Forex on Edge: Euro, Pound and Aussie React as Markets Await US GDP and PCE Data

Today, investors and forex traders are focusing on Germany’s January producer price data. Forecasts suggest that annual PPI growth may slow from –2.5% to –2.1%, while on a monthly basis a rebound of 0.3% is possible after a –0.2% decline previously. Market participants broadly agree that the European Central Bank (ECB) is unlikely to rush into interest rate changes aimed at containing price pressures, as supporting economic growth currently remains the higher priority. Attention will also be on February business activity indices from S&P Global and Hamburg Commercial Bank (HCOB). In Germany’s manufacturing sector, the PMI is expected to rise from 49.1 to 49.6 points in February, still failing to move decisively above the key 50 threshold. In services, the index may ease from 52.4 to 52.2 points. Across the eurozone, composite indicators are projected to edge up from 49.5 to 50.0 in manufacturing and from 51.6 to 52.0 in services. The most important releases, however, will be US fourth-quarter GDP data—expected to slow from 4.4% to 3.0% year-on-year—and the Personal Consumption Expenditures (PCE) price index at 15:30 (GMT+2). The latter is closely monitored by the Federal Reserve when assessing inflation dynamics and could play a decisive role in shaping expectations for the scale of potential rate cuts in the second half of the year. Current forecasts point to core PCE accelerating from 2.8% to 2.9% year-on-year, with the monthly figure rising from 0.2% to 0.3%, while the headline index is expected to remain near 2.8% annually and increase from 0.2% to 0.3% on a monthly basis.

GBP/USD

The pound is extending a strong bearish impulse formed earlier this week and is testing the 1.3445 level to the downside. However, traders remain cautious about opening fresh positions ahead of the release of UK retail sales data. Annual retail sales are expected to rise from 2.5% to 2.8%, while the monthly figure may ease from 0.4% to 0.2%. Excluding fuel, sales growth is projected to accelerate from 3.1% to 3.6% year-on-year, while the monthly reading may slow from 0.3% to 0.2%, potentially weighing further on the outlook for the British currency. UK investors are also digesting labour market data released earlier this week, particularly the December–January report. The unemployment rate rose to 5.2% from 5.1% in the previous quarter, marking its highest level since early 2021. The number of unemployed increased by 94,000 to 1.883 million, while regular wage growth excluding bonuses slowed to 4.2% in December 2025 from 4.6%, its weakest pace in nearly four years. In addition, annual inflation eased from 3.4% to 3.0% in January, while monthly inflation fell by 0.5% after a 0.4% increase previously. Taken together, these developments significantly raise the likelihood that the Bank of England will soon pivot toward a more dovish stance, adding further pressure on the pound.

AUD/USD

The Australian dollar is showing mixed dynamics against the US dollar, testing the 0.7040 level to the downside as investors focus on business activity data. In February, the manufacturing PMI slowed from 52.3 to 51.5 points, undershooting consensus forecasts, while the services index dropped sharply from 56.3 to 52.2 points. At the same time, data from the Australian Bureau of Statistics (ABS) released earlier showed that the unemployment rate held steady at 4.1%, beating expectations for a rise to 4.2%. The economy added 17,800 new jobs, with the key positive signal coming from a strong increase in full-time employment by 50,500 positions, highlighting persistent structural tightness in the labour market. These figures, combined with a recent surge in inflation expectations—February readings hit a three-year high of 5.0%—reinforce expectations that the Reserve Bank of Australia (RBA) may continue tightening monetary conditions. Markets now price in a near-certainty of the policy rate rising to 4.10% by August, creating a sharp contrast with the Federal Reserve’s more cautious tone. Minutes from the RBA’s February meeting, published earlier this week, confirmed that policymakers viewed higher borrowing costs as necessary to prevent inflation from remaining above target for a prolonged period, though they stopped short of outlining a clear path for future moves, stressing data dependence. Key events this week include US fourth-quarter GDP data and the PCE inflation report due at 15:30 (GMT+2), both of which could materially influence expectations for Fed policy easing later in the year.

USD/JPY

The US dollar is trading with mixed momentum against the Japanese yen, holding near 155.20 during the Asian session as investors assess Japan’s January inflation data. Headline CPI slowed sharply from 2.1% to 1.5% year-on-year, undershooting expectations, while core inflation eased from 2.9% to 2.6%. Pressure on the yen stems from a combination of structural factors, including a persistent trade imbalance, weak domestic consumption growth, and expectations that the Bank of Japan will maintain a cautious policy stance amid expanding fiscal commitments. In the political and economic context, the strengthening position of the Liberal Democratic Party under Prime Minister Sanae Takaichi following the snap parliamentary election on February 8 has given the government a strong mandate to pursue reforms with limited opposition resistance. At the same time, institutional investors have grown increasingly concerned about debt sustainability. A proposal to suspend the 8.0% consumption tax on food for two years could reduce national budget revenues by around 5.0 trillion yen. This has pushed up long-term Japanese government bond yields and increased pressure on the financial system through rising debt servicing costs, which Japan’s Ministry of Finance projects could climb by 28.0% by 2029. Concerns were further reinforced by warnings from the International Monetary Fund (IMF) about debt sustainability risks, underscoring the need for a careful balance between stimulus and structural reforms. Recent machinery orders data provided some relief: orders surged by 19.1% month-on-month versus expectations of 5.1%, and rose 16.8% year-on-year compared with 3.9% previously, confirming resilience in the sector and partially offsetting earlier weak GDP data for the fourth quarter. This supports expectations that the Bank of Japan’s plans to eventually raise interest rates may still materialise, albeit with some delay.

XAU/USD

Gold prices are consolidating near the psychological 5,000.0 level, awaiting fresh catalysts. Weekly price action has been largely flat, although overall trading activity remains elevated. Support continues to come from expectations of an eventual dovish cycle by the Federal Reserve. Following softer inflation data, market participants have revised their outlook for policy easing in the second quarter, now anticipating cumulative rate cuts of around 65 basis points. However, sentiment within the Fed remains mixed, with some policymakers still advocating a wait-and-see approach. Much will depend on incoming macroeconomic data, as well as the upcoming change in leadership at the US Treasury in May. Today’s most critical releases include US fourth-quarter GDP figures, expected to slow from 4.4% to 3.0% year-on-year, and the PCE inflation report due at 15:30 (GMT+2). As the Fed’s preferred inflation gauge, PCE data could significantly shape expectations for the scale and timing of potential rate cuts in the second half of the year. Current forecasts point to core PCE accelerating from 2.8% to 2.9% annually, with the monthly rate rising from 0.2% to 0.3%, while the headline index is expected to remain near 2.8% year-on-year and increase from 0.2% to 0.3% on a monthly basis.