Today, investors are focused on the final publication of Eurozone inflation data for January. This report will allow us to assess in detail the factors that caused the price increase at the beginning of the year, among which there are probably temporary effects.
The Ifo Business Climate index in Germany for February is also expected to be published. It will be interesting to compare it with the PMI data released on Friday, which showed a slight increase in the composite index, mainly due to an improvement in the weakened industrial sector.
In the second half of the week, the market's attention will shift to February inflation data from Germany, Spain and Italy. There will also be reports on the dynamics of wages and credit growth in the eurozone.
In the United States, the Fed's main inflation indicator, the Personal Consumption Expenditures Index (PCE), is expected to be published on Friday. In addition, investors continue to monitor possible new tariff measures from the Donald Trump administration and geopolitical news.
Results of the week: German elections and macroeconomic indicators
The markets reacted positively to the results of the German elections, which led to the formation of a two-party majority between the conservative CDU/CSU bloc and the Social Democrats (SPD). This will simplify the decision-making process compared to the previous government, which included three parties.
Against the backdrop of the election, the euro strengthened by 0.6% in the Asian session, while DAX futures rose by 1.1%. Friedrich Merz, the CDU/CSU leader, is likely to become the new chancellor, as his party received 28.6% of the vote. The formation of a coalition may take from one to two months.
The election also increased the likelihood of a reform of budget constraints in Germany, allowing for increased borrowing. However, the impact on defense spending and support for Ukraine remains questionable: the extreme parties (AfD and Leftist) won 34.3% of the vote and may block some key initiatives requiring two-thirds of the votes in parliament.
Friday was full of February Business Activity Indices (PMI). In the Eurozone, the composite PMI turned out to be lower than expected (50.2 versus the forecast of 50.5), mainly due to a decrease in the service sector (50.7 versus the expected 51.5). The industrial sector, on the contrary, showed a slight improvement (47.3 versus 47.0).
In the UK, the picture was mixed: the manufacturing PMI turned out to be weaker than expected (46.4 versus 48.5), while the services sector exceeded expectations (51.1 versus 50.8). This left the composite index virtually unchanged (50.5). Retail sales data was also published: January growth was 1.2% year-on-year, which turned out to be higher than forecast (0.6%). However, the revised data for December was lowered, which smoothed out the effect of the positive surprise.
In the US, the PMI picture resembled the European one: the industrial index continued to grow (51.6 versus 51.5), but the service sector declined sharply (49.7 versus 53.0), reaching its lowest level since January 2023. The internal components of the report showed a decrease in inflationary pressure: the price index for services fell to its lowest level since May 2020, while employment declined in both sectors. At the same time, production price indices and the order-to-inventory ratio continued to grow. The overall report looks dovish in the context of the Fed's policy.
The geopolitical situation and financial markets
For the first time, Ukrainian President Volodymyr Zelensky announced the possibility of resigning in order to achieve Ukraine's membership in NATO or long-term peace. This statement was made against the background of the truce negotiations in which the United States is involved in Saudi Arabia. At the same time, Zelensky rejected the Trump administration's demand to provide the United States with a share of mining revenues in Ukraine.
In the stock markets, an attempt at growth gave way to a decline. Global indexes fell 1%, with the S&P 500 down 1.7% and the Russell 2000 index of small companies down 2.9%. European stocks, on the contrary, showed growth (Stoxx 600 +0.5%), which indicates a noticeable superiority of the region. Investors actively shifted into defensive assets, buying bonds and the utility sector, while technology and industrial companies came under pressure. Volatility (VIX index) rose above 18, the highest since early February.
In the foreign exchange market, commodity currencies weakened, losing out to the Japanese yen, Swiss franc and US dollar as market sentiment worsened towards the end of the week. The euro gained support against the background of the election results in Germany.
U.S. Treasury bond yields declined amid weak data and expectations that government spending cuts could slow the economy more than expected. The spread between 10-year Treasuries and German Bunds has narrowed, falling below 200 bps again. In Germany, the CDU/CSU victory, expected to be confirmed by the election results, creates the prerequisites for a coalition with the SPD and potentially a third party.
Thus, the markets continue to search for a balance between economic data, political events and monetary policy expectations.
The EUR/JPY currency pair turned down after testing the resistance zone around 163.80. This level has repeatedly limited the pair's growth since January, which confirms its importance for the market. Additional pressure was exerted by the upper limit of the Bollinger Bands indicator, signaling an overheated market.The formation of the Shooting Star candle pattern on the daily chart indicates a weakening of the upward momentum and the possible development of a downward correction. This pattern, especially in combination with the key resistance, increases the likelihood of a further decline in quotes.The Stochastic indicator in the daily range is in the overbought zone, which further confirms the likelihood of a corrective movement. The immediate target of sellers is the support level of 161.00, where the market may find interest in buying again. 
USD/CHF amalysis on March 19, 2025After an active decline over the previous two days, when USD/CHF updated the lows on March 10, the pair showed a slight correction on Wednesday. Quotes are testing the 0.8770 level for a downward breakout. Market participants are awaiting the outcome of the US Federal Reserve's monetary policy meeting.Experts are almost certain that the Fed will keep its key interest rate at 4.5%. However, the market's attention will be focused on clarifying the long-term prospects for monetary policy. Donald Trump's protectionism, with a sharp increase in import duties, puts pressure on the stability of the dollar.The US macroeconomic data is also worrisome. In February, industrial production grew by 0.7% month-on-month, exceeding the forecast of 0.2%. The level of production capacity utilization increased to 78.2% against expectations of 77.8%. The volume of construction started increased sharply from -11.5% to 11.2%, reaching 1,501 million, which was also higher than the forecast of 1.38 million.February data on Switzerland's foreign trade will be published on Thursday at 09:00 (GMT+2). Previously, exports amounted to 24.45 billion francs and imports to 18.33 billion francs, resulting in a trade surplus of 6.12 billion francs.A meeting of the Swiss National Bank (SNB) will be held at 10:30 (GMT+2). According to a Reuters poll, 90% of 32 economists expect an interest rate cut to 0.25%, where it will remain until at least 2026. This decision is supported by the low inflation rate, which reached a four-year low of 0.3% in February. However, the weakness of the Swiss franc may create risks of rising prices in the near term.USD/CHF technical analysis for todayOn the daily chart (D1), the Bollinger Band indicator indicates a mixed trading pattern in the short term. The MACD indicator is declining, forming a weak sell signal. Stochastic is showing a more confident decline, being near the oversold zoneTrading recommendations- We will consider selling after the breakdown down to the level of 0.8758 with a target of 0.8669. It is recommended to set a stop loss of 0.8800.- Purchases are possible after a rebound from the 0.8758 level and an upward breakdown of 0.8800. The target is 0.8900. The stop loss is 0.8758. 
The US dollar continues to strengthen in the Asian session on Wednesday. USD/JPY is developing an upward momentum that began a week ago. The pair is testing the 149.60 level for an upward breakout and remains near the local maximum of March 5. The main event for the market was the meeting of the Bank of Japan, following which the regulator unanimously kept the interest rate at 0.50%, which fully coincided with analysts' expectations.The Bank of Japan's statement noted that the country's economy is showing a moderate recovery, although negative trends remain in some sectors. Industrial production and exports remain stable, but trade barriers imposed by the administration of US President Donald Trump pose additional risks. In particular, 25 percent duties on steel and aluminum, as well as possible new tariffs on car imports, could put pressure on the Japanese auto industry. Inflation remains above the target level: the core consumer price index reached 3.2%, which forces the regulator to think about further tightening monetary policy. However, the specific terms of the rate review were not announced. Last year, the Bank of Japan raised the interest rate by 25 basis points twice, in March and July.Additional attention was drawn to Japan's foreign trade data for February. Exports grew by 11.4% after 7.3% a month earlier, although an increase of 12.1% was expected. Imports, on the contrary, slowed sharply, falling 0.7% after January's 16.2% increase. As a result, the trade balance shifted from a deficit (-2758.8 billion yen) to a surplus (584.5 billion yen), although the consensus forecast assumed an increase to 722.8 billion yen.A meeting of the US Federal Reserve System will be held today at 20:00 (GMT+2). Analysts are almost unanimous in the opinion that the regulator will keep the interest rate at 4.50%. However, the attention of market participants will be focused on the Fed's rhetoric regarding future prospects. The protectionist policy of the Donald Trump administration, accompanied by rising import duties, is putting pressure on the dollar. Additionally, the situation is complicated by weak macroeconomic data, which increases fears of a recession.USD/JPY technical analysis for todayOn the Daily chart, the Bollinger indicator is in a horizontal movement position, which signals a decrease in volatility and a limited growth potential in the short term. The MACD indicator maintains a steady buy signal. Stochastic, approaching the overbought zone (level 80).Trading recommendations• Long positions are recommended after a confident breakout of the 150.00 resistance with a target of 151.50. A protective stop loss is 149.20.• A return to the "bearish" scenario with a breakdown of 149.09 down may be a signal for sales with a target of 148.00. Stop loss — 149.60. 
FOREX Fundamental analysis for EUR/USD on March 19, 2025The Bundestag's approval of the fiscal stimulus project proposed by Friedrich Merz has already been played out on the market. Investors who have been actively building up long positions in the euro may start taking profits. Asset managers have brought their net euro long positions to a 5-month high, and forex hedging shows a significant reduction in short positions.Against this background, the upcoming meeting of the FOMC (Federal Committee on Open Market Operations) may be a key trigger for further movement of the EUR/USD pair.Jerome Powell in the current conditions resembles a duck, which is calm on the surface, but actively works underwater. Formally, the situation in the US economy looks stable, with economic growth continuing and inflation slowing. However, trade wars remain a serious risk that can change the current dynamics.Traders will closely monitor the forecasts of the FOMC members. In December, officials expected two rate cuts in 2025, but in March they may revise their own forecasts. Citi suggests that the number of declines may increase to three, given the cooling economy and the recovery of the disinflationary trend. However, there is also the opposite scenario. The Fed may reduce the forecast to one reduction or even abandon it due to the risks of stagflation, a process when economic growth slows and inflation accelerates.Markets are in uncertainty. A week ago, derivatives assumed a rate cut of 71 basis points (equivalent to three steps), but before the March FOMC meeting, these expectations dropped to 57 basis points. This happened despite a series of weak data, including a slowdown in consumer price growth and retail sales.Reputable organizations such as the OECD and Fitch Ratings express skepticism about further easing of the Fed's monetary policy. The OECD has stated that the cycle of monetary expansion is completed at least until the end of 2025. Fitch Ratings lowered its forecast for US GDP growth this year from 2.1% to 1.7%, and next year from 1.7% to 1.5%. This is significantly lower than in 2023-2024, when the economy grew by about 3%.Possible scenarios for EUR/USDThe outcome of the FOMC meeting will determine the further dynamics of the EUR/USD pair. If the Fed restricts itself to a single rate cut or abandons it altogether, this may provoke the fixation of long positions in the euro. On the contrary, three rate cuts may push the pair to the level of 1.1000. If the December forecasts are maintained, the pair is likely to move sideways. A drop below the level of 1.0890 will be a sales signal. 
AUD/USD analysis on March 18, 2025On Tuesday, AUD/USD continues its upward movement and is trading at 0.6374. The Australian dollar is recovering after a short-term decline caused by the Reserve Bank of Australia (RBA) meeting last week. The weakening of the US dollar contributes to the formation of a stable upward trend, which allows quotes to stay above the interim annual maximum of 0.6400.Reserve Bank of Australia officials stress the need for restraint in further easing monetary policy. They intend to carefully assess macroeconomic indicators and the impact of the recent interest rate cut by 25 basis points.Meanwhile, the tourism sector is showing signs of recovery. In January, the volume of international trips reached a multi-year record: the number of short-term arrivals increased by 17.6% year-on-year, reaching 710,040 thousand. The short-term profitability of residents increased by 10.9%, amounting to 1.544 million Australian dollars. The total number of arrivals increased by 12.3% to 2.383 million, and departures abroad — by 16.3% to 2.031 million.The US dollar index is strengthening slightly and recovered to 103.10. The instability of the dollar is related to macroeconomic reports that did not meet market expectations. For example, retail sales in February increased from -1.2% to 0.2%, which was lower than the forecast of 0.6%. The core retail sales index increased from -0.6% to 0.3%, in line with expectations, but without having a significant impact on the market.AUD/USD technical analysis for todayOn the daily chart, the AUD/USD pair is approaching the resistance line of the ascending channel, the boundaries of which are in the range of 0.6500–0.6100.Technical indicators reinforce buy signals. The averages on the alligator indicator are pointing upwards. The awesome oscillator (AO) indicator has formed several ascending bars in the positive zone, which confirms the potential for further growth.Trading recommendations- Long positions: can be considered after the price rises and fixes above the level of 0.6400 with a target of 0.6530. It is recommended to set the stop loss at 0.6320.- Sales are relevant after the price drops and fixes below the level of 0.6350 with a target of 0.6200. The stop loss is 0.6430. 
USD/CAD analysis on March 18, 2025During Tuesday morning's session, USD/CAD is recovering from yesterday's decline, which resulted in updated lows on March 6. Quotes are testing the 1.4300 level, while market participants expect new drivers to appear for further movement.Today at 14:30 (GMT+2), investors' attention will be focused on Canadian inflation data. The consumer price index (CPI) is expected to accelerate from 1.9% to 2.1–2.2% in annual terms and from 0.1% to 0.6% on a monthly basis. The base index, which excludes food and energy resources, may adjust from 2.1% to 2.2% on an annual basis and from 0.4% to 0.2% on a monthly basis.These data may put pressure on the Bank of Canada, forcing it to take a pause in further monetary policy easing. This trend is observed by most major central banks, including the US Federal Reserve, which will hold a meeting on Wednesday at 20:00 (GMT+2). Although no Fed rate changes are expected, the tone of the accompanying statement may be more dovish, which will have an impact on the markets.The Organization for Economic Cooperation and Development (OECD) has revised down its forecasts for global economic growth. The increase in foreign trade tariffs by the Trump administration could lead to a slowdown in global economic growth from 3.2% in 2024 to 3.1% in 2025 and 3.0% in 2026.Sanctions and trade restrictions will negatively affect business investment and may accelerate consumer price growth, which will allow central banks to keep interest rates higher for longer. Economic growth in the United States is projected to slow to 2.2% this year and 1.6% next year, and in Canada to 0.7% in both years, well below previous expectations.Markets reacted to February data on retail sales in the United States, which showed a decrease from 3.9% to 3.1% in annual terms, which is worse than expected. On a monthly basis, the indicator increased from -1.2% to 0.2%, but also failed to meet forecasts of 0.7%.Special attention was drawn to the sharp decline in the index of business activity in the manufacturing sector from the Federal Reserve Bank of New York in March: the indicator fell from 5.7 points to -20.0 points, which is significantly worse than the expected level of -1.9 points.USD/CAD technical analysis for todayOn the daily chart, the Bollinger Band indicator is decreasing moderately. The MACD indicator retains a sell signal. Stochastic has reached its minimum values and is turning up, signaling the risks of oversold conditions in the short term.Trading recommendations:- After breaking down the 1.4250 level, we will consider selling with a target of 1.4145. It is recommended to set the stop loss at 1.4300.- Purchases are possible after an upward breakdown of the 1.4350 level. The target will be 1.4451. We put the stop loss at 1.4300. 
In Tuesday's Asian session, GBP/USD is consolidating near the local highs of early November, around 1.2970. Market activity remains moderate, as investors prefer to wait for new drivers, among which the outcome of the US Federal Reserve meeting will be key.The Fed is expected to keep its key interest rate at 4.50%, despite growing concerns about the prospects for the US economy. Additional pressure on the dollar is exerted by the aggressive trade policy of the Trump administration, which is already affecting the dynamics of the currency and may lead to more serious changes in the global economic environment.In April, the White House plans to impose retaliatory duties on countries that restrict imports of American goods. This may also affect the UK, which has previously requested exemptions for steel and aluminum exports.After cutting the rate by 25 basis points to 4.50%, the Bank of England is likely to maintain its current level at its meeting on Thursday. The head of the regulator, Andrew Bailey, has repeatedly stressed the need for a "gradual and cautious" approach to adjusting monetary policy amid ongoing uncertainty both domestically and globally.At least two of the nine committee members are expected to advocate a further 25 basis point rate cut. The Organization for Economic Cooperation and Development (OECD) has adjusted its forecast for UK GDP growth: in 2025 it is expected to increase by 1.4% instead of the previously predicted 1.7%, and in 2026 — by 1.2% instead of 1.3%.In January, the UK consumer price index decreased from 0.3% to -0.1% in monthly terms, indicating a decrease in inflationary pressure. The index of business activity in the service sector rose slightly to 51.0 points, although it did not reach the forecast of 51.1 points.On Thursday at 09:00 (GMT+2), data on the UK labor market will be published. It is expected that the number of applications for unemployment benefits in February will decrease from 22.0 thousand to 7.9 thousand. The average salary excluding bonuses is likely to grow by 5.9%, and adjusted for bonuses from 6.0% to 5.9%. The unemployment rate is expected to remain at 4.4%.Technical analysis of GBP/USD for todayOn the daily chart, the Bollinger indicator indicates a narrowing of the price range, reflecting the mixed nature of trading in the short term. The MACD indicator is declining, forming a sell signal. Stochastic has turned towards growth, but is located near the overbought zone, which indicates the risks of correction.Trading recommendations- Short positions: can be considered after the breakdown of the 1.2900 level down with a target of 1.2800. It is recommended to set the stop loss at 1.2965.- Purchases will be possible when growth resumes and the 1.3000 level breaks up. The target will be 1.3100. The stop loss is 1.2950. 
Germany: voting on fiscal packageA vote on a package of fiscal measures is scheduled in the Bundestag today, and the document is due to be considered in the Bundesrat on Friday. The package is expected to be approved.CDU/CSU leader Friedrich Merz declared unanimous support for the initiative, but there are risks that not all party members will vote in favor.In addition, the Free Voters of Bavaria party may not support the bill when voting in the Bundesrat.USA and Russia: negotiations on UkraineUS President Donald Trump has announced plans to hold talks with Russian President Putin on ending the conflict in Ukraine. The discussion is likely to touch on the issue of territorial concessions from Ukraine, as well as the transfer of control over energy facilities, which Trump has previously expressed. At the moment, Ukraine has agreed to a 30-day truce.Japan: Bank of Japan meetingThe Bank of Japan will end its two-day monetary policy meeting overnight. It is expected that the regulator will keep the interest rate unchanged, as the unexpected increase in January, trade tensions and the strengthening of the yen have already had an impact on inflation. However, given the likely increase in wages this year, the Bank of Japan may find opportunities to raise rates further in the summer.Overview of key economic events and market newsThe situation in the Middle EastIsrael carried out its largest attack since the January truce, hitting several Hamas targets. Prime Minister Netanyahu's office said it was in response to the group's refusal to release the remaining hostages. Before the strike, the Israeli authorities held consultations with the White House administration.US retail Sales dataThe February statistics on retail sales in the United States gave mixed signals. The indicator of the control group increased by 1.0% (forecast: 0.3%) after falling by 0.9% in January. However, the overall indicator increased by only 0.2% mom after a 0.9% decrease in January. The exclusion of volatile categories improved the picture: the control group showed an increase of 1.0% against the previous decline of 1.0%. However, the effect of seasonal adjustments could artificially increase the growth rate, which confirms the decrease in the annual rate (+0.3% yoy versus +4.1%). After the release of these data, the EUR/USD exchange rate declined.The economic situation in ChinaThe January-February data showed a solid start to the year, although some weaknesses remain. Industrial production exceeded expectations, increasing by 5.9% YoY (forecast: 5.3%). This growth explains the recent rise in metal prices. A more important signal was the improvement in consumer demand: retail sales increased by 4% YoY (forecast: 3.8%). Despite the positive dynamics, the level remains below 7-8% of the pre-pandemic period. Boosting domestic demand is now a top priority for the Chinese government.Financial marketsStock indexesGlobal stock markets mostly showed growth. In the United States, the S&P 500 and Nasdaq indexes recorded their first two-day gains since the record close on February 19. However, macroeconomic statistics did not support this growth. The Dow Jones index rose 0.9%, the S&P 500 by 0.6%, the Nasdaq by 0.3%, and the Russell 2000 by 1.2%.Positive sentiment prevailed in Asian markets, with the Hang Seng index reaching a new high since the beginning of the year. At the same time, Indonesia's economy is experiencing difficulties, which has led to the sale of assets and the temporary suspension of trading. In Europe, futures are showing growth amid expectations of a vote in the Bundestag, while American futures are showing a decline.Bonds and the foreign exchange marketBond yields on both sides of the Atlantic declined ahead of the German vote and amid relatively stable market sentiment. The EUR/USD pair was trading around 1.09, remaining close to last week's highs. EUR/SEK held above 11.00 as investors assessed the impact of increased government loans amid increased defense spending.