• Manufacturing PMI 46.1 vs 45.5 expected vs. 45.0 prior
• Services PMI 52.2 vs 52.5 expected vs. 52.5 prior
• Composite PMI 51.0 vs 50.8 expected and 50.5 prior

Key findings:

• HCOB Flash Germany Composite PMI Output Index(1) at 51.0 (Jan: 50.5). 9-month high.
• HCOB Flash Germany Services PMI Business Activity Index(2) at 52.2 (Jan: 52.5). 2-month low.
• HCOB Flash Germany Manufacturing PMI Output Index(4) at 48.5 (Jan: 46.3). 9-month high.
• HCOB Flash Germany Manufacturing PMI(3) at 46.1 (Jan: 45.0). 24-month high.

Comment:

Commenting on the flash PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:

“The manufacturing sector is still struggling, but things are looking up. The recession has been easing for two months now,
and the output index is getting closer to the expansionary threshold of 50. This improvement is thanks to a slowdown in the
drop of new orders, including those from abroad. However, it’s too soon to celebrate just yet, as the manufacturing sector is
most likely to face challenges from US tariffs in the coming months.

“The service sector has been growing steadily for three months. Fears that it would be dragged down by the manufacturing
recession haven’t come true so far. This is partly because the downturn in manufacturing has eased up a bit. Plus, services
are benefiting from an increase in private consumption, which has been growing at a good pace.

“The strength of the service sector is evident in companies’ ability to raise prices at a similar robust pace as before. That
doesn’t necessarily mean their profit margins are improving, as costs are still rising significantly due to high wage
agreements and other factors. But the fact that they can maintain their pricing power is a sign of resilience.

“Overall, the economy seems to be back on a growth path, at least for the first two months of the year. According to our GDP
Nowcast, which takes the PMI and other data into account, the drag on growth from manufacturing is getting smaller, and
the growth in services is making up for it. Looking ahead, much of the mood will depend on the capability of the new to be
elected government to signal stability and to take bold measures.”

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• Prior 48.2
• Manufacturing PMI 45.5 vs 45.5 expected
• Prior 45.0
• Composite PMI 44.5 vs 48.0 expected
• Prior 47.6

That’s a real awful set of readings with both the services and composite ones being 17-month lows. It reaffirms that the French economy is sliding deeper into contraction territory at the start of this year as weaker demand conditions continue to be the main drag. Meanwhile, employment conditions also suffered as firms reduced workforce numbers by the most since August 2020. Ouch. HCOB notes that:

“Recession with no end in sight. The HCOB French Flash PMI in February failed to provide any relief, with the headline
Composite Output Index plunging over three points to signal its deepest contraction since September 2023. Surprisingly, it
was the services sector, not the manufacturing sector, that caused the latest decline. This fresh setback for the French
economy perhaps comes as a surprise, given the recent allaying of some political uncertainty in the country. Prime Minister
Francois Bayrou managed to pass the 2025 budget by bypassing Parliament with Article 49.3 and survived a no-confidence
vote. However, the economy seems to view Bayrou’s achievement more as a temporary success rather than long-term
stability, as he still lacks a majority in Parliament and could be ousted by the opposition at any time.

“The services sector is a cause for concern, with a significant downturn in activity compared to the previous month. The
HCOB data presents a very weakened picture of the sector at the start of 2025. Order intakes are shrinking at a rapid pace
and future activity expectations remain well below the historical average. In this situation, new hires are hardly possible, and
we saw substantial layoffs in February.

“The manufacturing sector showed small signs of underlying improvement. The HCOB Flash PMI for manufacturing rose
slightly in January but remains in contraction territory. Demand remains weak, although new orders shrank more slowly than
in the previous month. Overall, there is little hope to be drawn from the slightly improved index figures, as the outlook for
output is still viewed pessimistically and layoffs are commonplace. The sector’s woes are exacerbated by faster increases in
input prices.”

This article was written by Justin Low at www.forexlive.com.

• Eurostoxx +0.1%
• Germany DAX -0.1%
• France CAC 40 +0.2%
• UK FTSE flat
• Spain IBEX -0.1%
• Italy FTSE MIB +0.3%

Generally speaking, the winning streak is under threat after the declines in the past two days. The DAX and CAC 40 are still down on the week but the IBEX is flattish and FTSE MIB sitting higher. The IBEX itself is looking for nine straight weeks of gains while the FTSE MIB is searching for a sixth weekly gain in seven. For now though, the overall mood is more tentative for today. US futures are also flat as all eyes are on PMI data to see what that has to offer to the equation.

This article was written by Justin Low at www.forexlive.com.

• Prior 95
• Manufacturing confidence 97
• Prior 95; revised to 96
• Services confidence 98
• Prior 96

The French business climate improved slightly in February, owing to a bounce in both industry and services morale. However, employment conditions worsened with the indicator there falling to 94 from 98 previously. That’s the lowest reading since April 2021 and if you scrap out the Covid pandemic as an outlier, it’s the weakest reading since March 2015. That is something to be wary about when looking at the future reports in the months ahead.

This article was written by Justin Low at www.forexlive.com.

The call is said to “communicate issues in the economic field” between both countries. There’s no details on when that call will take place but it is something that we might expect some headlines from either over the weekend or next week perhaps.

This article was written by Justin Low at www.forexlive.com.

• Prior -0.3%; revised to -0.6%
• Retail sales +1.0% vs +0.6% y/y expected
• Prior +3.6%; revised to +2.8%
• Retail sales ex autos, fuel +2.1% vs +0.9% m/m expected
• Prior -0.6%; revised to -0.9%
• Retail sales ex autos, fuel +1.2% vs +0.5% y/y expected
• Prior +2.9%; revised to +2.1%

As seen above, the jump on the month was largely driven by food store sales (+5.6%) – which was the largest rise since March 2020. That said, it follows from four straight months of declines previously. So, that puts into perspective the backdrop coming into this month’s report as sales were poor during the final quarter of last year.

Non-store retailers’ sales volumes also increased modestly with retailers in this sector noting that post-Christmas sales are remaining strong. Besides that, all other sectors reported declines on the month with department stores’ sales coming in flat.

As a whole, UK retail sales volumes are still down 1.3% compared with the pre-pandemic level of February 2020.

This article was written by Justin Low at www.forexlive.com.

Global Markets:

•  Asian Stock Markets : Nikkei up 0.24%, Shanghai Composite up 0.73%, Hang Seng up 3.13% ASX down 0.32%
• Commodities : Gold at $2940.35 (-0.53%), Silver at $33.35 (-0.8%), Brent Oil at $76.8 (-0.2%), WTI Oil at $72.8 (-0.3%)
• Rates : US 10-year yield at 4.486, UK 10-year yield at 4.6085, Germany 10-year yield at 2.5335

News & Data:

• (USD) Unemployment Claims 219K  to 215K expected

Markets Update:

Hong Kong shares reached a three-year high on Friday, leading regional gains as investors assessed Japan’s inflation data alongside U.S. tariff concerns. The Hang Seng Index surged 2.95%, its highest since February 2022, while the Hang Seng Tech Index climbed 4.67%. Alibaba shares jumped 11% after reporting strong December quarter profits, driven by growth in its Cloud Intelligence and e-commerce divisions. Meanwhile, China’s CSI 300 gained 0.4%.

In Japan, the Nikkei 225 fell 0.43%, and the Topix slipped 0.33%. The country’s inflation rate rose to 4% in January, marking its highest level since early 2023. Core inflation, which excludes fresh food prices, climbed to 3.2%, exceeding Reuters’ forecast of 3.1%. South Korea’s Kospi dropped 0.42%, while the small-cap Kosdaq inched up 0.43%. Australia’s S&P/ASX 200 rose 0.59%.

Investors are closely monitoring the Japanese yen, which strengthened to a two-month high of 150.52 per U.S. dollar on Thursday amid expectations of further Bank of Japan rate hikes. The currency is now trading at 150.22 per dollar, reflecting continued market uncertainty.

On Wall Street, U.S. stocks pulled back after the S&P 500 hit record highs for two straight days. Investors sold off shares following a weak forecast from Walmart, raising concerns about the economic outlook. The Dow Jones Industrial Average dropped 450.94 points (-1.01%) to 44,176.65, while the S&P 500 fell 0.43% to 6,117.52, and the Nasdaq Composite declined 0.47% to 19,962.36.

Upcoming Events: 

• 01:30 PM GMT – CAD Core Retail Sales m/m
• 01:30 PM GMT – CAD Retail Sales m/m
• 02:45 PM GMT – USD Flash Manufacturing PMI
• 02:45 PM GMT – USD Flash Services PMI

The post Friday 21st February 2025: Asian Markets Rally as Hong Kong Hits Three-Year High; U.S. Stocks Retreat first appeared on IC Markets | Official Blog.

IC Markets Europe Fundamental Forecast | 21 February 2025

What happened in the Asia session?

The flash Composite PMI report for Australia showed the private sector expanding at the fastest pace since August 2024, driven mainly by accelerating services activity growth. Although overall new business also rose at a quicker rate, export orders remained in contraction. The better-than-expected PMI result should continue to keep the Aussie elevated on Friday – this currency pair was floating around 0.6400 by midday in Asia.

What does it mean for the Europe & US sessions?

Consumer spending in the U.K. has been poor for most parts of 2024 as sales declined in four out of the last seven months, even in December despite stronger Christmas sales. Consumer spending fell 0.3% MoM in December but it is now expected to rebound 0.4% in January. Combined with the flash Composite PMI report that is expected to show expansion, albeit at a slower pace, the pound could be supported should the above macroeconomic data exceed market expectations.

After contracting in October and December, Composite PMI activity in the Euro Area rebounded into expansion in January with a reading of 50.2. PMI activity is now expected to mark a second consecutive month of expansion with a reading of 50.5 in February, based on the flash estimates. Should PMI activity come in stronger than anticipated, the Euro could receive a strong tailwind during the European trading hours.

Consumer spending in Canada has been steady in the second half of 2024 and it surged in December due to the traditional holiday shopping season. Sales jumped 1.6% MoM to mark the biggest gains since May 2022, based on preliminary estimates. The final estimate points to a slightly lower figure of 1.5% but it would still register a huge monthly gain for retail sales. The Loonie could receive a near-term boost later today, a result that would weigh on USD/CAD.

The Dollar Index (DXY)

Key news events today

S&P Global Composite PMI (2:45 pm GMT)

What can we expect from DXY today?

The flash Composite PMI report for the U.S. is expected to show another successive month of expansion driven primarily by the services sector. However, demand for the dollar has waned significantly as the backdrop of ongoing trade tariffs and potential de-escalation in the Russia-Ukraine war continue to overshadow key macroeconomic data for now. The DXY is likely to remain under pressure on the final trading day as it is all but certain to notch a third consecutive week of decline.

Central Bank Notes:

• The Board of Governors of the Federal Reserve System voted unanimously to maintain the Federal Funds Rate in a target range of 4.25 to 4.50% on 29 January.
• The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run and judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.
• Recent indicators suggest that economic activity has continued to expand at a solid pace while the unemployment rate has stabilized at a low level in recent months, and labour market conditions remain solid. However, inflation remains somewhat elevated.
• December’s Summary of Economic Projections (SEP) now indicates just two rate cuts in 2025 totalling 50 bps, compared to the full percentage point of reductions projected in the previous quarter.
• GDP growth forecasts were revised upward for 2024 (2.5% vs. 2% in the September projection) and 2025 (2.1% vs. 2%), while remaining steady at 2% for 2026. Similarly, PCE inflation projections have been adjusted higher for 2024 (2.4% vs. 2.3%), 2025 (2.5% vs. 2.1%), and 2026 (2.1% vs. 2%).
• In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.
• The Committee will roll over at auction the amount of principal payments from the Federal Reserve’s holdings of Treasury securities maturing in each calendar month that exceeds a cap of $25 billion per month and redeem Treasury coupon securities up to this monthly cap and Treasury bills to the extent that coupon principal payments are less than the monthly cap.
• In addition, the Committee will reinvest the amount of principal payments from the Federal Reserve’s holdings of agency debt and agency mortgage-backed securities (MBS) received in each calendar month that exceeds a cap of $35 billion per month into Treasury securities to roughly match the maturity composition of Treasury securities outstanding.
• The next meeting runs from 18 to 19 March 2025.

Next 24 Hours Bias

Medium Bearish

Gold (XAU)

Key news events today

No major news events.

What can we expect from Gold today?

The backdrop of ongoing trade tariffs, economic reforms in the U.S. and global geo-political tensions have kept demand for this precious metal elevated. Spot prices for gold recorded its latest high on Thursday as it eclipsed $2,954.94/oz and it will no doubt mark its eighth successive week of higher gains.

Next 24 Hours Bias

Medium Bullish

The Australian Dollar (AUD)

Key news events today

S&P Global Composite PMI (10:00 pm GMT 20th February)

What can we expect from AUD today?

The flash Composite PMI report for Australia showed the private sector expanding at the fastest pace since August 2024, driven mainly by accelerating services activity growth. Although overall new business also rose at a quicker rate, export orders remained in contraction. The better-than-expected PMI result should continue to keep the Aussie elevated on Friday – this currency pair was floating around 0.6400 by midday in Asia.

Central Bank Notes:

• The RBA reduced the cash rate by 25 basis points to bring it down to 4.10% on 18 January, marking the first rate cut since November 2020.
• Financial conditions are restrictive, which is weighing on demand and is helping to bring down underlying inflation; growth in private demand has been subdued.
• Underlying inflation has moderated over the past three quarters with trimmed mean inflation easing to 3.2% over 2024 and it is expected to reach the 2–3% target range in early 2025, which is sooner than expected at the time of the November Statement.
• The unemployment rate declined a little in late 2024 to 4% with much of the strength in the labour market underpinned by strong employment growth, which has also bolstered household incomes.
• The announcement of tariffs between the United States and other major economies poses challenges to the global outlook but the scale and incidence of the tariffs and their effects remain highly uncertain – which may itself delay some investment until the outlook becomes clearer.
• Economic activity strengthened in China but growth there is still facing structural headwinds while domestic economic growth is forecast to pick up and the labour market is forecast to remain tight.
• If the cash rate follows the market path, underlying inflation is projected to be a little above 2.5% over most of the forecast period. The anticipated recovery of GDP growth and lingering tightness in labour market conditions are expected to sustain some upward pressure on inflation.
• Sustainably returning inflation to target within a reasonable timeframe remains the Board’s highest priority. This is consistent with the RBA’s mandate for price stability and full employment.
• The Board will continue to rely upon the data and the evolving assessment of risks to guide its decisions, paying close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market.
• The next meeting is on 1 April 2025.

Next 24 Hours Bias

Medium Bullish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

Despite making a jumbo 50-basis point (bps) reduction in the Official Cash Rate on Wednesday, the Kiwi strengthened as the RBNZ signalled less aggressive rate cuts for 2025. This currency pair has climbed 1.3% since the monetary policy announcement and it remained elevated at around 0.5760 as Asian markets came online on Friday.

Central Bank Notes:

• The Monetary Policy Committee (MPC) agreed to reduce the Official Cash Rate (OCR) by 50 basis points bringing it down to 3.75% on 19 February, marking the fourth consecutive rate cut.
• The Committee assessed that annual consumer price inflation remains near the midpoint of the MPC’s 1 to 3% target band; inflation expectations are at target and core inflation continues to fall towards the target mid-point.
• Economic activity in New Zealand remains subdued and with spare productive capacity, domestic inflation pressures continue to ease. Price and wage-setting behaviours are adapting to a low-inflation environment while the price of imports has fallen, also contributing to lower headline inflation.
• Economic growth is expected to recover during 2025 as lower interest rates will encourage spending, although elevated global economic uncertainty is expected to weigh on business investment decisions. Higher prices for some key commodities and a lower exchange rate will increase export revenues and employment growth is expected to pick up in the second half of the year as the domestic economy recovers.
• Global economic growth is expected to remain subdued in the near term as geopolitics, including uncertainty about trade barriers, is likely to weaken global growth. Global economic activity is also likely to remain fragile over the medium term given increasing geoeconomic fragmentation.
• Consumer price inflation is expected to be volatile in the near term, due to a lower exchange rate and higher petrol prices. Nevertheless, the Committee is well placed to maintain price stability over the medium term.
• The economic outlook remains consistent with inflation remaining in the band over the medium term, giving the Committee confidence to continue lowering the OCR. If economic conditions continue to evolve as projected, the Committee has scope to lower the OCR further through 2025.
• The next meeting is on 9 April 2025.

Next 24 Hours Bias

Medium Bullish

The Japanese Yen (JPY)

Key news events today

S&P Global Composite PMI (12:30 am GMT)

What can we expect from JPY today?

PMI activity in Japan expanded at the strongest rate in five months based on the flash estimates for February. The Composite index rose to 51.6, this modest improvement was driven by sustained growth in services activity, while manufacturing output declined at a softer rate. Coupled with speculation that the Bank of Japan (BoJ) will hike interest rates sooner rather than later, the yen has strengthened significantly causing USD/JPY to tumble under 150 overnight. Downward pressures remain for this currency pair and it is likely to slide lower as the day progresses.

Central Bank Notes:

• The Policy Board of the Bank of Japan decided on 24 January, by an 8-1 majority vote, to set the following guidelines for money market operations for the inter-meeting period:
  1. The Bank will encourage the uncollateralized overnight call rate to remain at around 0.5%.
  2. The Bank will embark on a plan to reduce the amount of its monthly outright purchases of JGBs so that it will be about 3 trillion yen in January-March 2026; the amount will be cut down by about 400 billion yen each calendar quarter in principle.
• Japan’s economy has recovered moderately, although some weakness has been seen in part. Exports and industrial production have been more or less flat while corporate profits have been on an improving trend and business sentiment has stayed at a favourable level.
• The employment and income situation has improved moderately while private consumption has been on a moderately increasing trend despite the impact of price rises and other factors.
• On the price front, the year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) has been at around 3% recently, as services prices have continued to rise moderately, reflecting factors such as wage increases, although the effects of a pass-through to consumer prices of cost increases led by the past rise in import prices have waned.
• Inflation expectations have risen moderately while underlying CPI inflation has been increasing gradually toward the price stability target of 2%. With wages continuing to rise, there has been an increase in moves to reflect higher costs, such as increased personnel expenses and distribution costs, in selling prices.
• Japan’s economy is likely to keep growing at a pace above its potential growth rate, with overseas economies continuing to grow moderately and as a virtuous cycle from income to spending gradually intensifies against the background of factors such as accommodative financial conditions.
• The next meeting is on 19 March 2025.

Next 24 Hours Bias

Medium Bearish

The Euro (EUR)

Key news events today

S&P Global Composite PMI (9:00 am GMT)

What can we expect from EUR today?

After contracting in October and December, Composite PMI activity in the Euro Area rebounded into expansion in January with a reading of 50.2. PMI activity is now expected to mark a second consecutive month of expansion with a reading of 50.5 in February, based on the flash estimates. Should PMI activity come in stronger than anticipated, the Euro could receive a strong tailwind during the European trading hours.

Central Bank Notes:

• The Governing Council reduced the three key ECB interest rates by 25 basis points on 30 January to mark the fourth successive rate cut.
• Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be decreased to 2.90%, 3.15% and 2.75% respectively.
• The disinflation process is well on track and inflation is set to return to the Governing Council’s 2% medium-term target in the course of this year. Most measures of underlying inflation suggest that inflation will settle at around the target on a sustained basis.
• Staff see headline inflation averaging 2.4% in 2024, 2.1% in 2025, 1.9% in 2026 and 2.1% in 2027 when the expanded EU Emissions Trading System becomes operational. For inflation excluding energy and food, staff project an average of 2.9% in 2024, 2.3% in 2025 and 1.9% in both 2026 and 2027.
• Staff now expect a slower economic recovery than in the September projections. Although growth picked up in the third quarter of this year, survey indicators suggest it has slowed in the current quarter – the economy is expected to grow by 0.7% in 2024, 1.1% in 2025, 1.4% in 2026 and 1.3% in 2027
• The asset purchase programme (APP) and pandemic emergency purchase programme (PEPP) portfolios are declining at a measured and predictable pace, as the Eurosystem no longer reinvests the principal payments from maturing securities.
• The Governing Council stands ready to adjust all of its instruments within its mandate to ensure that inflation stabilises sustainably at its 2% target over the medium term and to preserve the smooth functioning of monetary policy transmission.
• The next meeting is on 6 March 2025.

Next 24 Hours Bias

Weak Bullish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

The franc saw strong inflows on Thursday as USD/CHF fell over 0.6% to hit a low of 0.8975. However, this currency pair stabilized on Friday around this level to rebound and looks set to climb above the threshold of 0.9000 once more.

Central Bank Notes:

• The SNB eased monetary policy by lowering its key policy rate by 50 basis points, going from 1.00% to 0.50% on 12 December, marking the fourth consecutive reduction.
• Underlying inflationary pressure has decreased again this quarter.
• Inflation in the period since the last monetary policy assessment has again been lower than expected as it decreased from 1.1% in August to 0.7% in November; both goods and services contributed to this decline.
• In the shorter term, the new conditional inflation forecast is below that of September: 1.1% for 2024, 0.3% for 2025 and 0.8% for 2026, based on the assumption that the SNB policy rate is 0.5% over the entire forecast horizon.
• GDP growth in Switzerland was only modest in the third quarter of 2024 with growth in the services sector again somewhat stronger, while value added in manufacturing declined.
• There was a further slight increase in unemployment, and employment growth was subdued while the utilisation of overall production capacity was
• normal.
• The SNB anticipates GDP growth of around 1% this year while currently expecting growth of between 1.0% and 1.5% for 2025.
• The SNB will continue to monitor the situation closely and will adjust its monetary policy if necessary to ensure inflation remains within the range consistent with price stability over the medium term.
• The next meeting is on 20 March 2025.

Next 24 Hours Bias

Weak Bullish

The Pound (GBP)

Key news events today

Retail Sales (7:00 am GMT)

S&P Global Composite PMI (9:30 am GMT)

What can we expect from GBP today?

Consumer spending in the U.K. has been poor for most parts of 2024 as sales declined in four out of the last seven months, even in December despite stronger Christmas sales. Consumer spending fell 0.3% MoM in December but it is now expected to rebound 0.4% in January. Combined with the flash Composite PMI report that is expected to show expansion, albeit at a slower pace, the pound could be supported should the above macroeconomic data exceed market expectations.

Central Bank Notes:

• The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 7 to 2 to reduce the Bank Rate by 25 basis points (bps) to bring it down to 4.50% on 6 February 2025, while two members preferred to reduce it by 50 bps.
• The MPC also voted unanimously to reduce the stock of UK government bond purchases held for monetary policy purposes and financed by the issuance of central bank reserves, by £100B over the next 12 months to a total of £558B, starting in October 2024. On 18 December 2024, the stock of UK government bonds held for monetary policy purposes was £655B.
• CPI inflation was 2.5% in 2024 Q4 as domestic inflationary pressures moderated but remained somewhat elevated while some indicators eased more slowly than expected. Higher global energy costs and regulated price changes are expected to push up headline CPI inflation to 3.7% in 2025 Q3, even as underlying domestic inflationary pressures are expected to wane further.
• While CPI inflation is expected to fall back to around the 2% target thereafter, the Committee will pay close attention to any consequent signs of more lasting inflationary pressures.
• GDP growth has been weaker than expected at the time of the November Monetary Policy Report, and indicators of business and consumer confidence have declined – GDP growth is expected to pick up from the middle of this year.
• The labour market has continued to ease and is judged to be broadly in balance. Productivity growth has been weaker than previously estimated, and the Committee judges that growth in the supply capacity of the economy has weakened.
• Based on the Committee’s evolving view of the medium-term outlook for inflation, a gradual and careful approach to the further withdrawal of monetary policy restraint is appropriate and it will continue to monitor closely the risks of inflation persistence and what the evolving evidence may reveal about the balance between aggregate supply and demand in the economy.
• Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further and the Committee will decide the appropriate degree of monetary policy restrictiveness at each meeting.
• The next meeting is on 8 May 2025.

Next 24 Hours Bias

Weak Bullish

The Canadian Dollar (CAD)

Key news events today

Retail Sales (1:30 pm GMT)

What can we expect from CAD today?

Consumer spending in Canada has been steady in the second half of 2024 and it surged in December due to the traditional holiday shopping season. Sales jumped 1.6% MoM to mark the biggest gains since May 2022, based on preliminary estimates. The final estimate points to a slightly lower figure of 1.5% but it would still register a huge monthly gain for retail sales. The Loonie could receive a near-term boost later today, a result that would weigh on USD/CAD.

Central Bank Notes:

• The Bank of Canada reduced its target for the overnight rate by 25 basis points bringing it down to 3% on 29 January; this marked the sixth consecutive meeting where rates were reduced.
• The bank announced its plan to complete the normalization of its balance sheet, ending quantitative tightening, and will restart asset purchases in early March, beginning gradually so that its balance sheet stabilizes and then grows modestly, in line with growth in the economy.
• Past cuts to interest rates have started to boost the economy and the recent strengthening in both consumption and housing activity is expected to continue. However, business investment remains weak while the outlook for exports is being supported by new export capacity for oil and gas.
• The Bank forecasts GDP growth will strengthen in 2025 and now projects GDP will grow by 1.8% in both 2025 and 2026, somewhat higher than potential growth.
• The labour market remains soft, with the unemployment rate at 6.7% in December. Job growth has strengthened in recent months, after lagging growth in the labour force for more than a year. Wage pressures, which have proven sticky, are showing some signs of easing.
• CPI inflation remains close to 2%, with some volatility due to the temporary suspension of the GST/HST on some consumer products. Shelter price inflation is still elevated but it is easing gradually, as expected
• A broad range of indicators, including surveys of inflation expectations and the distribution of price changes among components of the CPI, suggests that underlying inflation is close to 2% with forecasts that CPI inflation will be around the 2% target over the next two years.
• With inflation around 2%, the economy in excess supply, and recent indicators tilted towards softer growth than projected, the Governing Council decided to reduce the policy rate a further 25 basis points to support growth and keep inflation close to the middle of the 1-3% target range.
• The cumulative reduction in the policy rate since last June is substantial as lower interest rates are boosting household spending and the economy is expected to strengthen gradually and inflation to stay close to target. However, if broad-based and significant tariffs were imposed, the resilience of Canada’s economy would be tested.
• The Bank is committed to maintaining price stability for Canadians by keeping inflation close to the 2% target.
• The next meeting is on 12 March 2025.

Next 24 Hours Bias

Weak Bullish

Oil

Key news events today

No major news events.

What can we expect from Oil today?

Despite the EIA crude oil inventories increasing higher than forecasts for the fourth week in a row as seen in the overnight report, crude oil rose for the third successive day as disruptions to oil supply in Russia and Ukraine as a result of attacks on pipeline infrastructure and production facilities kept prices elevated. WTI oil has climbed almost 3% this week and it looks set to break above the $73 mark on the final trading day of the week.

Next 24 Hours Bias

Medium Bullish

The post IC Markets Europe Fundamental Forecast | 21 February 2025 first appeared on IC Markets | Official Blog.

The dollar fell in trading yesterday but the major currencies bloc is not showing much change so far today outside of the Japanese yen that is. USD/JPY continues to run rather volatile, now climbing back up to above 150.00 levels after the drop since US trading yesterday. The low earlier touched 149.27, just a few pips shy of the 50.0 Fib retracement level of the swing higher since September at 149.22.

All in all, the greenback remains in a vulnerable spot as we approach the closing stages on the week. That especially with EUR/USD running up against key resistance at 1.0500. That will be one to watch in the sessions ahead. The bad news for the dollar is that the fall yesterday comes despite sagging risk sentiment. It’s never a good look when that happens.

For today, PMI data will be the key economic data releases to watch. That will apply to both Europe and the US later. Any major surprises there could trigger some decent moves in the euro and/or the dollar. So, do keep an eye out for that.

0700 GMT – UK January retail sales data0745 GMT – France February business confidence0815 GMT – France February flash manufacturing, services, composite PMI0830 GMT – Germany February flash manufacturing, services, composite PMI0900 GMT – Eurozone February flash manufacturing, services, composite PMI0930 GMT – UK February flash manufacturing, services, composite PMI

That’s all for the session ahead. I wish you all the best of days to come and good luck with your trading! Stay safe out there.

This article was written by Justin Low at www.forexlive.com.

• BOJ Ueda says policy still accommodative, will adjust if underlying prices rise
• OPEC+ is expected to once again postpone it production hike
• UK asset manager ABRDN in talks with China Citic to form Joint Venture
• BoJUeda says hike to 50bp interest rates will boost interest payments on reserves 1tln yen
• Japan Prime Minister Ishiba has strong concerns that rising yields may harm finances
• BOJ Governor Ueda warns loss of mkt confidence in Japan fiscal could drive JGB yields up
• USD/JPY volatility persists – it rose around 150 points from its earlier session low
• More on Japan’s finance minister warning of fiscal strain as bond yields hit 15-year high
• Japan’s Core Inflation Hits 19-Month High, Strengthening Expectations for BOJ Rate Hikes
• More from BOJ’s Ueda – Ready to respond to abnormal market moves
• Bank of Japan Governor Ueda sees the bright side of higher interest rates
• RBNZ Chief Economist Conway – OCR forecasts indicate another 75bp easing
• PBOC sets USD/ CNY reference rate for today at 7.1696 (vs. estimate at 7.2433)
• Japanese Industry and Trade Minister Muto will head to the US to talk tariffs
• Japan Jibun February preliminary manufacturing PMI 48.9 (prior 48.7)
• Chinese financial media says PBOC LPRs have room to fall further
• Japan finance minister Kato – higher long term rates can pressure Japan’s fiscal situation
• RBA Bullock says did not want to be late to easing
• Japan January Core CPI 3.2% y/y vs. 3.1% expected
• Fed’s Kugler says watching labour market layoffs like a hawk
• Reserve Bank of Australia Governor Bullock says might be more rate cuts, caution required
• Ukraine President Zelenskyy says meeting with US’ General Kellogg ‘restores hope’
• Fed’s Kugler says will have to wait to assess the inflation impact of tariffs
• RBA Gov Bullock says the Bank aiming for the mid-point of the 2-3% inflation target band
• RBA Gov Bullock wary that cutting rates too quickly could lead to inflation above midpoint
• Pimco cautious on Australia semi-govmt debt, concerns mount about states fiscal health
• FT front page headline says US opposes language on ‘Russian aggression’ in Ukraine
• Fed’s Kugler says she thinks the Fed should not cut interest rates again for some time
• Forexlive Americas FX news wrap 20 Feb. The USD moves lower. USDJPY falls to new 2025 low.
• Australian Preliminary Manufacturing PMI for February 50.6 (prior 50.2)
• Fed’s Kugler says Fed Funds rate is moderately restrictive
• New Zealand January trade balance a deficit of 486bn NZD (prior 94mn surplus)
• ICYMI former BOJ Sakurai hawkish comments: Could be a May hike, sees 1.5% by end FY 2026
• Trade ideas thread – Friday, 21 February, insightful charts, technical analysis, ideas

USD/JPY extended its decline leading into Japan’s inflation data release today, but in a surprising turn, the pair rebounded sharply despite figures that reinforced expectations of continued Bank of Japan (BOJ) rate hikes.

The inflation data showed:

• Core inflation (excluding fresh food): 3.2% y/y, a 19-month high.
• Core-core inflation (excluding food and energy): 2.5% y/y.
• Headline inflation: 4.0% y/y.

On the surface, this data supported the case for the BOJ to stay on its tightening path. However, after initially sliding, USD/JPY found a bottom and began to climb—a move that initially looked like a classic “buy the fact” reaction (a sharp sell-off ahead of the data, followed by a rebound once it was confirmed). But instead of stabilizing, the rally kept extending.

As this was unfolding, Japanese government bond (JGB) yields surged. The 10-year benchmark yield hit 1.455%, its highest level since 2009, while the 2-year yield climbed to its highest level since October 2008. These moves triggered official pushback, with policymakers attempting to talk yields down:

• Finance Minister Katsunobu Kato warned that rising bond yields could strain Japan’s finances due to increased debt-servicing costs.
• Prime Minister Shigeru Ishiba echoed similar concerns about the burden of higher yields.
• BOJ Governor Kazuo Ueda signaled potential bond market intervention, stating:
  “We will purchase government bonds nimbly to foster the stable formation of yields in exceptional cases where long-term yields rise sharply.”

Concerns over Japan’s rising debt burden fuelled yen weakness, sending USD/JPY surging from just under 149.30 to above 150.70 at its peak. Ueda’s comments on intervention helped cap JGB yields, which edged lower afterward, allowing USD/JPY to pull back slightly to around 150.20 as of the latest update.

If an Asia market Wrap has a “Key Takeaway” today’s is that despite strong inflation data pointing toward further BOJ rate hikes, the combination of rising bond yields and government intervention threats shifted the market’s focus. Instead of reinforcing yen strength, concerns over Japan’s fiscal strain and potential BOJ bond-buying led to renewed yen selling, fueling a sharp USD/JPY rally.

***

While Japan’s bond market drama dominated the session, there were also remarks from Federal Reserve Governor Adriana Kugler and Reserve Bank of Australia (RBA) Governor Michelle Bullock, both striking a cautious tone on monetary policy.

• Kugler reinforced the Fed’s “wait and see” stance, emphasizing the need to assess factors such as the impact of tariffs and labor market conditions before making further policy decisions.
• Meanwhile, Bullock provided no clear signals on the timing of potential rate cuts in Australia, if any, maintaining a measured outlook.

This article was written by Eamonn Sheridan at www.forexlive.com.

DXY (US Dollar Index):

Potential Direction: Bearish
Overall momentum of the chart: Bearish

Price could potentially make a bearish reversal off the pivot and fall toward the 1st support.

Pivot: 106.86

Supporting reasons: Identified as a pullback resistance, indicating a potential area where selling pressures could intensify.

1st support: 106.34
Supporting reasons: Identified as a support that aligns with the 127.2% Fibonacci extension, indicating a potential level where price could find support once more.

1st resistance: 107.40
Supporting reasons: Identified as an overlap resistance, indicating a potential area that could halt any further upward movement.

EUR/USD:

Potential Direction: Bullish

Overall momentum of the chart: Bullish

Price could potentially make a bullish bounce off the pivot and rise toward the 1st resistance.

Pivot: 1.0455

Supporting reasons: Identified as a pullback support, indicating a potential area where buying interests could pick up to stage a rebound. 

1st support: 1.0389

Supporting reasons: Identified as a pullback support, indicating a potential level where price could find support once again.

1st resistance: 1.0535
Supporting reasons:  Identified as an overlap resistance that aligns with the 127.2% Fibonacci extension, indicating a potential area that could halt any further upward movement.

EUR/JPY:

Potential Direction: Bullish
Overall momentum of the chart: Bearish

Price could potentially make a bullish continuation toward the 1st resistance.

Pivot: 157.10

Supporting reasons: Identified as a pullback support that aligns close to the 78.6% Fibonacci retracement, indicating a potential area where buying interests could pick up to stage a minor rebound.

1st support: 155.58

Supporting reasons: Identified as a support, indicating a potential level where the price could find support once more.

1st resistance: 159.45
Supporting reasons: Identified as a pullback resistance that aligns with the 61.8% Fibonacci retracement, indicating a potential area that could halt any further upward movement.

EUR/GBP:

Potential Direction: Bullish

Overall momentum of the chart: Bearish

Price has made a bullish bounce off the pivot and could potentially rise toward the 1st resistance.

Pivot: 0.8272

Supporting reasons: Identified as an overlap support that aligns with the 127.2% Fibonacci extension, indicating a potential area where buying interests could pick up to stage a minor rebound.

1st support: 0.8224

Supporting reasons: Identified as a multi-swing-low support, indicating a potential level where the price could find support once again.

1st resistance: 0.8319
Supporting reasons: Identified as a pullback resistance that aligns with the 61.8% Fibonacci retracement,  indicating a potential area that could halt any further upward movement.

GBP/USD:

Potential Direction: Bullish

Overall momentum of the chart: Bullish

Price could potentially make a bullish bounce off the pivot and rise toward the 1st resistance.

Pivot: 1.2516

Supporting reasons: Identified as a pullback support that aligns with the 38.2% Fibonacci retracement, indicating a potential area where buying interests could pick up to stage a rebound.

1st support: 1.2365

Supporting reasons: Identified as an overlap support, indicating a potential level where the price could stabilize once more.

1st resistance: 1.2721
Supporting reasons: Identified as an overlap resistance, indicating a potential area that could halt any further upward movement.

GBP/JPY:

Potential Direction: Bullish
Overall momentum of the chart: Bearish

Price could potentially make a bullish continuation toward the 1st resistance.

Pivot: 189.21

Supporting reasons: Identified as a pullback support that aligns with the 61.8% Fibonacci retracement, indicating a potential area where buying interests could pick up to stage a rebound.

1st support: 187.10
Supporting reasons: Identified as an overlap support that aligns with the 61.8% Fibonacci retracement, indicating a potential level where price could find support once again.

1st resistance: 192.00
Supporting reasons: Identified as an overlap resistance, indicating a potential area that could halt any further upward movement.

USD/CHF:

Potential Direction: Bullish

Overall momentum of the chart: Bearish

Price could potentially make a bullish bounce off the pivot and rise toward the 1st resistance.

Pivot: 0.8974

Supporting reasons: Identified as an overlap support, indicating a potential level where buying interests could pick up to stage a rebound

1st support: 0.8882
Supporting reasons: Identified as a pullback support that aligns close to the 100% Fibonacci projection, indicating a potential level where the price could find support once again.

1st resistance: 0.9058
Supporting reasons: Identified as an overlap resistance, indicating a potential area that could halt any further upward movement.

USD/JPY:

Potential Direction: Bullish

Overall momentum of the chart: Bearish

Price could potentially make a bullish continuation toward the 1st resistance.

Pivot: 149.65

Supporting reasons: Identified as a swing low support that aligns close to a 127.2% Fibonacci extension, indicating a potential level where buying interests could pick up to stage a rebound.

1st support: 148.64
Supporting reasons: Identified as a swing-low support that aligns close to a 161.8% Fibonacci extension, indicating a potential level where the price could find support once more.

1st resistance: 151.23
Supporting reasons: Identified as a pullback resistance, indicating a potential area that could halt any further upward movement.

USD/CAD:

Potential Direction: Bearish

Overall momentum of the chart: Bearish

Price could potentially make a bearish reversal off the pivot and fall toward the 1st support.

Pivot: 1.4204

Supporting reasons: Identified as a pullback resistance that aligns with a 50% Fibonacci retracement, indicating a potential area where selling pressures could intensify. The presence of a red Ichimoku Cloud adds further significance to the strength of the bearish momentum.

1st support: 1.4099
Supporting reasons: Identified as a swing-low support that aligns with a 161.8% Fibonacci extension, indicating a key level where the price could stabilize once more.

1st resistance: 1.4245
Supporting reasons: Identified as a swing-high resistance, indicating a potential area that could halt any further upward movement. 

AUD/USD:

Potential Direction: Bearish
Overall momentum of the chart: Bullish

Price could potentially make a bearish reversal off the pivot and pull back towards the 1st support.

Pivot: 0.6421

Supporting reasons: Identified as an overlap resistance, indicating a potential area where selling pressures could intensify.

1st support: 0.6377

Supporting reasons: Identified as a pullback support, suggesting a potential area where the price could stabilize once again.

1st resistance: 0.6465
Supporting reasons: Identified as a swing-high resistance that aligns with a 100% Fibonacci projection, indicating a potential area that could halt any further upward movement.

NZD/USD

Potential Direction: Bullish
Overall momentum of the chart: Bullish

Price has made a bullish bounce off the pivot and could potentially rise towards the 1st resistance.

Pivot: 0.5755

Supporting reasons: Identified as an overlap support, indicating a potential level where buying interests could pick up to resume the uptrend.

1st support: 0.5693

Supporting reasons: Identified as an overlap support, suggesting a potential area where the price could stabilize once more.

1st resistance: 0.5809

Supporting reasons: Identified as an overlap resistance, indicating a potential area that could halt any further upward movement.

US30 (DJIA):

Potential Direction: Bearish
Overall momentum of the chart: Neutral

Price could rise towards the pivot and potentially make a bearish reversal off this level to fall towards the 1st support.

Pivot: 44,395.00

Supporting reasons: Identified as a pullback resistance that aligns close to a 61.8% Fibonacci retracement, indicating a potential area where selling pressures could intensify.

1st support: 43,819.01

Supporting reasons: Identified as a multi-swing-low support that aligns close to a 38.2% Fibonacci retracement, indicating a potential level where the price could stabilize once again.

1st resistance: 44,732.90

Supporting reasons: Identified as a swing-high resistance, indicating a potential area that could halt any further upward movement.

DE40 (DAX):

Potential Direction: Bearish
Overall momentum of the chart: Bearish

Price has made a bearish reversal off the pivot and could potentially fall towards the 1st support.

Pivot: 22,554.00

Supporting reasons: Identified as a pullback resistance, indicating a potential area where selling pressures could intensify.

1st support: 21,927.70

Supporting reasons: Identified as a pullback support that aligns close to a 50% Fibonacci retracement, indicating a key level where the price could stabilize once more.

1st resistance: 22,881.50
Supporting reasons: Identified as a multi-swing-high resistance, indicating a potential area that could halt any further upward movement.

US500 (S&P 500): 

Potential Direction: Bullish
Overall momentum of the chart: Neutral

Price could fall towards the pivot and potentially make a bullish bounce off this level to rise towards the 1st resistance.

Pivot: 6,100.37

Supporting reasons: Identified as an overlap support that aligns close to a 38.2% Fibonacci retracement, indicating a potential level where buying interests could pick up to resume the uptrend. The presence of the green Ichimoku Cloud adds further significance to the strength of the bullish momentum.

1st support: 6,005.90

Supporting reasons: Identified as a multi-swing-low support, indicating a potential level where the price could stabilize once again.

1st resistance: 6,190.65

Supporting reasons: Identified as a resistance that aligns with a 100% Fibonacci projection, indicating a potential area that could halt any further upward movement.

BTC/USD (Bitcoin):

Potential Direction: Bearish
Overall momentum of the chart: Neutral

Price could rise towards the pivot and potentially make a bearish reversal off this level to fall towards the 1st support.

Pivot: 98,853.40

Supporting reasons: Identified as a multi-swing-high resistance, indicating a potential level where selling pressures could intensify.

1st support: 92,857.02
Supporting reasons: Identified as a swing-low support, indicating a potential level where the price could stabilize once more.

1st resistance: 101,963.41
Supporting reasons: Identified as a swing-high resistance that aligns close to a confluence of Fibonacci levels i.e. a  61.8% retracement and a 161.8% extension, indicating a potential area that could halt any further upward movement.

ETH/USD (Ethereum):

Potential Direction: Neutral
Overall momentum of the chart: Neutral

Price could potentially fluctuate between the 1st resistance and 1st support.

1st support: 2,472.17
Supporting reasons: Identified as a swing-low support that aligns close to a 50% Fibonacci retracement, indicating a potential level where the price could stabilize once again.

1st resistance: 2,855.60
Supporting reasons: Identified as a multi-swing high resistance that aligns close to a 61.8% Fibonacci retracement, indicating a potential area that could halt any further upward movement.

WTI/USD (Oil):

Potential Direction: Bearish
Overall momentum of the chart: Bearish

Price has made a bearish reversal off the pivot and could potentially fall toward the 1st support.

Pivot: 72.83

Supporting reasons: Identified as a multi-swing-high resistance, indicating a potential area where selling pressures could intensify.

1st support: 70.40
Supporting reasons: Identified as a multi-swing-low support that aligns close to a 78.6% Fibonacci projection, indicating a key level where the price could stabilize once more.

1st resistance: 73.85
Supporting reasons: Identified as a multi-swing-high resistance that aligns close to a 38.2% Fibonacci retracement, indicating a potential area that could halt any further upward movement.

XAU/USD (GOLD):

Potential Direction: Bearish

Overall momentum of the chart: Bullish

Price has made a bearish reversal off the pivot and could potentially fall toward the 1st support.

Pivot: 2,936.87

Supporting reasons: Identified as a multi-swing-high resistance, indicating a potential area where selling pressures could intensify.

1st support: 2,873.72

Supporting reasons: Identified as an overlap support, indicating a potential level where the price could find support once again.

1st resistance: 2,979.04

Supporting reasons: Identified as a resistance that aligns with a 161.8% Fibonacci extension, indicating a potential area that could halt any further upward movement.

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The post Friday 21st February 2025: Technical Outlook and Review first appeared on IC Markets | Official Blog.

IC Markets Asia Fundamental Forecast | 21 February 2025

What happened in the U.S. session?

Unemployment claims in the U.S. have trended higher over the past four weeks which is typically a sign of labour market weakness. Claims hit 219K in the latest report as it exceeded market forecasts of 215K and the 12-week average of 218K. Overlaid with the ongoing dollar weakness, the dollar index (DXY) tumbled over 0.7% overnight as it hit a low of 106.33. The DXY is likely to remain under pressure on the final trading day as it is all but certain to notch a third consecutive week of decline.

What does it mean for the Asia Session?

PMI activity in Japan expanded at the strongest rate in five months based on the flash estimates for February. The Composite index rose to 51.6, this modest improvement was driven by sustained growth in services activity, while manufacturing output declined at a softer rate. Coupled with speculation that the Bank of Japan (BoJ) will hike interest rates sooner rather than later, the yen has strengthened significantly causing USD/JPY to tumble under 150 overnight. Downward pressures remain for this currency pair and it is likely to slide lower as the day progresses.

The Dollar Index (DXY)

Key news events today

S&P Global Composite PMI (2:45 pm GMT)

What can we expect from DXY today?

The flash Composite PMI report for the U.S. is expected to show another successive month of expansion driven primarily by the services sector. However, demand for the dollar has waned significantly as the backdrop of ongoing trade tariffs and potential de-escalation in the Russia-Ukraine war continue to overshadow key macroeconomic data for now. The DXY is likely to remain under pressure on the final trading day as it is all but certain to notch a third consecutive week of decline.

Central Bank Notes:

• The Board of Governors of the Federal Reserve System voted unanimously to maintain the Federal Funds Rate in a target range of 4.25 to 4.50% on 29 January.
• The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run and judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.
• Recent indicators suggest that economic activity has continued to expand at a solid pace while the unemployment rate has stabilized at a low level in recent months, and labour market conditions remain solid. However, inflation remains somewhat elevated.
• December’s Summary of Economic Projections (SEP) now indicates just two rate cuts in 2025 totalling 50 bps, compared to the full percentage point of reductions projected in the previous quarter.
• GDP growth forecasts were revised upward for 2024 (2.5% vs. 2% in the September projection) and 2025 (2.1% vs. 2%), while remaining steady at 2% for 2026. Similarly, PCE inflation projections have been adjusted higher for 2024 (2.4% vs. 2.3%), 2025 (2.5% vs. 2.1%), and 2026 (2.1% vs. 2%).
• In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.
• The Committee will roll over at auction the amount of principal payments from the Federal Reserve’s holdings of Treasury securities maturing in each calendar month that exceeds a cap of $25 billion per month and redeem Treasury coupon securities up to this monthly cap and Treasury bills to the extent that coupon principal payments are less than the monthly cap.
• In addition, the Committee will reinvest the amount of principal payments from the Federal Reserve’s holdings of agency debt and agency mortgage-backed securities (MBS) received in each calendar month that exceeds a cap of $35 billion per month into Treasury securities to roughly match the maturity composition of Treasury securities outstanding.
• The next meeting runs from 18 to 19 March 2025.

Next 24 Hours Bias

Medium Bearish

Gold (XAU)

Key news events today

No major news events.

What can we expect from Gold today?

The backdrop of ongoing trade tariffs, economic reforms in the U.S. and global geo-political tensions have kept demand for this precious metal elevated. Spot prices for gold recorded its latest high on Thursday as it eclipsed $2,954.94/oz and it will no doubt mark its eighth successive week of higher gains.

Next 24 Hours Bias

Medium Bullish

The Australian Dollar (AUD)

Key news events today

S&P Global Composite PMI (10:00 pm GMT 20th February)

What can we expect from AUD today?

The flash Composite PMI report for Australia showed the private sector expanding at the fastest pace since August 2024, driven mainly by accelerating services activity growth. Although overall new business also rose at a quicker rate, export orders remained in contraction. The better-than-expected PMI result should continue to keep the Aussie elevated on Friday – this currency pair was edging higher towards 0.6400 at the beginning of the Asia session.

Central Bank Notes:

• The RBA reduced the cash rate by 25 basis points to bring it down to 4.10% on 18 January, marking the first rate cut since November 2020.
• Financial conditions are restrictive, which is weighing on demand and is helping to bring down underlying inflation; growth in private demand has been subdued.
• Underlying inflation has moderated over the past three quarters with trimmed mean inflation easing to 3.2% over 2024 and it is expected to reach the 2–3% target range in early 2025, which is sooner than expected at the time of the November Statement.
• The unemployment rate declined a little in late 2024 to 4% with much of the strength in the labour market underpinned by strong employment growth, which has also bolstered household incomes.
• The announcement of tariffs between the United States and other major economies poses challenges to the global outlook but the scale and incidence of the tariffs and their effects remain highly uncertain – which may itself delay some investment until the outlook becomes clearer.
• Economic activity strengthened in China but growth there is still facing structural headwinds while domestic economic growth is forecast to pick up and the labour market is forecast to remain tight.
• If the cash rate follows the market path, underlying inflation is projected to be a little above 2.5% over most of the forecast period. The anticipated recovery of GDP growth and lingering tightness in labour market conditions are expected to sustain some upward pressure on inflation.
• Sustainably returning inflation to target within a reasonable timeframe remains the Board’s highest priority. This is consistent with the RBA’s mandate for price stability and full employment.
• The Board will continue to rely upon the data and the evolving assessment of risks to guide its decisions, paying close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market.
• The next meeting is on 1 April 2025.

Next 24 Hours Bias

Medium Bullish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

Despite making a jumbo 50-basis point (bps) reduction in the Official Cash Rate on Wednesday, the Kiwi strengthened as the RBNZ signalled less aggressive rate cuts for 2025. This currency pair has climbed 1.3% since the monetary policy announcement and it remained elevated at around 0.5760 as Asian markets came online on Friday.

Central Bank Notes:

• The Monetary Policy Committee (MPC) agreed to reduce the Official Cash Rate (OCR) by 50 basis points bringing it down to 3.75% on 19 February, marking the fourth consecutive rate cut.
• The Committee assessed that annual consumer price inflation remains near the midpoint of the MPC’s 1 to 3% target band; inflation expectations are at target and core inflation continues to fall towards the target mid-point.
• Economic activity in New Zealand remains subdued and with spare productive capacity, domestic inflation pressures continue to ease. Price and wage-setting behaviours are adapting to a low-inflation environment while the price of imports has fallen, also contributing to lower headline inflation.
• Economic growth is expected to recover during 2025 as lower interest rates will encourage spending, although elevated global economic uncertainty is expected to weigh on business investment decisions. Higher prices for some key commodities and a lower exchange rate will increase export revenues and employment growth is expected to pick up in the second half of the year as the domestic economy recovers.
• Global economic growth is expected to remain subdued in the near term as geopolitics, including uncertainty about trade barriers, is likely to weaken global growth. Global economic activity is also likely to remain fragile over the medium term given increasing geoeconomic fragmentation.
• Consumer price inflation is expected to be volatile in the near term, due to a lower exchange rate and higher petrol prices. Nevertheless, the Committee is well placed to maintain price stability over the medium term.
• The economic outlook remains consistent with inflation remaining in the band over the medium term, giving the Committee confidence to continue lowering the OCR. If economic conditions continue to evolve as projected, the Committee has scope to lower the OCR further through 2025.
• The next meeting is on 9 April 2025.

Next 24 Hours Bias

Medium Bullish

The Japanese Yen (JPY)

Key news events today

S&P Global Composite PMI (12:30 am GMT)

What can we expect from JPY today?

PMI activity in Japan expanded at the strongest rate in five months based on the flash estimates for February. The Composite index rose to 51.6, this modest improvement was driven by sustained growth in services activity, while manufacturing output declined at a softer rate. Coupled with speculation that the Bank of Japan (BoJ) will hike interest rates sooner rather than later, the yen has strengthened significantly causing USD/JPY to tumble under 150 overnight. Downward pressures remain for this currency pair and it is likely to slide lower as the day progresses.

Central Bank Notes:

• The Policy Board of the Bank of Japan decided on 24 January, by an 8-1 majority vote, to set the following guidelines for money market operations for the inter-meeting period:
  1. The Bank will encourage the uncollateralized overnight call rate to remain at around 0.5%.
  2. The Bank will embark on a plan to reduce the amount of its monthly outright purchases of JGBs so that it will be about 3 trillion yen in January-March 2026; the amount will be cut down by about 400 billion yen each calendar quarter in principle.
• Japan’s economy has recovered moderately, although some weakness has been seen in part. Exports and industrial production have been more or less flat while corporate profits have been on an improving trend and business sentiment has stayed at a favourable level.
• The employment and income situation has improved moderately while private consumption has been on a moderately increasing trend despite the impact of price rises and other factors.
• On the price front, the year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) has been at around 3% recently, as services prices have continued to rise moderately, reflecting factors such as wage increases, although the effects of a pass-through to consumer prices of cost increases led by the past rise in import prices have waned.
• Inflation expectations have risen moderately while underlying CPI inflation has been increasing gradually toward the price stability target of 2%. With wages continuing to rise, there has been an increase in moves to reflect higher costs, such as increased personnel expenses and distribution costs, in selling prices.
• Japan’s economy is likely to keep growing at a pace above its potential growth rate, with overseas economies continuing to grow moderately and as a virtuous cycle from income to spending gradually intensifies against the background of factors such as accommodative financial conditions.
• The next meeting is on 19 March 2025.

Next 24 Hours Bias

Medium Bearish

The Euro (EUR)

Key news events today

S&P Global Composite PMI (9:00 am GMT)

What can we expect from EUR today?

After contracting in October and December, Composite PMI activity in the Euro Area rebounded into expansion in January with a reading of 50.2. PMI activity is now expected to mark a second consecutive month of expansion with a reading of 50.5 in February, based on the flash estimates. Should PMI activity come in stronger than anticipated, the Euro could receive a strong tailwind during the European trading hours.

Central Bank Notes:

• The Governing Council reduced the three key ECB interest rates by 25 basis points on 30 January to mark the fourth successive rate cut.
• Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be decreased to 2.90%, 3.15% and 2.75% respectively.
• The disinflation process is well on track and inflation is set to return to the Governing Council’s 2% medium-term target in the course of this year. Most measures of underlying inflation suggest that inflation will settle at around the target on a sustained basis.
• Staff see headline inflation averaging 2.4% in 2024, 2.1% in 2025, 1.9% in 2026 and 2.1% in 2027 when the expanded EU Emissions Trading System becomes operational. For inflation excluding energy and food, staff project an average of 2.9% in 2024, 2.3% in 2025 and 1.9% in both 2026 and 2027.
• Staff now expect a slower economic recovery than in the September projections. Although growth picked up in the third quarter of this year, survey indicators suggest it has slowed in the current quarter – the economy is expected to grow by 0.7% in 2024, 1.1% in 2025, 1.4% in 2026 and 1.3% in 2027
• The asset purchase programme (APP) and pandemic emergency purchase programme (PEPP) portfolios are declining at a measured and predictable pace, as the Eurosystem no longer reinvests the principal payments from maturing securities.
• The Governing Council stands ready to adjust all of its instruments within its mandate to ensure that inflation stabilises sustainably at its 2% target over the medium term and to preserve the smooth functioning of monetary policy transmission.
• The next meeting is on 6 March 2025.

Next 24 Hours Bias

Weak Bullish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

The franc saw strong inflows on Thursday as USD/CHF fell over 0.6% to hit a low of 0.8975. However, this currency pair stabilized on Friday around this level to rebound and looks set to climb above the threshold of 0.9000 once more.

Central Bank Notes:

• The SNB eased monetary policy by lowering its key policy rate by 50 basis points, going from 1.00% to 0.50% on 12 December, marking the fourth consecutive reduction.
• Underlying inflationary pressure has decreased again this quarter.
• Inflation in the period since the last monetary policy assessment has again been lower than expected as it decreased from 1.1% in August to 0.7% in November; both goods and services contributed to this decline.
• In the shorter term, the new conditional inflation forecast is below that of September: 1.1% for 2024, 0.3% for 2025 and 0.8% for 2026, based on the assumption that the SNB policy rate is 0.5% over the entire forecast horizon.
• GDP growth in Switzerland was only modest in the third quarter of 2024 with growth in the services sector again somewhat stronger, while value added in manufacturing declined.
• There was a further slight increase in unemployment, and employment growth was subdued while the utilisation of overall production capacity was
• normal.
• The SNB anticipates GDP growth of around 1% this year while currently expecting growth of between 1.0% and 1.5% for 2025.
• The SNB will continue to monitor the situation closely and will adjust its monetary policy if necessary to ensure inflation remains within the range consistent with price stability over the medium term.
• The next meeting is on 20 March 2025.

Next 24 Hours Bias

Weak Bullish

The Pound (GBP)

Key news events today

Retail Sales (7:00 am GMT)

S&P Global Composite PMI (9:30 am GMT)

What can we expect from GBP today?

Consumer spending in the U.K. has been poor for most parts of 2024 as sales declined in four out of the last seven months, even in December despite stronger Christmas sales. Consumer spending fell 0.3% MoM in December but it is now expected to rebound 0.4% in January. Combined with the flash Composite PMI report that is expected to show expansion, albeit at a slower pace, the pound could be supported should the above macroeconomic data exceed market expectations.

Central Bank Notes:

• The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 7 to 2 to reduce the Bank Rate by 25 basis points (bps) to bring it down to 4.50% on 6 February 2025, while two members preferred to reduce it by 50 bps.
• The MPC also voted unanimously to reduce the stock of UK government bond purchases held for monetary policy purposes and financed by the issuance of central bank reserves, by £100B over the next 12 months to a total of £558B, starting in October 2024. On 18 December 2024, the stock of UK government bonds held for monetary policy purposes was £655B.
• CPI inflation was 2.5% in 2024 Q4 as domestic inflationary pressures moderated but remained somewhat elevated while some indicators eased more slowly than expected. Higher global energy costs and regulated price changes are expected to push up headline CPI inflation to 3.7% in 2025 Q3, even as underlying domestic inflationary pressures are expected to wane further.
• While CPI inflation is expected to fall back to around the 2% target thereafter, the Committee will pay close attention to any consequent signs of more lasting inflationary pressures.
• GDP growth has been weaker than expected at the time of the November Monetary Policy Report, and indicators of business and consumer confidence have declined – GDP growth is expected to pick up from the middle of this year.
• The labour market has continued to ease and is judged to be broadly in balance. Productivity growth has been weaker than previously estimated, and the Committee judges that growth in the supply capacity of the economy has weakened.
• Based on the Committee’s evolving view of the medium-term outlook for inflation, a gradual and careful approach to the further withdrawal of monetary policy restraint is appropriate and it will continue to monitor closely the risks of inflation persistence and what the evolving evidence may reveal about the balance between aggregate supply and demand in the economy.
• Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further and the Committee will decide the appropriate degree of monetary policy restrictiveness at each meeting.
• The next meeting is on 8 May 2025.

Next 24 Hours Bias

Weak Bullish

The Canadian Dollar (CAD)

Key news events today

Retail Sales (1:30 pm GMT)

What can we expect from CAD today?

Consumer spending in Canada has been steady in the second half of 2024 and it surged in December due to the traditional holiday shopping season. Sales jumped 1.6% MoM to mark the biggest gains since May 2022, based on preliminary estimates. The final estimate points to a slightly lower figure of 1.5% but it would still register a huge monthly gain for retail sales. The Loonie could receive a near-term boost later today, a result that would weigh on USD/CAD.

Central Bank Notes:

• The Bank of Canada reduced its target for the overnight rate by 25 basis points bringing it down to 3% on 29 January; this marked the sixth consecutive meeting where rates were reduced.
• The bank announced its plan to complete the normalization of its balance sheet, ending quantitative tightening, and will restart asset purchases in early March, beginning gradually so that its balance sheet stabilizes and then grows modestly, in line with growth in the economy.
• Past cuts to interest rates have started to boost the economy and the recent strengthening in both consumption and housing activity is expected to continue. However, business investment remains weak while the outlook for exports is being supported by new export capacity for oil and gas.
• The Bank forecasts GDP growth will strengthen in 2025 and now projects GDP will grow by 1.8% in both 2025 and 2026, somewhat higher than potential growth.
• The labour market remains soft, with the unemployment rate at 6.7% in December. Job growth has strengthened in recent months, after lagging growth in the labour force for more than a year. Wage pressures, which have proven sticky, are showing some signs of easing.
• CPI inflation remains close to 2%, with some volatility due to the temporary suspension of the GST/HST on some consumer products. Shelter price inflation is still elevated but it is easing gradually, as expected
• A broad range of indicators, including surveys of inflation expectations and the distribution of price changes among components of the CPI, suggests that underlying inflation is close to 2% with forecasts that CPI inflation will be around the 2% target over the next two years.
• With inflation around 2%, the economy in excess supply, and recent indicators tilted towards softer growth than projected, the Governing Council decided to reduce the policy rate a further 25 basis points to support growth and keep inflation close to the middle of the 1-3% target range.
• The cumulative reduction in the policy rate since last June is substantial as lower interest rates are boosting household spending and the economy is expected to strengthen gradually and inflation to stay close to target. However, if broad-based and significant tariffs were imposed, the resilience of Canada’s economy would be tested.
• The Bank is committed to maintaining price stability for Canadians by keeping inflation close to the 2% target.
• The next meeting is on 12 March 2025.

Next 24 Hours Bias

Weak Bullish

Oil

Key news events today

No major news events.

What can we expect from Oil today?

Despite the EIA crude oil inventories increasing higher than forecasts for the fourth week in a row as seen in the overnight report, crude oil rose for the third successive day as disruptions to oil supply in Russia and Ukraine as a result of attacks on pipeline infrastructure and production facilities kept prices elevated. WTI oil has climbed almost 3% this week and it looks set to break above the $73 mark on the final trading day of the week.

Next 24 Hours Bias

Medium Bullish

The post IC Markets Asia Fundamental Forecast | 21 February 2025 first appeared on IC Markets | Official Blog.