1.3433 to 1.2099 at 1.2609. Rejection by this level will keep near term outlook bearish. Break of 1.2331 support will suggest that the rebound from 1.2099 has completed as a correction, and bring retest of 1.2099 low. However, firm break of 1.2609 will raise the chance of near term reversal, and target 61.8% retracement at 1.2923.

    In the bigger picture, rise from 1.0351 (2022 low) should have already completed at 1.3433 (2024 high), and the trend has reversed. Further fall is now expected as long as 1.2810 resistance holds. Deeper decline should be seen to 61.8% retracement of 1.0351 to 1.3433 at 1.1528, even as a corrective move. However, firm break of 1.2810 will dampen this bearish view and bring retest of 1.3433 high instead.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:45 NZD PPI Input Q/Q Q4 -0.90% 1.40% 1.90%
    21:45 NZD PPI Output Q/Q Q4 -0.10% 1.10% 1.50%
    23:50 JPY Machinery Orders M/M Dec -1.20% 0.30% 3.40%
    23:50 JPY Trade Balance (JPY) Jan -0.86T -0.24T -0.03T -0.22T
    00:30 AUD Wage Price Index Q/Q Q4 0.70% 0.80% 0.80% 0.90%
    01:00 NZD RBNZ Rate Decision 3.75% 3.75% 4.25%
    07:00 GBP CPI M/M Jan -0.10% -0.30% 0.30%
    07:00 GBP CPI Y/Y Jan 3.00% 2.80% 2.50%
    07:00 GBP Core CPI Y/Y Jan 3.70% 3.70% 3.20%
    07:00 GBP RPI M/M Jan -0.10% -0.10% 0.30%
    07:00 GBP RPI Y/Y Jan 3.60% 3.70% 3.50%
    07:00 GBP PPI Input M/M Jan 0.80% 0.70% 0.10% 0.20%
    07:00 GBP PPI Input Y/Y Jan -0.10% -0.50% -1.50% -1.30%
    07:00 GBP PPI Output M/M Jan 0.50% 0.20% 0.10% -0.20%
    07:00 GBP PPI Output Y/Y Jan 0.30% 0.10% 0.10% -0.10%
    07:00 GBP PPI Core Output M/M Jan 0.30% 0%
    07:00 GBP PPI Core Output Y/Y Jan 1.50% 1.50% 1.60%
    09:00 EUR Eurozone Current Account (EUR) Dec 38.4B 30.2B 27.0B 25.1B
    13:30 USD Building Permits Jan 1.48M 1.45M 1.48M
    13:30 USD Housing Starts Jan 1.37M 1.39M 1.50M
    19:00 USD FOMC Minutes

     



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  • Dollar Surges as Hot Inflation Data Solidifies Prolonged Fed Pause, Yields Surge

    Dollar Surges as Hot Inflation Data Solidifies Prolonged Fed Pause, Yields Surge


    Dollar rallied sharply in early US trading after inflation data came in hotter than expected, reinforcing expectations that Fed will maintain its restrictive policy stance for longer than previously anticipated. 10-year Treasury yield surged past 4.6%, extending its strong rebound from earlier in the week. US equity futures plunged, with DOW futures down around -1% as traders reassessed the likelihood of near-term rate cuts. The report shattered market hopes that the Fed might move forward with another rate cut by mid-year, instead strengthening the case for a prolonged pause.

    Both headline and core CPI surpassed forecasts, rising more than expected on both a monthly and annual basis. This marks a clear warning sign that inflation pressures remain persistent. Fed fund futures now imply a nearly 65% probability that Fed will keep rates unchanged through June, a notable increase from 50% just a day earlier. While it is still premature, it couldn’t be totally ruled out that another rate hike could be back on the table if inflationary pressures intensifies further.

    US trade policy is another key wildcard for future price pressures. President Donald Trump’s tariff war is still in its early stages. Reports indicated that his administration is finalizing details for reciprocal tariffs. Trade analysts suggest that structuring these tariffs might be more challenging than anticipated, potentially delaying their rollout. However, if implemented aggressively, these tariffs could drive further price increases, creating additional inflationary risks that Fed would have to contend with.

    The currency markets reacted decisively, with Dollar emerging as the strongest performer for the day, followed by Swiss Franc and Euro. Yen, however, is the worst performer, struggling under the weight of rising US yields. Australian and New Zealand Dollars also faced significant pressure, caught in the wave of risk aversion triggered by inflation fears and concerns over global trade tensions. Meanwhile, Canadian Dollar and British Pound traded with a more neutral stance, positioning in the middle of the performance spectrum.

    In Europe, at the time of writing, FTSE flat. DAX is up 0.06%. CAC is down -0.18%. UK 10-year yield is up 0.071 at 4.583. Germany 10-year yield is up 0.043 at 2.477. Earlier in Asia, Nikkei rose 0.42%. Hong Kong HSI rose 2.64%. China Shanghai SSE rose 0.85%. Singapore Strait Times rose 0.36%. Japan 10-year JGB yield rose 0.0406 to 1.347.

    US CPI rises to 3% in Jan, core CPI up to 3.3%

    US headline CPI rose 0.5% mom in January, exceeding expectations of 0.3% mom and marking the fastest monthly pace since August 2023. Core CPI, which strips out food and energy prices, also outpaced forecasts (0.3% mom) at 0.4% mom, the highest since March 2024.

    Key inflation drivers for the month included a 0.4% mom increase in shelter costs, a 1.1% mom jump in energy prices, and a 0.4% mom rise in food prices.

    On an annual basis, CPI accelerated from 2.9% yoy to 3.0% yoy, beating expectations of 2.9% yoy and extending its upward streak for the fourth consecutive month.

    Core CPI also climbed, rising from 3.2% yoy to 3.3% yoy, surpassing the projected 3.1% yoy. Energy prices rose 1.0% yoy, while food costs were up 2.5% yoy.

    ECB’s Villeroy warns of negative impact from US tariffs

    French ECB Governing Council member Francois Villeroy de Galhau cautioned that US President Donald Trump’s tariffs will “very likely” have a “negative effect” on the economy.

    Speaking on France Culture radio, Villeroy criticized “protectionism is a seductive short-term policy, but in the long term it is a losing strategy.”

    Despite trade tensions, Villeroy maintained an optimistic view on France’s economic resilience. He reaffirmed that the country is likely to avoid a recession in 2025.

    Bank of France indicated on Tuesday that French GDP is on track to expand by 0.1% to 0.2% in the first quarter.

    ECB’s Holzmann: Inflation risks rising, rate cuts require patience

    Austrian ECB Governing Council member Robert Holzmann emphasized caution regarding rate cuts, citing renewed inflation risks from tariffs.

    Speaking to CNBC, Holzmann noted that while inflation pressures had previously “somewhat dissipated,” the latest developments, particularly increased trade frictions, pose fresh threats to price stability. As a result, policymakers must be careful in their approach on policy easing.

    Holzmann explained that while increased trade barriers may reduce economic growth, they also contribute to inflationary pressures. “We will have to be more patient,” he stated.

    Addressing speculation about a larger 50 basis point rate cut, Holzmann dismissed the idea, arguing that ECB’s mandate is to manage inflation, not stimulate growth.

    “Using the interest rate in order to initiate a higher growth is not the way how we should work,” he stated.

    USD/JPY Mid-Day Outlook

    Daily Pivots: (S1) 151.90; (P) 152.25; (R1) 152.86; More…

    USD/JPY’s strong break of 153.70 support turned resistance should confirm that corrective pull back from 158.86 has completed at 150.92. That came after drawing support from 38.2% retracement of 139.57 to 158.86 at 151.49. Intraday bias is back on the upside for retesting 158.86. Firm break there will resume whole rally from 139.57 to retest 161.94 high. For now, risk will stay on the upside as long as 150.92 support holds, in case of retreat.

    In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). In case of another fall, strong support should be seen from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound. However, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY Money Supply M2+CD Y/Y Jan 1.30% 1.30% 1.30%
    06:00 JPY Machine Tool Orders Y/Y Jan P 4.70% 11.20% 12.60%
    13:30 USD CPI M/M Jan 0.50% 0.30% 0.40%
    13:30 USD CPI Y/Y Jan 3.00% 2.90% 2.90%
    13:30 USD CPI Core M/M Jan 0.40% 0.30% 0.20%
    13:30 USD CPI Core Y/Y Jan 3.30% 3.10% 3.20%
    15:30 USD Crude Oil Inventories 2.4M 8.7M

     



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  • Yen Weakens as US Yields Bounce, Markets Eye Trump’s Reciprocal Tariffs and US CPI

    Yen Weakens as US Yields Bounce, Markets Eye Trump’s Reciprocal Tariffs and US CPI


    Yen struggled in the Asian session and stayed weak, with renewed selling pressure driven by a combination of rising US Treasury yields and ongoing concerns over trade policy developments. Market participants are still digesting the implications of US President Donald Trump’s decision to reintroduce tariffs on steel and aluminum imports, with Canada and the EU voicing strong opposition. Japan has now joined Australia in formally requesting an exemption, but there is little clarity on whether any exceptions will be granted. The focus has now shifted to Trump’s impending announcement of “reciprocal tariffs,” which he indicated would be unveiled either yesterday or today. Until the full scope of these measures is known, uncertainty in currency markets is likely to persist.

    Meanwhile, Fed Chair Jerome Powell’s testimony overnight reinforced expectations that the central bank is in no rush to adjust its policy stance. His remarks confirmed that the current pause in rate cuts could last for an extended period, particularly if inflation remains sticky. Fed funds futures continue to price in roughly 50% probability of a rate cut occurring in June, suggesting that market participants are still divided on the timing of Fed’s next move.

    The upcoming release of US consumer inflation data will be a critical factor in shaping those expectations. Headline CPI is forecast to remain steady at 2.9%, while core CPI is projected to dip slightly from 3.2% to 3.1%. However, any upside surprise could further push expectations for rate cuts into the second half of the year.

    In the currency markets, Sterling has emerged as the strongest performer so far this week, followed by Euro and Aussie. At the other end of the spectrum, Yen is the weakest major currency, Swiss franc and Kiwi are also underperforming. Dollar and Loonie are trading in a more mixed manner.

    Technically, US 10-year Treasury yield has found strong support at 38.2% retracement of 3.603 to 4.809 at 4.348. The subsequent rebound has brought attention back to the 4.590 resistance. Firm break above this point would indicate that pullback from 4.809 has concluded, setting the stage for stronger rally to retest that high. Given the close correlation between US yields and USD/JPY, further bounce in Treasury yields could provide additional lift for the pair, pushing it back toward 158.86 high.

    In Asia, at the time of writing, Nikkei is up 0.34%. Hong Kong HSI is up 1.34%. China Shanghai SSE is down -0.12%. Singapore Strait Times is down -0.09%. Japan 10-year JGB yield is up 0.025 at 1.341, at the highest level since 2011. Overnight, DOW rose 0.28%. S&P 500 rose 0.03%. NASDAQ fell -0.36%. 10-year yield rose 0.044 to 4.537.

    Fed’s Williams: Current modestly restrictive policy well positioned to achieve dual mandate

    New York Fed President John Williams stated in a speech overnight that policy remains “well positioned” to balance the dual mandate. He added that the current “modestly restrictive” policy is expected to support a gradual return to 2% inflation while maintaining economic growth and labor market resilience.

    Nevertheless, Williams also acknowledged the high degree of uncertainty surrounding the economic outlook, particularly concerning fiscal, trade, immigration, and regulatory policies.

    On the labor market, Williams noted that it has reached a “good balance” after a period of “unsustainably tight conditions” in prior years. He highlighted that wage growth has now aligned with productivity gains, which should keep inflationary pressures contained. He projected inflation at around 2.5% this year and expects it to reach the Fed’s 2% target “in coming years.”

    Williams also forecasted that the unemployment rate would remain stable between 4% and 4.25% throughout the year, with GDP growth expected to hold around 2% both in 2025 and 2026.

    ECB’s Schnabel: Europe must rethink export-driven model amid geopolitical fragmentation

    ECB Executive Board member Isabel Schnabel emphasized in a speech that while interest rate cuts could help “mitigate economic weakness”, they are not a cure-all for the deeper “structural crises” facing Eurozone.

    She pointed to persistent issues such as high energy prices, declining competitiveness, and labor shortages, which continue to weigh on the region’s economic outlook.

    Schnabel acknowledged the growing pressures facing Europe’s economy, particularly in light of Donald Trump’s return to the White House and his trade policies.

    “The export-led growth model needs to be reconsidered in the face of this increasing geopolitical fragmentation,” she stated.

    USD/JPY Daily Outlook

    Daily Pivots: (S1) 151.90; (P) 152.25; (R1) 152.86; More…

    Immediate focus is now on 153.70 support turned resistance as USD/JPY’s rebound from 150.92 extends. Firm break of 153.70 will argue that correction from 158.86 has already completed after drawing support from 38.2% retracement of 139.57 to 158.86 at 151.49. Such development will also keep the rally from 139.57 intact. Further rise should then be seen to retest 158.86 next. ON the downside, however, sustained trading below 151.49 will suggest that whole rise from 139.57 has completed, and bring deeper fall to 61.8% retracement at 146.32 next.

    In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). In case of another fall, strong support should be seen from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound. However, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY Money Supply M2+CD Y/Y Jan 1.30% 1.30% 1.30%
    06:00 JPY Machine Tool Orders Y/Y Jan P 11.20%
    13:30 USD CPI M/M Jan 0.30% 0.40%
    13:30 USD CPI Y/Y Jan 2.90% 2.90%
    13:30 USD CPI Core M/M Jan 0.30% 0.20%
    13:30 USD CPI Core Y/Y Jan 3.10% 3.20%
    15:30 USD Crude Oil Inventories 2.4M 8.7M

     



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  • Dollar’s Wild Week Ends in Uncertainty, Awaits Next Tariff Cue

    Dollar’s Wild Week Ends in Uncertainty, Awaits Next Tariff Cue


    Dollar faced significant volatility last week as shifting trade policy signals from the White House left investors scrambling for clarity. Initially, tariffs on Canadian and Mexican imports were imposed, only to be quickly suspended for 30 days following new agreements on border security and fentanyl control. Now, the focus turns to “reciprocal tariffs,” a move that could see the US impose duties equivalent to those faced by American exports in key markets.

    While traders hope for clarity once the reciprocal tariffs are officially announced, the risk of another abrupt reversal remains high. The unpredictability of the administration’s trade stance, particularly regarding its approach toward key partners like the European Union, suggests continued volatility in currency markets. Until the full scope of Trump’s trade strategy is revealed, market sentiment is likely to remain fragile, with investors hesitant to commit to a firm direction.

    Amid these confusions, Yen stood out as the strongest performer, supported by positive economic data that reinforced expectations of further BoJ rate hikes. Canadian Dollar followed behind, benefiting from a temporary tariff reprieve and stronger-than-expected employment report. Meanwhile, Australian and New Zealand Dollars managed to recover some ground, but their gains were limited by the continued US tariffs on Chinese goods and the lack of any progress in US-China trade negotiations.

    On the weaker side, Euro was the worst-performing currency, struggling under the weight of tariff threats. Despite its late-week bounce, Dollar ended the week near the bottom of the performance rankings. British Pound also weakened after the BoE delivered a surprisingly dovish rate cut, while the Swiss Franc was also soft.

    Duel Uncertainty of Trade War and Hawkish Fed Outlook in the US

    Investors in US financial markets are grappling with two major uncertainties—President Donald Trump’s evolving tariff strategy and Fed’s interest rate outlook. This dual uncertainty has led to volatile but indecisive trading in major equity indices and large price swings in Dollar, reflecting broader confusion in the markets.

    Trump’s Tariff Play: Economic Policy or Political Leverage?

    The core intention behind Trump’s tariff policies remains unclear. His administration initially imposed 25% tariffs on imports from Canada and Mexico, only to suspend them for 30 days following agreements with both nations on border security and fentanyl control measures. This move suggests that Trump may be using tariffs as a tool for securing non-trade-related concessions rather than purely as an economic strategy. The immediate delay in enforcement highlights that these tariffs could be more of a negotiation tactic than an outright protectionist measure.

    However, fresh concerns emerged on Friday when Trump said that the US would announce, in the coming days, “reciprocal tariffs” on a range of trading partners to ensure American exports are treated “evenly.” This move, if implemented broadly, could have far-reaching economic consequences, particularly if the US targets major trade partners like the European Union. Unlike the previous round of tariffs during Trump’s first term, which were primarily aimed at China, this time the scope appears much wider, raising the specter of more extensive trade disruptions.

    The biggest risk is that tariffs could become an ongoing feature of US trade policy rather than a temporary bargaining tool. With Trump also eyeing the EU as a target, the outlook for global trade is highly uncertain. For now, investors are clearly staying in wait-and-see mode, monitoring Trump’s next steps closely.

    Strong US Job Market to Keep Fed on Hold, Inflation Risks Re-Emerging?

    While trade concerns dominate the headlines, the strength of the US labor market has reinforced expectations that Fed will remain in a prolonged pause on rate cuts.

    Dallas Fed President Lorie Logan articulated a noteworthy point last week. She argued falling inflation with robust labor market means interest rates are already near neutral. That would leave little room for further easing in the near term. Fed would then stay on hold until there is clear evidence of a labor market slowdown, not just declining inflation.

    Friday’s non-farm payroll report added weight to this narrative. While job growth slowed to 143K, falling short of expectations, revisions to previous months were significant, with December’s figure being adjusted upward to 307K. Additionally, the unemployment rate unexpectedly declined from 4.1% to 4.0%, suggesting that the labor market remains resilient. Wage growth also accelerated, with average hourly earnings rising 0.5% mom —above expectations—bringing the annual increase to 4.1%.

    Another concerning development in recent data was the sharp rise in consumer inflation expectations. University of Michigan’s Surveys of Consumers revealed that short-term inflation expectations jumped from 3.3% to 4.3%, the highest level since November 2023. Long-term inflation expectations also ticked higher, reaching 3.3%, marking the highest reading since June 2008.

    If inflation expectations continue rising alongside strong wage growth, Fed could face renewed pressure to reconsider its monetary policy stance. A scenario where inflation remains stubbornly above target while employment stays strong could force Fed to maintain high rates longer than markets currently anticipate. In an extreme case, policymakers may even have to consider reintroducing rate hikes—an outcome that is not currently priced into the market but remains a potential risk, albeit minor.

    S&P 500 Stuck in Range, Upside Appears Limited

    Technically, S&P 500’s price actions from 6128.18 (Jan high) are still corrective looking, suggesting larger up trend remains intact. However, even in case of up trend resumption, loss of momentum as seen in D MACD could limit upside at 61.8% projection of 5119.26 to 6099.97 from 5773.31 at 6379.38.

    On the other hand, strong break of 55 D EMA (now at 5970.70) would put 5773.31 structural support into focus. Firm break of 5773.31 will argue that a medium term top was already in place, and larger scale correction is underway.

    Sideway Trading to Continue in Dollar Index and 10-Year Yield

    Dollar Index’s initial spike was capped below 110.17 resistance, and followed by steep pull back. Overall outlook is unchanged that consolidation pattern from 110.17 is still extending. In case of another selloff, downside should be contained by 38.2% retracement of 100.15 to 110.17 at 106.34 to bring rebound. However, firm break of 110.17 is needed to confirm up trend resumption, which is unlikely for the near term. Hence, sideway trading is set to continue for a while.

    10-year yield’s fall from 4.809 extended lower last week but recovered notably on Friday to close at 4.487. As long as 38.2% retracement of 3.603 to 4.809 at 4.348 stays intact, price actions from 4.809 are viewed as a corrective pattern. Break of 4.590 will bring stronger rebound. But upside should be limited by 4.809, at least on first attempt. That is, similar to Dollar Index, range trading will likely continue for a while.

    EUR/JPY and GBP/JPY Tumble as Yen Rides Rate Expectations and Trade Uncertainty

    Yen emerged as a dominant force in the forex markets last week, with EUR/JPY and GBP/JPY among the biggest losers, down -2.7% and -2.3% respectively. The shift was driven by a combination of declining US and European benchmark yields, alongside increasing expectations of further BoJ rate hikes. These factors reinforced the Yen’s bullish momentum and kept both EUR/JPY and GBP/JPY under heavy selling pressure.

    BoJ board member Naoki Tamura, the most hawkish voices within the central bank, continued to advocate his view that interest rates should rise to at least 1% by the end of fiscal 2025. His stance gained additional credibility after IMF also backed a gradual rate hike approach, recommending that the policy rate reach the midpoint of 1.5% within the 1-2% neutral range by the end of 2027.

    The case for BoJ tightening has been reinforced by strong nominal wage growth, with real wages increasing for a second consecutive month. More importantly, the wage gains are feeding into stronger consumption, a critical factor in sustaining inflation at the central bank’s 2% target. If this trend continues, BoJ will have even more reason to proceed with further hikes.

    Meanwhile, Euro came under additional pressure from Trump’s tariff threats. With a formal reciprocal tariff announcement expected soon, the EU is almost certain to be included, raising fears of another prolonged trade conflict. Given the region’s reliance on exports, such a development could have a significant negative impact on Eurozone already sluggish growth prospects, forcing ECB to take a more dovish stance than currently anticipated.

    ECB Chief Economist Philip Lane has been advocating for a “middle path” in policy easing, balancing inflation risks with economic headwinds. However, should tariffs materialize, ECB might be forced to accelerate rate cuts to cushion the economy from external shocks

    The UK has fared somewhat better as it is not a primary target of Trump’s trade measures. However, BOE’s unexpectedly dovish rate cut last week has left the Pound vulnerable too. Notably, hawkish policymaker Catherine Mann made a surprising U-turn, voting for a 50bps rate cut, a sharp departure from her previous stance. The base case still remains a quarterly 25bps cut throughout 2025 for BoE, but the risk is now tilted slightly toward a more aggressive easing cycle.

    Technically, as selloff in EUR/JPY intensified, the development in the next few weeks would be crucial. Attention will be on 100% projection of 100% projection of 166.7 to 156.16 from 164.89 at 154.38, which is close to 154.40 key support.

    Firm break there will resume whole pattern from 175.41 medium term top. More importantly, that would make 38.2% retracement of 114.42 to 175.41 at 152.11 key long term fibonacci level vulnerable.

    For GBP/JPY, the focus will be on 100% projection of 198.94 to 189.31 from 194.73 at 185.10. Decisive break there could prompt downside acceleration through 180.00 low to resume whole decline from 208.09 medium term top. That would at least put 38.2% retracement of 123.94 to 208.09 at 175.94 as next target.

    USD/CAD Weekly Outlook

    USD/CAD spiked higher to 1.4791 last week but reversed sharply from there. Nevertheless, downside is contained by 1.4260 cluster support (38.2% retracement of 1.3418 to 1.4791 at 1.4267), which is also close to 55 D EMA (now at 1.4264). There is no sign of reversal yet. Initial bias remains neutral this week first. On the upside, above 1.4501 minor resistance will turn bias back to the upside for stronger rebound. Larger up trend is expected to resume through 1.4791 at a later stage. However, firm break of 1.4260 will indicate that deeper correction is underway.

    In the bigger picture, long term up trend is tentatively seen as resuming with breach of 1.4667/89 key resistance zone (2020/2015 highs). Next target is 100% projection of 1.2401 to 1.3976 from 1.3418 at 1.4993. This will remain the favored case as long as 1.3976 resistance turned holds (2022 high), even in case of deep pullback.

    In the longer term picture, up trend from 0.9506 (2007 low) is in progress and possibly resuming. Next target is 61.8% projections of 0.9406 to 1.4689 from 1.2005 at 1.5270. While rejection by 1.4689 will delay the bullish case, further rally will remain in favor as long as 55 M EMA (1.3392) holds.



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  • Sterling Tumbles on BoE’s Dovish Rate Cut

    Sterling Tumbles on BoE’s Dovish Rate Cut


    The British Pound weakened significantly after BoE delivered a 25bps rate cut. The policy decision was more dovish than anticipated, primarily due to the unexpected shift in the MPC voting split. Catherine Mann, previously one of the most hawkish members of the committee, reversed course and joined Swati Dhingra in voting for a more aggressive 50bps cut.

    Adding to the bearish sentiment on Sterling, BoE’s updated economic projections painted a complicated macroeconomic outlook. The central bank sharply downgraded its 2025 GDP growth forecast. At the same time, inflation forecasts were revised higher. Facing the increased uncertainty, BoE emphasized its commitment to a “gradual and careful” approach to policy easing.

    Overall with today’s announcement, risk is clearly tilted toward a more dovish policy stance. The base case remains as one 25bps cut per quarter throughout 2025,. But today’s decision raises the probability of a faster easing cycle, in particular if growth conditions worsen further.

    Technically, EUR/GBP’s strong break of 0.8353 minor resistance argue that the pullback from 0.8472 might have completed at 0.8290 already. This also revives that case that rebound from 0.8221 is not totally completed. Further rise is now in favor back to 0.8472 resistance next.

    Overall in the currency markets, Yen is currently the strongest one, followed by Canadian, and then Dollar. Sterling is the worst, followed by Kiwi, and then Swiss Franc. Euro and Aussie are positioning in the middle. The picture is rather mixed with the exception of clear strength in Yen and weakness in Sterling. Other parts of the markets might need tomorrow’s US NFP data to provide more clarity.

    In Europe at the time of writing, FTSE is up 1.53%. DAX is up 0.82%. CAC is up 0.97%, UK 10-year yield is down -0.0249 at 4.416. Germany 10-year yield is up 0.004 at 2.369. Earlier in Asia, Nikkei rose 0.61%. Hong Kong HSI rose 1.43%. China Shanghai SSE rose 1.27%. Singapore Strait Times rose 0.39%. Japan 10-year JGB yield fell -0.0166 to 1.267.

    US initial jobless claims rises to 219k vs exp 214k

    US initial jobless claims rose 11k to 219k in the week ending February 1, above expectation of 214k. Four-week moving average of initial claims rose 4k to 217k.

    Continuing claims rose 36k to 1886k in the week ending January 25. Four-week moving average of continuing claims rose 2k to 1872k.

    BoE cuts rates to 4.50% in surprisingly dovish vote

    BoE lowered its policy rate by 25 basis points to 4.50%, as widely expected, but the tone of the decision was unexpectedly dovish.

    The Monetary Policy Committee vote split at 7-2, with Swati Dhingra advocating for a more aggressive 50bps cut—as expected—but hawkish member Catherine Mann surprisingly joining her, marking a significant shift in her stance.

    BoE emphasized a “gradual and careful” approach to easing, a slight adjustment from December’s messaging, which only referenced “gradual” reductions. This shift highlights policymakers’ growing concerns over inflation persistence and economic fragility. Governor Andrew Bailey reaffirmed that rate adjustments would be assessed on a “meeting-by-meeting” basis, with no pre-determined path for cuts.

    In its updated economic projections, BoE raised its inflation outlook, now expecting headline CPI to peak at 3.7% in Q3 2025, up from a prior forecast of 2.8%. The revision reflects higher energy costs and expected increases in regulated utility and transport prices. Inflation is not anticipated to return to the 2% target until Q4 2027, six months later than previously projected.

    Growth forecasts were also downgraded sharply for 2025, with expected GDP expansion halved to 0.75%, citing weak business sentiment, sluggish consumer activity, and poor productivity growth. However, projections for 2026 and 2027 were revised slightly upward to 1.5% from 1.25%, suggesting policymakers see a slow but eventual economic recovery.

    ECB’s Cipollone open to March cut, flags risks of full US-China trade war

    ECB Executive Board member Piero Cipollone indicating that while “there is still room for adjusting rates downwards”, the March decision remains uncertain. He stated that ECB must be “extremely careful” in its assessment, and he will enter the meeting “with an open mind”.

    Discussing the concept of the neutral rate in a Reuters interview, Cipollone downplayed its practical significance in policy setting. He pointed out that when estimates for the neutral rate vary widely—such as between 1.75% and 2.25%—it becomes “not terribly useful for setting monetary policy.” If ECB operates near either end of the range, it could risk either undershooting or overshooting its inflation target.

    Cipollone also raised concerns about the evolving global trade situation. The immediate impact of US tariffs depends on European retaliation and specific product categories affected, He warned that a “full trade war” between the US and China poses a more significant threat.

    With China accounting for 35% of global manufacturing capacity, broad trade restrictions could flood European markets with Chinese goods. This would create a dual challenge— “deflationary” pressures from lower-priced imports and a “contractionary” effect as European producers struggle to compete.

    Eurozone retail sales falls -0.2% mom in Dec, EU down -0.3% mom

    Eurozone retail sales slipped by -0.2% mom in December, missing market expectations of -0.1% decline and pointing to continued weakness in consumer demand. The drop was largely driven by -0.7% contraction in food, drinks, and tobacco sales, while non-food products saw a modest 0.3% increase. Automotive fuel sales in specialized stores also ticked up 0.2%, providing some offset to the broader decline.

    At the EU-wide level, retail sales fell even further, down 0.3% mom. The country-level breakdown highlights stark contrasts in retail activity. Slovenia (-2.2%), Germany (-1.6%), and Poland (-1.5%) saw the sharpest contractions, while Slovakia (+8.2%), Finland (+2.1%), and Spain (+1.4%) registered solid gains.

    BoJ’s Tamura advocates rate hike to 1% by late fiscal 2025

    BoJ board member Naoki Tamura, a known hawk, reinforced his stance on the need for tighter monetary policy, stating that Japan’s short-term interest rates should rise to at least 1% by the second half of fiscal 2025 to mitigate inflation risks.

    Tamura explained that inflationary pressures are mounting, necessitating a shift away toward a more neutral rate. He highlighted that by late fiscal 2025, the Japanese economy is expected to reach a point where the 2% inflation target can be considered sustainably achieved, supported by broad-based wage increases, including among smaller firms.

    “Bearing in mind that short-term interest rates should be at 1% by the second half of fiscal 2025, I think the Bank needs to raise rates in a timely and gradual manner, in response to the increasing likelihood of achieving its price target,” he said.

    Australia’s NAB business confidence improves, but profitability weakens

    Australia’s NAB Business Confidence rose from -7 to -4 in Q4, reflecting a slight improvement in sentiment. However, Business Conditions remained unchanged at 3, as trading conditions slipped from 6 to 5, and profitability turned negative from 0 to -1. Employment conditions as steady at 3.

    Forward-looking indicators showed a mixed picture. Expected business conditions for the next three months edged lower, but sentiment for the 12-month horizon improved by five points, aligning with a three-point increase in capital expenditure plans, suggesting firms are cautiously optimistic about long-term prospects.

    Cost pressures moderated, with labor cost growth slowing to 0.9% qoq from 1.2%, and purchase costs easing to 0.7% qoq from 1.0%. Retail price growth also softened to 0.5% qoq from 0.7%, though overall product price growth remained stable at 0.4% qoq, indicating ongoing margin pressure despite easing input costs. Wage costs remained the top concern for businesses, while demand constraints and labor shortages persisted as key challenges.

    GBP/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.2462; (P) 1.2506; (R1) 1.2548; More…

    GBP/USD dips notably today but stays above 1.2248 support and intraday bias remains neutral. While corrective rebound from 1.2099 could still extend, upside should be limited by 38.2% retracement of 1.3433 to 1.2099 at 1.2609. On the downside, break of 1.2248 support will bring retest of 1.2099 first. Firm break there will resume whole decline from 1.3433. However, decisive break of 1.2609 will raise the chance of near term reversal, and target 61.8% retracement at 1.2923.

    In the bigger picture, rise from 1.0351 (2022 low) should have already completed at 1.3433 (2024 high), and the trend has reversed. Further fall is now expected as long as 1.2810 resistance holds. Deeper decline should be seen to 61.8% retracement of 1.0351 to 1.3433 at 1.1528, even as a corrective move. However, firm break of 1.2810 will dampen this bearish view and bring retest of 1.3433 high instead.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    00:30 AUD NAB Business Confidence Q4 -4 -6 -7
    00:30 AUD Trade Balance (AUD) Dec 5.09B 6.73B 7.08B 6.79B
    06:45 CHF Unemployment Rate M/M Jan 2.70% 2.70% 2.60% 2.70%
    07:00 EUR Germany Factory Orders M/M Dec 6.90% 1.70% -5.40% -5.20%
    09:30 GBP Construction PMI Jan 48.1 53.7 53.3
    10:00 EUR Eurozone Retail Sales M/M Dec -0.20% -0.10% 0.10% 0.00%
    12:00 GBP BoE Interest Rate Decision 4.50% 4.50% 4.75%
    12:00 GBP MPC Official Bank Rate Votes 0–9–0 0–8–1 0–3–6
    12:30 USD Challenger Job Cuts Y/Y Jan -39.50% 11.40%
    13:30 USD Initial Jobless Claims (Jan 31) 219K 214K 207K 208K
    13:30 USD Nonfarm Productivity Q4 P 1.20% 1.80% 2.20%
    13:30 USD Unit Labor Costs Q4 P 3.00% 3.30% 0.80%
    15:00 CAD Ivey PMI Jan 53 54.7
    15:30 USD Natural Gas Storage -167B -321B

     



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