Forecasts point to a slowdown in the headline inflation rate from 2.1% to 2.0% year-on-year, which would further support expectations that the European Central Bank (ECB) will maintain its current monetary policy stance. On a monthly basis, inflation is expected to accelerate from 0.1% to 0.5%. Labor market data will also be released: analysts anticipate a moderate increase in the number of unemployed by 2,000 in January after flat dynamics a month earlier, while the seasonally adjusted unemployment rate is likely to remain around 6.3%. Earlier, attention was focused on Germany’s fourth-quarter GDP report, which showed growth of 0.3% quarter-on-quarter and 0.4% year-on-year, in line with market expectations. In addition, March consumer climate data from the GfK Group — a leading indicator of household spending and economic confidence — pointed to a further deterioration, with the index falling from –24.2 to –24.7 points.
Commenting on the data, Rolf Bürkl, an analyst at the Nuremberg Institute for Market Decisions, noted that consumers remain pessimistic and are more likely to channel funds into savings rather than spending, amid rising geopolitical uncertainty. Meanwhile, ECB President Christine Lagarde, speaking before a European Parliament committee, reiterated that monetary authorities’ efforts to curb inflation have been effective: consumer price growth is steadily moving toward the 2.0% medium-term target as wage growth gradually slows, while the region’s economic potential remains solid despite new restrictions imposed by the White House.
According to Lagarde, the trade environment remains challenging due to changing tariffs, a stronger euro, and persistent global policy volatility. Recall that after the U.S. Supreme Court ruled that the 10.0% import tariffs initiated by Donald Trump were unlawful and exceeded presidential authority under the International Emergency Economic Powers Act (IEEPA) without congressional approval, the U.S. president announced an adjustment of the rate from 10.0% to 15.0% for all countries, this time under the Trade Act of 1974.
GBP/USD
The pound is attempting to recover after a sharp decline in the previous session and is now testing the 1.3490 level for an upside breakout. However, pressure on the pair is again coming from weak macroeconomic data in the UK. In particular, investors focused on a deterioration in the GfK consumer confidence index from –16.0 to –19.0 points, while most forecasts had expected a modest improvement to –15.0. Market participants continue to anticipate an imminent rate change by the Bank of England. Earlier, Governor Andrew Bailey told the Parliamentary Treasury Committee that a rate cut remains an “open question,” although he noted that services inflation exceeded the BoE’s forecast at 4.1%.
Monetary Policy Committee member Alan Taylor took a more explicit stance, arguing in favor of two to three rate cuts in the near term, citing risks to employment and easing price pressures. Market expectations currently price in a nearly 80% probability of a 25-basis-point rate cut at the March 19 meeting, with cumulative easing approaching 50 basis points, which continues to weigh on the pound.
UK macroeconomic data send mixed signals: on the one hand, retail sales surged by 1.8% in January and February business activity indices remain firmly in expansion territory. On the other hand, weak labor market figures and a faster slowdown in inflation to 3.0% strengthen the case for near-term monetary easing by the Bank of England.
AUD/USD
The Australian dollar is posting modest gains against the U.S. dollar during the Asian session on February 27, holding near local highs around 0.7130. Trading activity remains subdued as market participants prefer to wait for U.S. producer inflation data due at 15:30 (GMT+2), although these figures are unlikely to materially alter expectations regarding a potential Federal Reserve rate cut at the March 18 meeting.
Current forecasts suggest that producer inflation will slow from 3.0% to 2.6% year-on-year and from 0.5% to 0.3% month-on-month, exerting only a limited impact on the U.S. dollar. A stronger catalyst could come from developments in U.S.–Iran nuclear talks. The third round of negotiations was held in Switzerland, but analysts believe no consensus was reached, as discussions were repeatedly paused for additional consultations. Previously, it was reported that the White House continues to demand the dismantling of three nuclear facilities — Fordow, Natanz, and Isfahan — as well as the transfer of Iran’s stockpile of enriched uranium to Washington.
Talks are set to resume next week in Vienna. The negotiations are taking place against a tense backdrop: U.S. President Donald Trump warned of “serious consequences” for Iran if diplomacy fails, keeping escalation risks elevated. At the same time, the Australian dollar is supported by the relatively hawkish stance of the Reserve Bank of Australia (RBA), which has reiterated its readiness to raise interest rates if necessary.
A key event this week was the release of January CPI data: the trimmed mean CPI rose from 3.3% to 3.4% year-on-year, slightly above neutral forecasts, while the headline index remained unchanged at 3.8%, contrary to expectations for a slowdown to 3.7%. RBA Governor Michele Bullock highlighted the complexity of monetary policy decisions under current conditions, stressing the need for patience in determining the future policy path. While inflation does not show signs of re-accelerating, it remains above the 2.0–3.0% target range, and the labor market continues to send mixed but generally supportive signals for maintaining a restrictive policy stance.
USD/JPY
The U.S. dollar is losing ground against the Japanese yen, extending the bearish momentum from the previous session and testing the 155.80 level for a downside break. Support for the yen comes from Japanese inflation data released earlier today. Tokyo CPI rose by 1.6% year-on-year in February, slightly accelerating from 1.5%, while the core index excluding food slowed to 1.8%, falling below the Bank of Japan’s 2.0% target for the first time since March 2022. The slowdown is largely attributed to government measures aimed at containing utility costs and points to further easing of price pressures in the near term.
Markets also noted a sharp rebound in retail sales, which rose 1.8% year-on-year in January after a 0.9% decline, far exceeding expectations for a –0.4% reading. This supports the case for potential monetary tightening by the Bank of Japan. Meanwhile, industrial production slowed from 2.6% to 2.3% year-on-year, although the monthly figure accelerated to 2.2% after a –0.1% decline previously, well below expectations for a 5.3% surge. Japan’s macro backdrop is further supported by strong current account data: in December 2025, the surplus reached ¥3.674 trillion, significantly above forecasts, with the adjusted figure at ¥3.14 trillion, underscoring Japan’s continued ability to finance its debt domestically and reducing the risk of sudden capital outflows.
XAU/USD
Gold prices are consolidating near the psychological $5,200 per troy ounce level during the morning session and are poised to end the week with modest gains, despite reaching fresh local highs earlier in the week. Market activity remains subdued as traders refrain from opening new positions ahead of U.S. producer inflation data due at 15:30 (GMT+2), which may clarify expectations for potential Fed rate cuts. Current forecasts suggest the annual rate will slow from 3.0% to 2.6%, while the monthly figure may rise from 0.1% to 0.5%. The session will conclude with the release of the Chicago PMI, expected to ease from 54.0 to 52.8 points.
Nevertheless, the dominant focus for markets remains developments surrounding the U.S.–Iran nuclear negotiations. The third round of talks was held in Switzerland, but analysts believe no breakthrough was achieved, as discussions were repeatedly interrupted for further consultations. Previous reports indicated that Washington continues to demand the dismantling of nuclear facilities in Fordow, Natanz, and Isfahan, along with the transfer of enriched uranium stockpiles. Negotiations will continue next week in Vienna.
The talks are unfolding in a highly tense environment. President Donald Trump has warned of “serious consequences” for Iran if diplomatic efforts fail, keeping escalation risks elevated. The U.S. is currently increasing its military presence in the Middle East, while Iranian officials have stated they are prepared to take “reciprocal” measures in response to any attacks on their infrastructure.
