Euro Finds Support on German Conservative Election Win; Eurozone CPI Eyed
GBP
GBP/USD is currently trading at 1.2641, while GBP/EUR stands at 1.2070 (interbank).
It’s set to be a relatively quiet week for market-moving data in the UK, though all eyes will be on MPC member David Ramsden’s speech later today for hints on future monetary policy.
BoE Governor Andrew Bailey has previously suggested that interest rate cuts will be gradual and carefully considered, with markets expecting two more cuts this year following recent dovish sentiment among MPC members.
Despite inflation rising to 3% in January and wage growth accelerating by 6%, Bailey seems largely unfazed by wage pressures, focusing instead on broader economic data.
Investors will also look ahead to MPC member Pill’s speech tomorrow for additional policy signals, while Friday’s retail sales and PMI data will provide further insight into consumer confidence and business sentiment.
Today’s events (GMT):
13:15 - MPC Member Ramsden Speaks
EUR
EUR/USD is slightly weaker this morning, trading at 1.0432 (interbank), as markets react to mixed economic and political developments in Germany.
The German IFO Business Climate Index ticked up to 85.2 for February, marginally below market forecasts of 85.8, signalling persistent weakness in Europe’s largest economy.
Over the weekend, Germany’s political landscape shifted rightwards, with the CDU/CSU leading elections, but requiring a coalition partner to secure a parliamentary majority.
Despite this uncertainty, markets expect short-term optimism, particularly if a stable coalition forms.
Meanwhile, the Eurozone is set to release its latest inflation data later today, with CPI expected to remain stable at 2.5% year-on-year, while core inflation is forecast at 2.7%.
These results will be key for future ECB policy moves, with additional interest rate cuts likely if inflationary pressures continue to weaken.
Today’s events (GMT):
09:00 - German Ifo Business Climate Index (Feb) – Forecast: 85.2 vs Actual: 85.9
10:00 - CPI (Jan) – Forecast: 2.5%
10:00 - Core CPI (Jan) – Forecast: 2.7%
USD
The Dollar Index, which measures the U.S. dollar against six major currencies, has dropped to 106.16 - the lowest level since mid-December.
U.S. business activity slowed significantly in February as worries over tariffs on imports and reductions in federal spending impacted sentiment, according to data released last Friday.
Despite President Trump’s claims that tariffs would bolster domestic production, business confidence has been dented, with consumer sentiment also falling to a 15-month low. This has weighed on the dollar, which has weakened further as inflation expectations rise.
Market pricing from the CME FedWatch Tool now reflects a lower probability (41.1%) of interest rates remaining unchanged this year.
Investors are now turning their attention to upcoming economic data, with Durable Goods Orders and the PCE Price Index for January scheduled for release later this week, which will be closely watched for further clues on inflation and future Fed rate decisions.
No significant events are scheduled for today.
CAD
USD/CAD is steady and currently trading at 1.4206 (interbank) in this morning’s trading session.
Recent data from Statistics Canada suggests a 0.4% decline in retail sales for January, the first drop in seven months, indicating a potential slowdown in consumer spending.
At the same time, rising industrial producer prices and a surge in the Raw Materials Price Index have heightened inflationary concerns, creating a policy dilemma for the BoC as it seeks to balance price stability with economic growth.
Market participants will be watching Friday’s GDP figures for further insights into the health of the Canadian economy.
Meanwhile, oil prices have declined, with Brent crude falling to $74.32 per barrel and West Texas Intermediate (WTI) slipping to $70.22 per barrel, weighing on the commodity-linked Canadian dollar.
No significant events are scheduled for today.
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