US Annual Inflation Rate in February Remains Relatively Stable at 2.8%

Economic

Summary:

While inflation has declined sharply from its peak in 2022, price increases have remained above Fed’s target rate of 2%

Consumer prices remained relatively stable in February even as some economists have warned that prices could rise again amid Donald Trump’s trade war and stock markets have fallen on fears of a recession.

According to the Bureau of Labor Statistics latest Consumer Price Index (CPI), which tracks the prices of a range of goods and services, the annualized inflation in February was 2.8%, a 0.2% decrease from January’s year-over-year rate of 3%. The month-by-month price increase for all goods minus the volatile food and energy industries was 0.2%, compared with January’s 0.4%.

The egg shortage caused by the avian flu outbreak drove egg prices up 10.4% in February. Meanwhile, energy prices cooled a bit, rising 0.2% in February compared with 1.1% in January.

While inflation has declined sharply from its peak just above 9% in 2022, price increases have remained above the Federal Reserve’s target rate of 2%. The closest inflation has gotten to the target rate was in September, when inflation hit 2.4%.

The Fed had spent the last few years adjusting interest rates in an attempt to gently lower inflation without hurting the labor market. At the end of last year, it seemed as if the Fed would achieve the so-called “soft landing”: prices were coming down, and the unemployment rate remained relatively low at around 4%. The Fed lowered interest rates three times last year. The central bank meets next week and is expected to leave rates unchanged. US Annual Inflation Rate in February Remains Relatively Stable at 2.8%_1

US Annual Inflation Rate in February Remains Relatively Stable at 2.8%_1

But the slow and steady recovery from the inflationary heights reached after the Covid pandemic has been jolted by Donald Trump’s return to the White House. The president has stuck to his campaign promise to use tariffs against the US’s key trading partners, arguing they have taken advantage of the US and done too little to halt the flow of illegal drugs into the country.

So far, he has tacked on an extra 20% tariff on all imports from China and 50% tariffs on steel and aluminum exports from Canada. Threats of other tariffs, including a 25% tariff on all imports from Mexico and Canada, are still up in the air.

The instability of Trump’s trade policies has rocked US stock markets, which has cratered downwards over the last week.

The White House has batted away warnings that reactionary trade policies could destabilize the economy and even cause a recession. Wall Street went down even further on Monday, after Trump didn’t rule out a possible recession, saying on Sunday that the country is in “a period of transition, because what we’re doing is very big”.

The Fed chair, Jerome Powell, has all but directly confirmed that the central bank will hold rates steady at its next meeting, on 18-19 March. In prepared remarks on 7 March, Powell said that the “costs of being cautious are very, very low” given that the economy is in a stable place – for now.

“The economy’s fine. It doesn’t need us to do anything, really. And so we can wait, and we should wait,” Powell said.

Taking pains to avoid any overtly political statements, Powell said that there is “heightened uncertainty about the economic outlook” but “it remains to be seen how these developments might affect future spending and investment”.

Source: Theguardian

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Warren Takunda

Economic

The Australian dollar is expected to weaken in the coming months as the Reserve Bank of Australia (RBA) finally embarks on a meaningful rate cutting cycle, according to a new report from Commerzbank Research.

The RBA cut its cash rate for the first time in this cycle, bringing an end to the longest rate hike cycle in the past 30 years.

The RBA's decision to lower rates follows 33 months of tightening, with a cumulative increase of 4.25%. However, despite the aggressive hikes, the peak interest rate remains the lowest in three decades, the report noted.

AUD Faces Continued Downward Pressure

While the Australian dollar has recovered slightly against the US dollar in recent weeks, analysts attribute this mainly to USD weakness rather than fundamental AUD strength.

“Since around mid-January, the Aussie has recovered somewhat against the US dollar, after having depreciated sharply in the preceding months,” the report states. “However, the rebound in recent weeks is more likely due to the pronounced weakness of the US dollar.”

Against most other G10 currencies, the AUD has continued its decline.

Analysts at Commerzbank predict further downside, with AUD-USD projected to fall to 0.60 by the end of 2025 and 0.58 by late 2026.

RBA Expected to Cut Faster Than Markets Anticipate

Commerzbank Research forecasts that the RBA will continue cutting rates faster than the market currently expects, with a projected cash rate of 3.5% by Q3 2025.

The market has priced in a slow pace of rate reductions, but Commerzbank analysts disagree. “At its February meeting, the RBA explicitly stated that the market should not assume that the first cut would necessarily be followed by further cuts,” the report explains. “However, given the continued weakness in business sentiment indicators and the persistently low level of consumer confidence, we continue to expect faster moves.”

Labour Market Resilience and China’s Economic Slowdown

Despite rising interest rates over the past 33 months, Australia's labour market remains surprisingly strong. Employment growth has been resilient, showing only slight signs of slowing, which is unusual compared to past rate hike cycles.

“The exceptional strength of the labour market is also reflected in job growth,” the report highlights. However, weak productivity and strong wage growth could pose risks for inflationary pressures moving forward.

Adding to AUD’s headwinds, China’s economic slowdown is expected to weigh heavily on Australian exports. As Australia’s largest trading partner, China’s weak demand for commodities could further pressure the AUD. “Over the medium term, the continued weakness of the Chinese economy is also likely to weigh on growth and, in particular, on Australian exports,” the report notes.

Market Outlook: More Downside Ahead

Analysts warn that the Australian dollar is likely to depreciate significantly, especially against a strengthening Euro. Commerzbank forecasts the EUR-AUD exchange rate to rise from 1.67 in mid-2025 to 1.90 by late 2026, signaling a sharp decline in AUD’s relative value.

With faster-than-expected rate cuts, global economic uncertainties, and slowing Chinese demand, the AUD could face further downside risks in the coming months. “We continue to expect a longer-term weaker AUD in the coming months,” Commerzbank analysts conclude.

Source: Poundsterlinglive

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Justin

Economic

The bond market had a counterintuitive reaction to yesterday’s cooler-than-expected core CPI data (0.2% MoM), with the Fed’s terminal rate pricing inching higher and Treasuries soft across the curve. This could mirror some reluctance to buy into the deflationary story before the tariff impact has started to show, ING's FX analyst Francesco Pesole notes.

Upside risks for the greenback

"The US Dollar (USD) followed UST yields higher but is still losing against most G10 peers since the start of the week. The canonical negative USD-equity market correlation has dwindled in the past weeks as US stocks are trading closely in line with US activity sentiment. Again, the key is whether more equity declines are a US-only matter or followed by European stocks. Futures point to the latter today, so the dollar may not face much idiosyncratic pressure."

"The main event in the US calendar today is the release of PPI data for February. Many core PPI components feed into the Fed-preferred core PCE, so markets will be quite attentive. Still, following yesterday’s unusual reaction to CPI data, we are not sure a cooler print today would trigger a dollar correction. Consensus is for a 0.3% MoM core PPI print, but expectations may have shifted to a slightly lower figure after yesterday’s CPI."

"Anyway, what seems to be weighing on sentiment this morning is the higher risk of a US government shutdown after Senate Democrats said they would block the bill to avert a government shutdown. The proposed alternative is an interim funding plan until 11 April: that would simply postpone a key risk for markets, hence the negative reaction in stock futures. Moving on, it is probably a USD-negative development given the current tight correlation between the US economic outlook and the dollar. We don’t have a high conviction directional call for the dollar today. A stabilization might be on the cards for now; in the coming weeks, we still see upside risks for the greenback."

Source: FXSTREET

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Michelle

Economic

Forex

The EUR/USD pair is trading near 1.0887 on Thursday as investors cautiously evaluate the impact of escalating global trade tensions on the economy and consumer behaviour. Despite the uncertainty, the currency pair shows resilience, with market participants closely monitoring key developments.

Key market factors affecting EUR/USD

The primary focus remains on the ongoing global trade war, which has intensified following recent announcements by US President Donald Trump. Trump has pledged to impose additional tariffs on trading partners in response to the EU and Canada’s retaliatory measures triggered by earlier US tariffs on steel and aluminium imports.

Further adding to the uncertainty, Trump reaffirmed his commitment to imposing additional retaliatory duties scheduled for April. This has intensified concerns about potential spillover effects on global markets and economic stability.

On the economic data front, US consumer inflation figures for February relieved the currency market. The Consumer Price Index (CPI) rose by 0.2% month-on-month, falling short of the expected 0.3% increase. Year-over-year, inflation eased to 2.8%, down from 3.0% in January. However, the full impact of recent tariffs is yet to materialise, leaving markets cautious about potential inflationary pressures in the coming months.

Investors are now focusing on the Federal Reserve’s upcoming policy meeting next week. Market consensus suggests that the Fed will hold interest rates steady, but all eyes will be on the updated economic forecasts and any signals regarding future monetary policy. The decision could play a pivotal role in shaping the near-term trajectory of the EUR/USD pair.

Technical analysis of EUR/USD

On the H4 chart, the EUR/USD pair recently completed a growth wave, reaching a high of 1.0944. Currently, the market is consolidating near the top of this wave. A downward breakout from this range is anticipated, potentially initiating the first wave of decline toward the 1.0533 level. Following this, a corrective rebound to 1.0740 could occur. This scenario is supported by the MACD indicator, whose signal line remains above zero but is trending downward, signalling weakening momentum.

On the H1 chart, the pair is forming a consolidation range around 1.0830, extending up to 1.0944. A decline towards the lower boundary of this range is expected, potentially leading to a breakout and a drop to 1.0750. A subsequent retest of 1.0830 (from below) may follow before a further decline to 1.0533. The Stochastic oscillator reinforces this bearish outlook, with its signal line below the 50 mark and trending downward toward 20.

Conclusion

The EUR/USD pair remains precarious as investors navigate the dual challenges of escalating trade tensions and impending central bank decisions. While technical indicators point to a bearish near-term outlook, market sentiment remains highly sensitive to trade negotiations and macroeconomic data developments. Traders should remain alert to potential volatility and be prepared to adapt their strategies as new information emerges.

Source: ACTIONFOREX

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Warren Takunda

Stocks

Asian shares were mostly lower on Thursday despite a rebound on Wall Street fueled by an encouraging update on U.S. consumer prices.

U.S. futures fell and oil prices were little changed.

Chinese markets slipped as investors watched for the next steps in President Donald Trump’s trade war. Hong Kong’s Hang Seng index shed 0.7% to 23,426.80, while the Shanghai Composite index lost 0.4% to 3,357.02.

Tokyo’s Nikkei 225 gained 0.5% to 37,014.82.

South Korea’s Kospi edged 0.1% lower, to 2,573.05. In Australia, the S&P/ASX 200 lost 0.4% to 7,756.10.

Taiwan’s Taiex shed 0.4% and the Sensex in India edged 0.1% higher. Bangkok’s SET slipped 0.1%.

On Wednesday, the S&P 500 gained 0.5% to 5,599.30 after skidding between an early gain of 1.3% and a later loss. The unsettled trading came a day after the index briefly fell more than 10% below its all-time high set last month.

The Dow Jones Industrial Average also pinballed sharply before ending with a loss of 0.2% at 41,350.93. The Nasdaq composite climbed 1.2% to 17,648.45.

The inflation report showed overall prices rose less for U.S. consumers last month than economists expected.

Companies in the artificial-intelligence industry led gains, bouncing back after AI stocks got crushed recently by worries their prices had gone too stratospheric.

Nvidia climbed 6.4% to trim its loss for the year so far to 13.8%. Server-maker Super Micro Computer rose 4%, and GE Vernova, which is helping to power AI data centers, gained 5.1%.

Elon Musk’s Tesla, whose price had more than halved since mid-December, rallied 7.6% for its first back-to-back gain in nearly a month.

But more stocks in the S&P 500 fell than rose. Among the hardest hit were businesses that could be set to feel pain because of Trump’s trade war.

Brown-Forman, the company behind Jack Daniel’s whiskey, tumbled 5.1%, and Harley-Davidson sank 5.7%.

U.S. bourbon and motorcycles are among the products the European Union is targeting with its own tariffs on U.S. products. The moves were in response to Trump’s 25% tariffs on steel and aluminum that kicked in earlier in the day.

Canada also hit back with tariffs announced on U.S. tools, sports equipment and other products.

“We deeply regret this measure,” European Union President Ursula von der Leyen said. “Tariffs are taxes. They are bad for business, and worse for consumers.”

The question hanging over Wall Street is how much pain Trump will let the economy endure through tariffs and other policies.

Even if Trump ultimately goes with milder tariffs, damage could still be done. The dizzying barrage of on -again, off -again announcements on tariffs has already begun sapping confidence among U.S. consumers and businesses by ramping up uncertainty. That could cause U.S. households and businesses to spend less, hurting the economy.

On Tuesday, for example, Trump said he would double 25% tariffs announced on Canadian steel and aluminum, only to walk it back later in the day after a Canadian province pledged to drop a retaliatory measure that had incensed Trump.

Several U.S. businesses have said they’ve already begun seeing a change in behavior among their customers.

Delta Air Lines sank 3% to compound its drop of 7.3% from the prior day, when the carrier said it’s seeing demand weaken for close-in bookings for its flights.

Casey’s General Stores, the Ankeny, Iowa-based company that runs nearly 2,900 convenience stores in 20 states, offered some encouragement. Its stock rose 6.2% after it reported stronger profit and revenue for the latest quarter than analysts expected thanks in part to strength for sales of hot sandwiches and fuel. It also kept steady its forecast for upcoming revenue this year.

Wednesday’s inflation report came at a time when worries are mounting that Trump’s tariffs will drive prices even higher as U.S. importers pass on their costs to their customers.

It’s also helpful for the Federal Reserve, which had been cutting interest rates last year to boost the economy before pausing this year, partly because of concerns about stubbornly high inflation.

In other dealings early Thursday, U.S. benchmark crude oil lost 11 cents to $67.57 per barrel. Brent crude, the international standard, gave up 5 cents to $70.90 per barrel.

The U.S. dollar fell to 147.88 Japanese yen from 148.25 yen. The euro rose to $1.0889 from $1.0887.

Source: AP

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Owen Li

Commodity

Crude oil prices dipped today, despite expectations for strong demand following the U.S. Energy Information Administration’s latest inventory report that showed a more sizable draw than expected.

At the time of writing, Brent crude was trading at $70.87 per barrel, with West Texas Intermediate at $67.55 per barrel, both down from Wednesday.

The Energy Information Administration reported a crude oil stock build of 1.4 million barrels for the week to March 7, but that build was accompanied by a much more sizable decline in gasoline inventories, at 5.7 million barrels. Middle distillates also declined, by 1.6 million barrels, in the reporting period.

“Declining U.S. gasoline inventories raised expectations for a seasonal demand increase in spring, but concerns about the global economic impact of tariff wars weighed on the market,” Nissan Securities Investment chief strategist Hiroyuki Kikukawa told Reuters.

Meanwhile, OPEC reiterated its bullish stance on oil demand for this year in its latest monthly report. The group expects global oil demand to grow by 1.45 million barrels daily this year, moderating slightly to 1.43 million barrels daily in 2026.

The oil cartel also reported higher production, which also affected prices on both Wednesday and early on Thursday. The February average for the group was 26.86 million barrels daily, up by 154,000 barrels daily from January. The biggest contributors to this higher output were Nigeria and Iran. OPEC+ output also rose strongly in February, driven by Kazakhstan, where production increased by an impressive 198,000 barrels daily. This will make the Central Asian producer’s task harder in making up for overproduction under the OPEC+ quota regime.

OPEC+ is expected to add some 138,000 barrels daily to total production beginning in April, as it had planned when it devised its production control policy. However, most observers appear to assume that the ramp-up is set in stone while in fact OPEC+ has repeatedly indicated it will be flexible in its decisions, basing them on market conditions, meaning prices.

Source: OILPRICE

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Glendon

Commodity

(March 13): Gold’s burgeoning safe-haven allure may see it surge to a record high of US$3,500 (RM15,522) an ounce during the third quarter, according to Macquarie Group analysts.

Bullion could average US$3,150 an ounce over that period, analysts led by Marcus Garvey said in a note. The precious metal — which was trading around US$2,940 an ounce on Thursday — will get further support from concerns about a potentially growing US deficit, they said.

Bullion has risen by 12% this year, driven by uncertainties around geopolitics and US President Donald Trump’s tariff policies. A worsening US budget outlook is signaling inflation could increase, which would benefit gold as a hedge, according to Macquarie.

“We view gold’s price strength to date, and our expectation for it to continue, as primarily being driven by investors’ and official institutions’ greater willingness to pay for its lack of credit or counterparty risk,” the analysts said.

There is “ample scope” for bullion-backed exchange-traded funds to increase holdings, they said. Gold will also find additional support from the physical market — jewellery, bars, coins and technology — which has held up despite elevated prices, they added.

Last month, Goldman Sachs Group Inc raised its year-end gold target to US$3,100 an ounce, while Citigroup Inc. said earlier in February that it expected prices to hit US$3,000 an ounce within three months.

Source: Theedgemarkets

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US Annual Inflation Rate in February Remains Relatively Stable at 2.8%

Source: Theguardian

Expect A Weaker Australian Dollar in the Coming Months

AUD Faces Continued Downward Pressure

RBA Expected to Cut Faster Than Markets Anticipate

Labour Market Resilience and China’s Economic Slowdown

Market Outlook: More Downside Ahead

Source: Poundsterlinglive

USD: Risk Sentiment Softer Again Today

Source: FXSTREET

EUR/USD Holds Onto Hopes of Further Growth as Investors Assess The Risks

Key market factors affecting EUR/USD

Technical analysis of EUR/USD

Conclusion

Source: ACTIONFOREX

Asian Shares Decline Despite Rebound on Wall St as Investors Await Next Steps in Trade Wars

Oil Prices Dip Despite Bullish Demand Outlook

Source: OILPRICE

Gold May Rise as High as US$3,500 in 3q, Macquarie Says

Source: Theedgemarkets

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