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Higher-than-expected European inflation numbers and more rumours on fast and huge fiscal spending in Europe weighed on European bonds with curves bear steepening. February inflation rose by 0.5% M/M (vs 0.4% consensus) with the annual number moderating from 2.5% to 2.4% instead of the hoped-for 2.3%. Core CPI picked up to 0.6% M/M and 2.6% Y/Y (from 2.7%). Inflation numbers strengthen the case for an April pause in the ECB’s cutting cycle. On the spending front, a defense package is expected to be announced on Thursday while whisper numbers on German efforts, bypassing the next parliament before it convenes a first time end March, reach as far as €1tn. This weekend’s developments with the collapsed Trump-Zelensky deal and the emergency summit in London accelerated the defense need with a willingness to freeze budget discipline. German yields add 6.4 bps (2-yr) to 11.2 bps (30-yr) in a daily perspective. The euro catches a bid against the dollar with the pair changing hands at 1.0485 form a start at 1.0371. European stock indices gain 1.5% on average with the German Dax (+3%) outperforming. US equities underperform, opening with modest gains (+0.25%).The US eco calendar included a significant upward revision to the February manufacturing PMI (52.7 from 51.6) and a near consensus headline manufacturing ISM (50.3 from 50.9 vs 50.7 expected). Details were weak though (stagflation!) with new orders (48.6 from 55.1) and employment (47.6 from 50.3) dropping below the 50-mark while price pressures intensify (62.4 from 54.9). US Treasuries gain ground in a first response with US yield changes posting minor losses in a daily perspective.

The Kingdom of Belgium announced its intention to issue a new OLO (104) via syndication in the near future, likely tomorrow. They are looking at a long 15-yr OLO, maturing in June2042. A third (and final?) syndication later this year is expected to have a shorter, 5y maturity (Jun2030). That way, the Kingdom breaks with its recent “tradition” of exploring the very long end of the Belgian curve. It’s been since 2018 that a new 15-yr deal was the one with longest maturity while the 30-yr was the preferred segment in the recent past (2022-2024). The debt agency so far raised €11.39bn via another syndication (€7bn Jun2035), a regular OLO auction (€3.88bn) and through the ORI facility (€0.51bn). That’s slightly over 27% of this year’s estimated €42bn OLO funding need to cover the lion share of the €44.65bn gross borrowing requirement.

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The Czech manufacturing PMI rebounded more than expected in February, from 46.6 to 47.7 (vs 47.1 consensus). The decline (<50 levels) is the slowest pace since June 2022. Contractions in output and new orders eased, but employment fell at a sharper pace. Demand weakness especially comes from export markets and the construction sector. Business confidence (12-month ahead) picked up to the strongest level since March 2024. Input costs increased at a quicker, but still historically soft, rate in February. Muted cost pressures enabled firms to discount their goods again, as selling prices fell marginally. The Hungarian manufacturing PMI rose from an upwardly revised 50 to 51 in February, the highest level since May 2024, mainly driven by increases in new orders and in output. Purchased inventories saw a notable gain as well, boding well for the future. Employment remains in contraction territory while prices indices were mixed with the import price index dropping and the export price index modestly improving. Both the Czech koruna and the Hungarian forint outperform the euro today, but that’s more linked to general positive risk climate, especially related to the crucial (for CE) car sector. EUR/CZK and EUR/HUF are closing in on support levels at respectively 25 and 400.

EC President von der Leyen highlighted three priorities after a second meeting of the Strategic Dialogue on the Future of the European Automotive Industry. The first one is innovation with a focus on advancing software and hardware for autonomous driving. A second in clean mobility with a need for flexibility on CO2 targets. A proposed amendment to the CO2 Standards Regulation will allow companies three years to meet targets instead of annual compliance, providing more breathing space without changing the targets. Finally there’s competitiveness with a crucial role for strengthening European car supply chains, particularly for batteries. Direct support for EU battery producers will be explored and regulatory simplification will continue. An action plan will be presented on Wednesday with another meeting planned before the summer break.

US ISM Manufacturing PMI slipped to 50.3 in February, down from 50.9, missing expectations of 50.8. The biggest red flag in the report was the sharp drop in new orders, which plunged from 55.1 to 48.6, marking a return to contraction after three months of growth. Production slowed to 50.7 from 52.5. Employment also fell back into contraction at 47.6 after briefly expanding in January. The figures suggest that while manufacturing activity remains in expansion territory, momentum is weakening.

One key concern is the rapid acceleration in price growth, with the Prices Index surging from 54.9 to 62.4. According to ISM, this reflects the initial shock of the new administration’s tariff policies, which have disrupted supply chains, caused new order backlogs, and led to supplier delivery stoppages.

Despite the decline in overall activity, ISM noted that the February reading still signals a 2.2% annualized growth in US GDP.

Full US ISM manufacturing release here.

Eurozone inflation may have exceeded expectations, but it has slowed from the previous month. This allows the European Central Bank (ECB) to consider cutting its key interest rate later this week, though a more cautious approach may be required moving forward.

The headline CPI declined to 2.4%, down from a peak of 2.5%, yet remains well above September’s 1.7% year-on-year rate. Over the past 17 months, inflation has held steady at around 2.4%, surpassing the target of “around 1.8%”.

Meanwhile, the core price index, excluding volatile goods, has dipped to 2.6%, marking its lowest level since early 2022 but still significantly higher than the stable inflation observed until mid-2021.

Despite these figures, the ECB has already slashed its key rate by 160 basis points since last September. Following today’s report, another quarter-point cut is expected on Thursday, which mitigates the risk of sudden inflation spikes.

Earlier in the week, the euro strengthened due to robust inflation data and improved European PMI readings for late February. For the ECB, stabilising and potential appreciation of the euro could influence further easing measures. With weak domestic demand in Europe posing minimal inflationary threats, the economy has responded positively to monetary easing and euro depreciation observed since late 2024.

Daily Pivots: (S1) 155.00; (P) 156.08; (R1) 157.37; More...

EUR/JPY's breach of 158.19 resistance suggests short term bottoming at 154.77, ahead of 154.40 key support. Intraday bias is back on the upside for 55 D EMA (now at 159.77). Sustained break there will argue that corrective pattern from 154.40 has started another rising leg, and target 161.17 resistance and above. Nevertheless, below 154.77 will target 154.40 support and below.

In the bigger picture, price actions from 175.41 are seen as correction to rally from 114.42 (2020 low). Strong support should be seen from 38.2% retracement of 114.42 to 175.41 at 152.11 to contain downside. However, sustained break of 152.11 will bring deeper fall even still as a correction. Next target will be 100% projection of 175.41 to 154.40 from 166.67 at 145.66.

Daily Pivots: (S1) 1.6660; (P) 1.6717; (R1) 1.6768; More...

EUR/AUD's break of 1.6800 resistance indicates resumption of whole rise from 1.5963. Intraday bias stays on the upside for 61.8% projection of 1.5963 to 1.6800 from 1.6355 at 1.6872. Firm break there could prompt upside acceleration to 100% projection at 1.7192, which is close to 1.7180 high. On the downside, below 1.6702 minor support will delay the bullish case and turn intraday bias neutral again first.

In the bigger picture, with 1.5996 key support (2024 low) intact, larger up trend from 1.4281 (2022 low) is still in favor to resume through 1.7180 at a later stage. Nevertheless, sustained break of 1.5996 will indicate that such up trend has completed and deeper decline would be seen.

Daily Pivots: (S1) 149.49; (P) 150.24; (R1) 151.38; More...

Break of 150.92 support turned resistance suggests short term bottoming at 148.55, on bullish convergence condition in 4H MACD. Intraday bias is back on the upside for stronger rebound to near term falling channel resistance (now at 152.61). On the downside, break of 148.55 will resume the fall from 158.86 to 61.8% retracement of 139.57 to 158.86 at 146.32 next.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). In case of another fall, strong support should be seen from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound. However, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

Daily Pivots: (S1) 0.8996; (P) 0.9017; (R1) 0.9050; More…

No change in USD/CHF's outlook and intraday bias stays neutral. On the upside, firm break of 0.9053 will suggest that corrective pattern from 0.9200 has already completed at 0.8911. Further rally should then be seen to retest 0.9200 resistance. In case of another fall, downside should be contained by 38.2% retracement of 0.8374 to 0.9200 at 0.8884 to bring rebound.

In the bigger picture, decisive break of 0.9223 resistance will argue that whole down trend from 1.0342 (2017 high) has completed with three waves down to 0.8332 (2023 low). Outlook will be turned bullish for 1.0146 resistance next. Nevertheless, rejection by 0.9223 will retain medium term bearishness for another decline through 0.8332 at a later stage.

Daily Pivots: (S1) 1.2549; (P) 1.2585; (R1) 1.2612; More...

Intraday bias in GBP/USD is turned neutral first with current strong recovery. On the upside, break of 1.2715 will resume the rally from 1.2099 to 1.2810 resistance. Firm break there will target 61.8% retracement of 1.3433 to 1.2099 at 1.2923. On the downside, break of 1.2558 will resume the fall from 1.2715 to near term rising channel support (now at 1.2439).

In the bigger picture, rise from 1.0351 (2022 low) should have already completed at 1.3433 (2024 high), and the trend has reversed. Further fall is now expected as long as 1.2810 resistance holds. Deeper decline should be seen to 61.8% retracement of 1.0351 to 1.3433 at 1.1528, even as a corrective move. However, firm break of 1.2810 will dampen this bearish view and bring retest of 1.3433 high instead.

Daily Pivots: (S1) 1.0350; (P) 1.0385; (R1) 1.0410; More...

EUR/USD's strong rebound today is mixing up the near term outlook. But still, intraday bias stays neutral and further decline is in favor as long as 38.2% retracement of 1.1213 to 1.0176 at 1.0572 holds. Below 1.0358 will target 1.0176/0210 support zone first. Firm break there will resume whole fall from 1.1213, and carry larger bearish implications. However, sustained trading above 1.0572 will pave the way to 61.8% retracement at 1.0817.

In the bigger picture, immediate focus is on 61.8 retracement of 0.9534 (2022 low) to 1.1274 (2024 high) at 1.0199. Sustained break there will solidify the case of medium term bearish trend reversal, and pave the way back to 0.9534. However, reversal from 1.0199 will argue that price actions from 1.1274 are merely a corrective pattern, and has already completed.