German Consumer Confidence Falls Further, Reflecting Challenge for New Government

Economic

Summary:

German consumer confidence continues to slide, a monthly survey said Wednesday, reflecting the enduring economic pessimism facing the country's new government.

The closely watched consumer-climate index conducted by research groups GfK and the Nuremberg Institute for Market Decisions fell to minus 24.7 in March's forecast, from minus 22.6 in February, the second decline in as many months. Economists polled by The Wall Street Journal by contrast expected it to improve slightly.

"Consumer climate has been stagnating at a low level since the middle of last year. There is still a great deal of uncertainty among consumers and a lack of planning security," said Rolf Buerkl, consumer expert at NIM.

While the survey was undertaken before the election, consumers said an uncertain economic and political situation, dissatisfaction with politics and concerns over inflation were key reasons behind expectations of worse income prospects and willingness to spend money.

"A fast formation of a new federal government after the parliamentary elections and the rapid approval of this year's budget would give both companies and private households more certainty when it comes to planning," Buerkl added.

Opposition leader Friedrich Merz won Sunday's election, likely ousting incumbent Olaf Scholz as chancellor, but will need a coalition partner to govern. He has said he hopes to form a government by April.

But economic prospects remain weak after two-straight years of contracting GDP. Bundesbank President Joachim Nagel said Tuesday that he couldn't rule out a third consecutive year of no growth in 2025.

Source：Dow Jones Newswires

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Alex

Economic

0720 GMT - German Bunds are finding a firmer footing amid second thoughts about fast changes to Germany's debt brake or funding, say Commerzbank Research's Rainer Guntermann and Erik Liem in a note. The market expected a new German government to move quickly to reform the debt brake, increasing the country's fiscal space. Bunds, nevertheless, continue to underperform U.S. Treasurys, the rates strategists say. The data calendar is light on Wednesday; Germany's GfK consumer climate index came in at minus 24.7, below analysts' consensus forecast of minus 21.5 in The Wall Street Journal's poll. Government bond supply will come from Germany, which will auction 2 billion euros in May 2036 and May 2038 Bunds. In early trade, the 10-year rises 2 basis points to 2.469%, according to LSEG data.

0718 GMT - Recent positive sentiment over China's economy boosted by DeepSeek optimism may not be sustained as U.S.-China tensions could rapidly escalate, Nomura analysts write in a note. Markets had previously expected stronger stimulus measures to come from Beijing, but have become more realistic recently, they say. Given supportive trade-in programs and front-loading of shipments amid tariff worries, Nomura projects China's real GDP growth to stay at 5.0% in 1Q. Somewhat similar to previous years, the Chinese economy may get off to a relatively good start only to face stronger downward pressure later, they say. Beijing will likely set its 2025 growth target at around 5% again to instill confidence, Nomura says.

0701 GMT - The Hong Kong budget speech is unlikely to boost market sentiment, as it lacks particularly exciting supporting measures, writes Lorraine Tan, Morningstar director of Asia equity research. "I would classify this budget as a 'non-event' for the stock market," Tan says. While measures like the tax relief of up to HK$1,500 for lower-income families are better than nothing, she says it's unlikely to spark a material increase in consumption. The plans for the housing and land sectors are also somewhat disappointing, she says. The proposal to raise the floor for charging HK$100 stamp duty on residential properties to up to HK$4 million from HK$3 million is seen as immaterial, as it is unlikely to boost homebuyers' confidence, who are more focused the trajectory of property values, Tan says.

0656 GMT - Market moves like those on Tuesday highlight the growing independence of euro rates versus the U.S., ING's Padhraic Garvey and Michiel Tukker say in a note. The correlation on the short end of the curve has already completely broken down since the U.S elections, the rates strategists say. Meanwhile, the spillover in the 10-year maturity has also lessened significantly, the strategists say. "If we look at implied volatility metrics we see a strong divergence with euro rates volatility still gradually coming down whilst U.S. volatility has been trading sideways since much of 2024," they say. ING adds that "U.S. volatility jumped up on Tuesday's move but euro volatility did relatively little."

0652 GMT - South Korea's benchmark Kospi rose 0.4% to close at 2641.09, reversing early losses. Internet and steel stocks were among the top gainers, leading the rebound. Institutional investors were net buyers, but foreign and retail investors remained net sellers amid lingering caution over Trump's tariff policy and future U.S. rate moves. Mobile internet platform company Kakao gained 5.9%, as its digital bank affiliate KakaoBank added 4.1%. Steelmakers Posco Holdings and Hyundai Steel rose 2.7% and 2.6%, respectively. USD/KRW settled 0.2% higher at 1,433.10 in Seoul onshore trading. South Korea's 10-year government bond yield was down 4.4 bps at 2.753%.

0635 GMT - The rally in U.S. Treasurys is expected to reverse after Tuesday's fall in yields, says Capital Economics' Joe Maher in a note. While souring risk sentiment pushed Treasury yields to levels unseen since mid-December, President Trump's policies will prevent the Federal Reserve from cutting interest rates this year, the assistant economist says. Tuesday's fall in yields appears to have been triggered by the largest monthly fall in the Conference Board's measure of consumer confidence since August 2021, which followed other weak U.S. data and survey releases recently. Capital Economics isn't especially upbeat about U.S. economic growth this year but it thinks "fears that the economy is falling off a cliff are overdone," Maher says. The 10-year Treasury yield rises 3 basis points to 4.329%, according to Tradeweb.

0633 GMT - Asia funds have increased their allocation to mainland China while lowering their exposure to Taiwan and India, HSBC analysts say in a research note. "The DeepSeek launch triggered investor attention towards the Chinese equity market, which was already trading at low valuations," the analysts say. Mainland China saw three consecutive weeks of foreign net buying in February, as the exposure to Mainland China by Asian funds marked a five-year high, they say. Also following DeepSeek's launch, India saw a total of $3.9 billion in outflows by foreign institutional investors. In Korea and Taiwan, foreign institutional investors also remained net sellers in the month, though Korean equities saw some selling pressure easing after seven consecutive months of outflows, they add.

0514 GMT - The Reserve Bank of Australia won't draw too much from the outwardly impressive January CPI data, preferring to keep watch on the job market which continues to run hot, says Paul Bloxham, chief economist at HSBC. With both headline and core CPI readings within the RBA's 2% to 3% target band in January, it might be tempting to predict that coming 1Q 2025 inflation data will be the best in years, he adds. But the CPI data for January doesn't include services inflation, which remains elevated, he says. The data won't sway the RBA's view on the possible rates pathway up or down, Bloxham says.

0458 GMT - Taken at face value, it might be tempting to think Australia's January CPI indicator pointed to downward pressure on inflation, given that all results were within the Reserve Bank of Australia's 2% to 3% target band. But Westpac economist Justin Smirk says the report actually points to upside risks. Some of the extra strength in the CPI basket was in quite volatile items, particularly from food prices, which can quickly become troubling, he adds. History has shown that a simple face-value estimate can be misleading, Smirk says. However, the upside risks are only modest, and the bank still expects both headline and core CPI in 2Q 2025 to print below the RBA's forecasts, he adds.

0348 GMT - The Singapore dollar is steady against its U.S. counterpart in the Asian session, underpinned by growing prospects for Fed rate cuts that typically undermine the appeal of U.S. fixed-income assets and demand for the greenback. The U.S. Conference Board's index of consumer sentiment released Tuesday posted biggest monthly decline in more than three years in February. Recent developments in the U.S. highlight worries about consumer health, Maybank analysts say in an FX Research & Strategy report. Markets are pricing in 56% chance of Fed rate cut in June, up from 39% last week, the analysts add. USD/SGD is little changed at 1.3375.

0315 GMT - The euro is likely to rise further against the dollar in the next month or so, says Quek Ser Leang of UOB Global Economics & Markets Research. The currency pair broke above a key resistance level, the top of the daily Ichimoku cloud, on Tuesday, the market strategist notes. The 21-day exponential moving average is set to cross above the 55-day EMA, suggesting increasing upside risk, the strategist says in a report. Also, the weekly moving average convergence divergence indicator turned positive on Friday, signaling a shift in the weekly momentum. However, the daily momentum isn't strong for now, and there is significant resistance in the 1.0630-1.0665 zone, the strategist adds. EUR/USD is 0.1% lower at 1.0505.

0254 GMT - The Bank of Japan is likely to keep raising interest rates to 1% if the results of annual wage talks due mid-March come out as strong as last year, says Mizuho Securities economist Ryosuke Katagi. Japanese companies gave employees an average raise of 5.1% in 2024, according to the Japanese Trade Union Confederation. Katagi had previously expected 4.8% wage growth at this year's negotiations but says the final result could exceed that forecast going by recent surveys. "Labor unions' demand for wage increases have become stronger than last year, and companies have also maintained a positive stance toward pay hikes," he adds.

Source：Dow Jones Newswires

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Cohen

Economic

Thailand's central bank cut its key interest rate by a quarter point on Wednesday amid government calls for further easing to support the economy and weaken the baht to boost exports.

The Bank of Thailand's monetary policy committee voted 6-1 to reduce the one-day repurchase rate by 25 basis points to 2.00% at its first meeting of 2025. That followed a rate hold in December and a quarter-point cut in October.

Ten of 26 economists in a Reuters poll had predicted the key rate would be cut this week. Sixteen economists had expected no policy change on Wednesday.

Finance Minister Pichai Chunhavajira had on Monday said Thailand's low inflation meant there was room for an interest rate cut to boost economic growth and help weaken the baht to support exports, a key growth engine.

Annual headline inflation was 1.32% in January, after averaging 0.4% last year, well below the central bank's target range of 1% to 3%.

The stock market rose after the announcement and was up 2% at 0709 GMT, while the baht pared earlier losses.

Source: Theedgemarkets

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ECB

Remarks of Officials

On February 25, 2025, Yannis Stournaras, Greek central bank chief, delivered a speech, stating:

"I don't think that our next meeting is the right moment to discuss pausing. It is too early for that," Stournaras told. "The economic growth will stay weak and that inflation will fall back to target this year. If the situation continues like that, we should definitely bring interest rates down further." The ECB has cut its key deposit rate from a record-high 4 percent to 2.75 percent today, but"we are definitely still in restrictive territory."

Inflation has declined significantly and is expected to reach the ECB's target level this year. While some analysts predict further rate cuts in 2026, "whatever we say now about 2026 is going to be very premature." he said. "Given the information we currently have, I expect that interest rates will reach 2 percent by the autumn of this year and that this is likely to be the terminal rate."

The labor market remains sluggish, with long-term uncertainties. Despite stable unemployment rates, weak growth remains a persistent challenge. The ECB is unlikely to have a clear view by March 6 of how the new U.S. administration's policies, specifically regarding trade tariffs, will affect the Eurozone economy, Stournaras said.

Overall, the ECB will continue its accommodative monetary policy stance until economic recovery and inflation targets are achieved. Amid the current uncertain global environment, Europe needs to further strengthen its economic and defense independence to address potential future risks and challenges.

His comments amount to a clear disagreement with board member Isabel Schnabel, who last week said the ECB's Governing Council should start to debate whether to "pause or halt" rate cuts when it next meets on March 6.

Schnabel had indicated that the timing to halt rate cuts might be approaching. However, Stournaras argued that his views within the ECB Governing Council appear to be in the minority. In recent weeks, several officials, including ECB President Christine Lagarde, Madis Muller, Gediminas Simkus, and Joachim Nagel, have all supported a slower pace of rate cuts, suggesting that "summer would be a more appropriate time for further rate cuts." This indicates that discussions on pausing rate cuts may soon be on the agenda.

ECB's Stournaras

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Cohen

Economic

Cryptocurrency

Key Highlights

Bitcoin price declined heavily and even traded below the $90,000 support.

BTC is now following a connecting bearish trend line with resistance at $91,600 on the 4-hour chart.

Ethereum price also declined and traded below the $2,500 support.

XRP dipped toward $2.00 before the bulls appeared.

Bitcoin Price Technical Analysis

Bitcoin price made a couple of attempts to settle above $100,000 against the US Dollar. However, BTC failed and started a fresh decline.

Looking at the 4-hour chart, the price gained bearish momentum after it broke the $95,000 support zone. There was a close below the $92,000 level, the 100 simple moving average (red, 4-hour) and the 200 simple moving average (green, 4-hour).

The bears even pushed the price below the $90,000 mark. A low was formed at $86,736 and the price is now consolidating losses. On the upside, the price could face resistance near the $90,000 level.

The next key resistance is $91,500. There is also a connecting bearish trend line forming with resistance at $91,600 on the same chart. It is close to the 38.2% Fib retracement level of the downward move from the $99,502 swing high to the $86,736 low.

A successful close above $91,600 might start another steady increase. In the stated case, the price may perhaps rise toward the $93,000 level. Any more gains might call for a test of $95,000.

Immediate support is near the $87,200 level. The next key support sits at $86,650. A downside break below $86,650 might send Bitcoin toward the $85,000 support. Any more losses might send the price toward the $83,200 support zone.

Looking at Ethereum, there was a fresh bearish reaction and the bears pushed the price below the $2,500 support zone.

Today’s Economic Releases

US New Home Sales for Jan 2025 (MoM) – Forecast +0.2% versus +3.6% previous.

Source: ACTIONFOREX

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FED

Remarks of Officials

On February 25, 2025, Tom Barkin, President of the Federal Reserve Bank of Richmond, delivered a speech detailing the following:

The economy is in a good place. Recession fears have dissipated. GDP grew 2.5 percent last year, a healthy level. Strong consumer spending, a rebound in business investment, and rising asset prices have collectively supported this growth. Over the last few years, we've seen the pandemic and geopolitical conflict expose the vulnerabilities associated with globalization. However, supply chain bottlenecks have gradually eased, and firms have adapted to the new market environment through productivity gains. These factors have enabled the economy to maintain stable growth.

Inflation has shown a clear downward trend but remains above the Fed's 2% target. The headline Personal Consumption Expenditures (PCE) index, the Fed's preferred inflation measure, has declined significantly from its peak but still lags behind the target. The January Consumer Price Index (CPI), which places a higher weight on housing costs, may have overstated the overall inflation level.

The labor market remains robust. Unemployment is at 4.0 percent, near most estimates of its natural rate. Firms continue to hire, wages are growing steadily, and the labor force participation rate is gradually recovering.

Businesses are leveraging automation and process optimization to enhance productivity, alleviating pressures from labor shortages. However, In the long run, the U.S. labor market may face structural challenges such as an aging population, declining birth rates, and uncertainties in immigration policy. These factors could lead to a reduction in future labor supply, thereby pushing up wage costs and exerting new upward pressure on inflation.

Monetary policy should remain cautious and avoid premature easing. With price levels still above target, the Federal Reserve needs to maintain a modestly restrictive stance to ensure that inflation does not rebound. Historical experience has shown that easing policy too early can allow inflation to resurge, thereby undermining economic stability.

The current economic environment remains fraught with uncertainties that could impact future inflation trends. Geopolitical conflicts, trade policy adjustments, changes in immigration policy, and volatility in energy markets all pose potential risks. In this context, the Fed must adopt a “wait-and-see” approach, closely monitoring economic data to ensure that policy adjustments align with the evolving economic landscape.

In summary, the Fed will continue to remain vigilant to avoid reigniting inflation through premature rate cuts. With solid economic growth, a strong labor market, and inflation trending downward but still requiring attention, maintaining a moderately restrictive monetary policy stance is prudent until there is greater confidence that inflation will sustainably return to the 2% target.

Fed's Barkin

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Owen Li

Economic

AUD/JPY holds ground following the release of the monthly Consumer Price Index.

Australia’s monthly CPI rose by 2.5% YoY in January, compared to an anticipated 2.6% growth.

The Japanese Yen may find support from rising bets of more BoJ’s rate hikes.

AUD/JPY maintains its position after registering losses in the previous session, trading around 96.50 during the Asian hours on Wednesday. However, the upside of the currency cross could be restrained after Australia’s monthly Consumer Price Index (CPI) showed a 2.5% year-over-year rise in January but fell short of market expectations for 2.6% growth.

Attention turns to potential updates from China’s Ministry of Commerce on talks between China’s Vice Commerce Minister and US business leaders regarding tariffs. A Bloomberg report on Tuesday revealed that the Trump administration plans to tighten chip export controls on China — a key trading partner for Australia. The US is reportedly considering stricter restrictions on Nvidia chip exports and additional limitations on Chinese firms like SMIC and CXMT.

The Japanese Yen (JPY) may find support amid a global risk-off mood and growing expectations of further interest rate hikes by the Bank of Japan (BoJ). The BoJ is expected to raise rates from 0.50% to 0.75% this year. According to Bloomberg, overnight index swaps fully price in a rate hike by September, with a 50% chance of an earlier move as soon as June.

Meanwhile, traders in Japan are preparing for a series of key economic reports set to be released on Friday. These reports — covering industrial production, retail sales, and Tokyo inflation — could offer crucial insights into the BoJ’s future monetary policy direction.

Source: FXSTREET

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German Consumer Confidence Falls Further, Reflecting Challenge for New Government

Source：Dow Jones Newswires

German Bunds Could Stabilize But Seen Underperforming Versus U.S. Treasurys

Source：Dow Jones Newswires

Thai Central Bank Cuts Key Rate By 25 Basis Points

Source: Theedgemarkets

ECB's Stournaras: As Growth Risks Intensify, Keep Easing Policy on Track

Bitcoin Loses Ground—Falling Below $90k Sparks Panic

Source: ACTIONFOREX

Fed's Barkin: Solid Growth and Inflation Decline, but Caution Remains

AUD/JPY Steadies Around 96.50, Focus Shifts to Potential US Tariff Updates on China

Source: FXSTREET

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