Thus, today at 11:00 (GMT+2), traders will focus on February data from the Institute for Economic Research (IFO): according to the consensus forecast, Germany’s business climate index may rise from 87.6 points to 88.4 points, while the economic expectations index may increase from 89.5 points to 90.5 points. Experts attribute this to stronger investment activity in the EU, including expanded defense programs and large-scale infrastructure modernization plans in Germany, as well as technological upgrades at industrial enterprises, with spending that may amount to about EUR 45.0–50.0 billion, of which around EUR 12.0–13.0 billion is expected to be directed toward rearmament and defense capacity enhancement. In addition, EUR 10.0–12.0 billion is planned for projects related to production process digitalization and the introduction of energy-efficient technologies in industrial zones.
Earlier, representatives of the Federal Ministry for Economic Affairs and Climate Action, as well as officials from the Federal Ministry of Finance, noted that additional fiscal stimulus and rising public investment should support the industrial sector and improve business sentiment in the medium term, while also stimulating domestic demand and supporting employment: around 120,000–150,000 new jobs are expected to be created during 2026. Meanwhile, the assessment of current conditions is also expected to show moderate growth in February, from 85.7 points to 86.1 points.
Representatives of the relevant agencies previously emphasized that, despite ongoing pressure from external demand and high costs, the economy is showing signs of gradual recovery; however, the process remains fragile and depends on global conditions and financial circumstances.
Positive business activity dynamics in the region provided additional support to EUR/USD quotes: according to the latest data, Germany’s manufacturing PMI rose from 49.1 points to 50.7 points in February, significantly exceeding the forecast of 49.6 points, while the services PMI increased from 52.4 points to 53.4 points versus 52.2 points expected.
Across the eurozone as a whole, the indicators adjusted from 49.5 points to 50.8 points and from 51.6 points to 51.8 points, respectively, signaling a recovery in activity and support for the single currency amid improving business sentiment.
GBP/USD
The pound is rebounding from local lows recorded on January 22 and renewed at the end of last week, and is now testing the 1.3520 level for an upside breakout, while investors and forex traders await new catalysts. According to a preliminary estimate by S&P Global, the composite PMI rose to 53.9 points from 53.7 points in February, reaching its highest level since April 2024, while analysts had expected 53.4 points. The positive dynamics were driven by a moderate recovery in new orders, which increased for the third consecutive month at the fastest pace since September 2024, with the manufacturing sector acting as the key driver.
Specifically, the manufacturing PMI adjusted to 52.0 points (an 18-month high), while the output index rose to 53.6 points (the highest level since October 2024). Meanwhile, export orders grew at the fastest pace in the last four and a half years, with manufacturers reporting a broad-based recovery in sales supported by demand from the US, EU, and Asia.
The services sector, although slowing slightly to 53.9 points from 54.0 points in January, remains in expansion territory. Additional support for the pound came from January retail sales data published on Friday by the Office for National Statistics: volumes rose by 1.8% month-on-month versus a forecast of 0.2%, marking the strongest reading since May 2024. In theory, such data should reduce expectations of monetary policy easing by the Bank of England; however, analysts warn that a sustained disinflation trend and labor market weakness are limiting the impact on these expectations: employment has been declining for seventeen consecutive months, with the sharpest drop observed in the services sector amid higher employer social contributions.
NZD/USD
The New Zealand dollar is showing mixed dynamics in the NZD/USD pair during the Asian session on February 23, consolidating around 0.5980. The main factor shaping price action last week was the outcome of the February 18 meeting of the Monetary Policy Committee of the Reserve Bank of New Zealand (RBNZ), the first under new Governor Anna Breman. As a reminder, the meeting resulted in the policy rate being held at 2.25%, fully in line with the consensus forecast.
Officials justified the decision by the current macroeconomic environment: according to the regulator, in the fourth quarter actual output was 1.5% below potential, indicating underutilization of productive capacity, while the Committee emphasized that inflation is likely to return to the 2.0% target within the next 12 months. Nevertheless, the key takeaway appears to be the shift in the expected timing of the first rate hike to one quarter earlier than in the November forecast, while an extremely moderate tightening cycle is still expected.
According to estimates, the rate will reach only 3.0% by 2028. This forecast contrasts with investor pricing, which implies at least one rate increase in the fourth quarter, and with some economists who expect tightening as early as September, which triggered an immediate sell-off in the New Zealand currency and a 0.6% decline in NZD/USD. According to the regulator’s forecast, monetary policy will remain on hold until a sustainable economic recovery and slower inflation are achieved, after which a gradual normalization of monetary conditions will follow. Today, traders focused on fourth-quarter retail sales data: they fell from 1.9% to 0.9%, which was still better than analysts’ expectations of 0.6%, while the indicator excluding auto sales adjusted from 1.2% to 1.5%, beating the market consensus.
Meanwhile, the market remains focused on President Donald Trump’s decision to raise tariffs to 15.0% on all partner countries in response to the Supreme Court ruling that his previous tariffs were unlawful. By majority vote, the court ruled that the president exceeded his authority by imposing trade restrictions under the 1977 International Emergency Economic Powers Act (IEEPA), whereas congressional approval is required to initiate import sanctions. Trump has already called the ruling “deeply disappointing” and stressed that he will use other restrictive mechanisms for foreign imports.
USD/JPY
The US dollar is showing a moderate decline in USD/JPY, testing the 154.40 level for a downside breakout: the instrument is developing an uncertain bearish impulse formed at the end of last week, when quotes retreated from local highs seen on February 10. Last Friday, US investors focused on December Personal Consumption Expenditures (PCE) price index data, which showed an acceleration in the annual headline figure from 2.8% to 3.0% versus preliminary estimates of 2.9%, and in the monthly figure from 0.2% to 0.4% versus expectations of 0.3%, while the core indicator adjusted from 2.8% to 2.9% year-on-year and from 0.2% to 0.4% month-on-month.
Given that this data is key for the Federal Reserve in assessing inflation trends and directly influences market expectations regarding possible changes in the benchmark interest rate, faster growth in spending strengthens arguments for a wait-and-see stance by the regulator or even tighter monetary conditions in the near future.
At the same time, markets are also assessing how revised inflation expectations from the University of Michigan may affect the future path of borrowing costs: February’s one-year inflation forecast was lowered from 3.5% to 3.4%, and the five-year forecast from 3.4% to 3.3%. Nevertheless, the sharp drop in US fourth-quarter GDP data from 4.4% to 1.4% year-on-year, while analysts had expected only a decline to 3.0%, disappointed investors: such dynamics could push the Fed toward faster monetary easing, but conditions are changing too quickly to make confident forecasts.
Meanwhile, Japanese investors assessed inflation data: the nationwide CPI slowed from 2.1% to 1.5% year-on-year, below the Bank of Japan’s 2.0% target, while the core indicator fell from 2.4% to 2.0%, a two-year low, which may hinder the regulator from maintaining a hawkish stance. Recall that most economists surveyed by Reuters expect officials to raise the interest rate from 0.75% to 1.00% by the end of June, while the probability of a rate change by April is estimated at around 70.0%.
XAU/USD
XAU/USD quotes are showing restrained growth, extending last week’s upward movement and testing the 5155.0 level: demand for gold remains consistently high amid persistent geopolitical risks, which are currently centered around Iran. After the Islamic Republic’s authorities presented a detailed proposal on the “nuclear deal” last week, analysts increasingly agree that US President Donald Trump may order limited military strikes on Iranian facilities in the coming days if diplomatic efforts fail, with the possibility of a broader attack if bilateral dialogue yields no results.
A new round of rulings is scheduled for Thursday, but the probability of escalation is already supporting demand for safe-haven assets. An additional growth factor for precious metal prices was the US Supreme Court’s decision declaring a significant portion of trade tariffs introduced by the Republican administration illegal, since President Donald Trump did not have the right to use the International Emergency Economic Powers Act (IEEPA) without congressional approval. Despite this, he announced a new increase in global tariffs from 10.0% to 15.0%, this time under the Trade Act of 1974. These sanctions are imposed for 150 days and cannot be extended without congressional approval: a majority of justices, six to three, ruled that the president must seek authorization.
The contradictory nature of the situation is reducing investor interest in risk assets, while Trump claims that judicial authorities were influenced by foreign interests when issuing the ruling. In the US, the key event last week was December PCE data, which showed an acceleration in the annual headline figure from 2.8% to 3.0% versus preliminary estimates of 2.9%, and in the monthly figure from 0.2% to 0.4% versus expectations of 0.3%, while the core indicator adjusted from 2.8% to 2.9% year-on-year and from 0.2% to 0.4% month-on-month. Given that this data is key for the Federal Reserve in assessing underlying inflation dynamics and directly affects market expectations regarding possible changes in the benchmark interest rate, stronger spending growth reinforces arguments for a wait-and-see stance by the regulator or even tighter monetary conditions in the near future.
