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Daily Pivots: (S1) 180.96; (P) 181.57; (R1) 182.32; More...

Intraday bias in EUR/JPY remains neutral and outlook is unchanged. Focus remains on 38.2% retracement of 172.24 to 186.86 at 181.27. On the downside, sustained break of 181.27 will argue that fall from 186.86 is correcting whole up trend from 154.77. Next near term target will be 161.8% projection of 186.86 to 181.76 from 186.22 at 177.96. Nevertheless, strong rebound from current level, followed by break of 182.99 minor resistance will retain near term bullishness, and bring retest of 186.86 high first.

In the bigger picture, considering bearish divergence condition in D MACD and break of 55 D EMA, a medium term top could be formed at 186.86 already. Deeper correction would be seen but downside should be contained by 38.2% retracement of 154.77 to 186.86 at 174.60 to bring rebound. Meanwhile, firm break of 186.86 will resume larger up trend to 78.6% projection of 124.37 to 175.41 from 154.77 at 194.88 next.

Daily Pivots: (S1) 0.8698; (P) 0.8724; (R1) 0.8762; More…

EUR/GBP breached 0.8744 resistance briefly, but failed to hold above there. Intraday bias stays neutral at this point. On the upside, decisive break of 0.8744 resistance will indicate that fall from 0.8863 has completed as a correction. Further rally should then be seen back to retest 0.8863 high. On the downside, sustained break of 38.2% retracement of 0.8221 to 0.8663 at 0.8618 will carry larger bearish implications and turn outlook bearish.

In the bigger picture, rise from 0.8221 medium term bottom (2024 low) is seen as a corrective move. Upside should be limited by 61.8% retracement of 0.9267 to 0.8221 at 0.8867. Sustained trading below 55 W EMA (now at 0.8631) should confirm that this corrective bounce has completed. In this case, deeper fall would be seen back to 0.8201/21 key support zone. However, decisive break of 0.8867 will suggest that EUR/GBP is already reversing whole decline from 0.9267 (2022 high). That should pave the way back to 0.9267.

Daily Pivots: (S1) 1.6692; (P) 1.6748; (R1) 1.6782; More...

EUR/AUD is still bounded in consolidations above 1.6620 and intraday bias remains neutral. With 1.7060 resistance intact, outlook stays bearish and further decline is expected. On the downside, break of 16620 will resume larger down trend from 1.8554 to 138.2% projection of 1.8554 to 1.7245 from 1.8160 at 1.6351 next. However, firm break of 1.7060 will indicate short term bottoming, and bring stronger rebound.

In the bigger picture, fall from 1.8554 medium term top is seen as reversing the whole up trend from 1.4281 (2022 low). Deeper decline should be seen to 61.8% retracement of 1.4281 to 1.8554 at 1.5913, which is slightly below 1.5963 structural support. For now, risk will stay on the downside as long as 1.7245 support turned resistance holds, even in case of strong rebound.

Daily Pivots: (S1) 0.9110; (P) 0.9125; (R1) 0.9145; More....

EUR/CHF is still bounded in consolidations above 0.9092 and intraday bias stays neutral. With 0.9180 resistance intact, further decline is expected. On the downside, firm break of 0.9092 will resume larger down trend and target 261.8% projection of 0.9394 to 0.9268 from 0.9347 at 0.9143. However, considering bullish convergence condition in 4H MACD, decisive break of 0.9180 will indicate short term bottoming, and bring stronger rebound towards 55 D EMA (now at 0.9228).

In the bigger picture, down trend from 0.9928 (2024 high) is still in progress with falling 55 W EMA (now at 0.9258) intact. Next target is 61.8% projection of 1.1149 to 0.9407 from 0.9928 at 0.8851. Outlook will stay bearish as long as 0.9394 resistance holds, in case of recovery.

Media release

Annual consumers price inflation was slightly above the Monetary Policy Committee’s 1 to 3 percent target band at the end of 2025. Increases in food and electricity prices and local council rates were the biggest contributors to above-target inflation.

The economy is at an early stage in its recovery. With ongoing strength in commodity prices, economic activity in the agricultural sector and regional New Zealand remains strong. Although residential and business investment is increasing, households remain cautious in their spending. The labour market is stabilising, but unemployment remains elevated. House price growth remains weak, dampening household wealth and inclination to spend.

In response to previous cuts in the OCR, economic growth is broadening across sectors of the economy, such as manufacturing, construction and some retail. Economic growth is expected to increase over 2026.

Inflation is most likely returning to within the Committee’s 1 to 3 percent target band in the current quarter. The Committee is confident that inflation will fall to the 2 percent midpoint over the next 12 months due to spare capacity in the economy, modest wage growth, and core inflation within the target band.

Risks to the inflation outlook are balanced. The global environment remains highly uncertain. Domestically, greater caution by households in their spending decisions could slow the pace of New Zealand’s economic recovery, risking inflation falling below the target midpoint. But with demand increasing in the economy, businesses could try to increase prices faster than expected, leaving inflation above the target midpoint.

The Committee agreed to hold the OCR at 2.25 percent. If the economy evolves as expected, monetary policy is likely to remain accommodative for some time. The Committee will continue to assess incoming data carefully. As the recovery strengthens and inflation falls sustainably towards the target midpoint, monetary policy settings will gradually normalise.

Summary record of meeting – February 2026

A significant easing in monetary policy since August 2024 is supporting a recovery in economic activity. Annual consumers price inflation increased to 3.1 percent in the December 2025 quarter, slightly above the Monetary Policy Committee’s 1 to 3 percent target range. The Committee is confident, however, that with significant excess capacity in the economy, inflation will fall to around the mid-point of the target range over the next 12 months.

Headline inflation is expected to fall to near the mid-point of the target band

The Committee noted that headline inflation is most likely returning to the target band in the March 2026 quarter. Recent increases in inflation have been driven by higher tradables inflation, partly due to larger increases in volatile items such as food, international airfares, and overseas accommodation. Tradables inflation is expected to fall back over the next 12 months due to relatively stable import prices and some support from the recent appreciation in the New Zealand dollar.

Inflation has also been held up by some components of non-tradables inflation that are less sensitive to monetary policy, particularly administered prices. These are prices that are set or heavily influenced by central or local government. Inflation in these components has been due to a lagged response to previous high inflation and a range of structural factors. The Committee expects there to be less inflation in some administered prices over the coming year, such as electricity lines fees, university fees and vehicle licensing fees.

Components of the non-tradables basket that are sensitive to monetary policy have declined to around historic average levels. Measures of core inflation have remained stable, albeit mostly above the target midpoint. Rates of wage inflation remain consistent with inflation trending back towards 2 percent.

The Committee emphasised the importance that higher near-term inflation not become embedded in longer-run expectations. Inflation expectations for professional forecasters and business leaders increased slightly across all tenors, but long-term expectations remain close to the target mid-point. Inflation expectations of households have continued to decline from elevated levels.

Significant spare capacity remains

The Committee noted that there is still significant spare capacity in the economy. The output gap is estimated to be -1.5 percent of potential GDP in the December 2025 quarter.

Spare capacity in the labour market is substantial but stabilising. While the unemployment rate increased to 5.4 percent, key measures of employment strengthened over the December quarter. The labour market is expected to continue to strengthen as the nascent recovery in economic activity broadens through 2026.

Continued spare capacity, subdued wage growth and measures of core inflation within the target band provide the Committee with confidence that the conditions are in place to return and sustain inflation at 2 percent over the medium term.

Economic activity is now recovering

Economic activity began recovering over the second half of last year in response to strong export prices and supportive monetary policy settings. GDP increased by 1.1 percent in the September quarter, after falling 1.0 percent in the June quarter. The Committee noted that measured GDP data has been more volatile than usual, in part due to a range of temporary factors and measurement issues.

There are signs that the recovery is broadening across the economy, although the September quarter GDP likely overstates the true level of momentum in the economy. Residential and business investment both increased from low levels, and measures of investment intentions and building consent issuance have all increased. More timely measures of economic activity such as the QSBO, PMI, and PSI suggest that growth has been maintained in 2025Q4 and 2026Q1.

The economic recovery has been uneven across sectors and regions. Stronger activity has been observed in the rural economy and in the primary sector. Consumer spending has been constrained by low growth in employment income and the negative effect of falling real house prices on household wealth.

House prices have continued to edge downwards despite lower mortgage rates and a modest pick-up in housing market activity. This possibly reflects weak population growth and elevated long-term interest rates. House price growth is expected to gradually increase over 2026 and then grow at around the rate of household income growth over the medium term.

Household consumption is projected to increase over the medium term as past reductions in the Official Cash Rate (OCR) continue to support demand. The Committee noted that labour market conditions are likely to become more important relative to house prices in influencing consumption.

Government expenditure is assumed to grow at a subdued pace over the medium term, consistent with the Half Year Economic and Fiscal Update 2025 projections.

Domestic financial conditions have tightened since November

The New Zealand dollar Trade Weighted Index has appreciated, reflecting higher domestic interest rates and a weakening US dollar. Wholesale interest rates beyond 12 months have increased due to higher global interest rates and investor expectations of future increases in the OCR. Banks have passed these increases through to fixed-term mortgage rates.

The flow of mortgage borrowing priced in the 1–2-year terms increased substantially since November. While the average mortgage rate has declined to 5.1 percent, further downward adjustments are expected to be less than assumed in November.

Global growth has been resilient but risks remain high

The Committee noted that the global economy was more resilient than expected in 2025. Tariffs have had less impact on global growth than previously expected, while strong investment in artificial intelligence technology has supported exports from our trading partners in Asia. Expansionary fiscal policy has also supported growth in a number of economies. The Committee continues to expect trade barriers to present a headwind to growth, with trading partner growth expected to weaken slightly over 2026.

On a trade weighted basis, global inflation has declined, but there has been significant divergence across countries. Tariff policies have increased inflation pressure in some economies such as the US, but these have been offset by disinflationary pressure in China and the broader Asia region.

Geopolitical developments over recent months have led to continued high economic uncertainty and financial market volatility. The US dollar has declined, while the prices of oil and precious metals have risen, along with sovereign bond term premia.

The domestic financial system remains stable

The Committee was briefed on financial system stability. Measures of domestic financial stress have eased as lower interest rates reduce debt servicing pressures. Non-performing housing loans have also declined, and banks expect further reductions in housing and commercial property impairments over 2026. The Committee agreed that there is currently no material trade-off between meeting its inflation objectives and maintaining financial system stability.

Risks to the outlook for inflation are balanced

There are upside and downside risks to the near-term outlook for inflation. The Committee noted the contribution that administered price inflation had played in recent inflation outturns and the risk that this could remain high for longer than currently assumed. Conversely, the Committee discussed the risk that volatile components of tradable inflation could fall more rapidly.

The Committee discussed the risks around firms’ price-setting behaviour. While weak demand has constrained the ability of firms to pass on higher costs, the Committee noted the risk that changing price setting behaviour could result in higher inflation. In this context the Committee also discussed the risk that the output gap could be smaller than currently estimated, accentuating the risk that firms raise prices as demand improves. This could lead to more persistence in domestically generated inflation pressure that would require tighter monetary policy than otherwise.

Members noted risks regarding the speed of the economic recovery. The Committee noted the risk that household spending could be slower to recover than currently assumed, particularly if house price growth remains subdued. This could lead to households continuing to maintain higher levels of precautionary saving. Conversely members noted a risk that higher export incomes and the return of capital to dairy farmers from the sale of Fonterra’s consumer brands business could spur higher investment and consumer spending by farmers.

The global outlook is uncertain

The Committee noted that the global economic outlook continues to be highly uncertain. In the near-term, key uncertainties relate to the direction of global trade policy, market valuations of artificial intelligence investment and geopolitical tensions. Downside risks remain to growth in China as policy makers attempt to maintain growth targets in the face of weak domestic demand. Continued excess capacity and subdued demand in China could create greater disinflationary pressure.

Over the longer term, the Committee noted risks associated with unsustainable fiscal dynamics in several countries. This could put ongoing pressure on central bank independence and create conditions for more persistent global inflation. This could lead to higher long-term global real interest rates and create risks to global financial stability.

The Committee reached consensus to hold the OCR at 2.25 percent

The Committee discussed the monetary conditions required to achieve their medium-term inflation mandate.

The Committee agreed that the economic recovery remains nascent, and a premature normalisation of monetary conditions could dampen the recovery and lead inflation to undershoot the target. The Committee also considered the risk that policy remains accommodative for too long, leading inflation to persist above the mid-point of the target range for longer.

Members agreed that the monetary policy stance would need to remain accommodative for some time to support a sustained recovery in economic activity. There is a risk that prolonged caution on the part of households could slow the recovery in consumption activity, particularly in the context of a recent tightening in financial conditions. Members also noted global risks that could slow domestic economic recovery. Significant excess capacity, modest wage growth and core inflation within the target band provides confidence that inflation will return to the midpoint of the target band.

Members noted the risk of inflation remaining more persistent, given surveys showing somewhat elevated inflation expectations and business pricing intentions. One member supported maintaining the OCR at current levels for now but noted that if economic activity recovers as expected, monetary stimulus could begin to be withdrawn somewhat earlier without compromising the economic recovery. Another member noted that responding too quickly to firms’ pricing intentions could reinforce perceptions of strong demand and encourage firms to align on further price increases.

On Wednesday 18 February the Committee reached consensus to hold the OCR at 2.25 percent. The forward OCR path reflects a somewhat stronger economic outlook and balanced risks to inflation.

If the economy evolves as expected, monetary policy is likely to remain accommodative for some time. The Committee will continue to assess incoming data carefully. As the recovery strengthens and inflation falls sustainably towards the target midpoint, monetary policy settings will gradually normalise.

Attendees:

MPC members: Anna Breman (Chair), Carl Hansen, Hayley Gourley, Karen Silk, Paul Conway, Prasanna Gai
Treasury Observer: Struan Little
MPC Secretary: Chris Bloor

• As widely expected, the RBNZ held the OCR at 2.25%. The decision was unanimous, so no vote was required.
• The RBNZ’s revised OCR forecast signals the likelihood of policy tightening beginning late this year, rather than by mid-2027 as was forecast in November.
• The RBNZ’s activity outlook hasn’t been significantly lifted and is weaker in the second half of 2026 and into 2027.
• The RBNZ expects inflation to move back inside the target band in the coming quarter and fall back to 2.0% by mid-2027. Risks are viewed as “balanced”.
• Westpac continues to expect the OCR will begin rising from the December 2026 meeting, with tightening to continue at most meetings in 2027.
• The generally dovish tone significantly moves the balance of risk away from an earlier start to the tightening cycle.
• Policy could tighten sooner than December if either activity or inflation readings exceed the RBNZ’s expectations, or later if the converse occurs.

Key take out: OCR on hold for a while yet.

As widely expected, the RBNZ held the OCR at 2.25%. The decision was reached by consensus and so no vote was required.

Also as expected, the RBNZ’s revised projections include a pulling forward of the timing of projected policy tightening.

The RBNZ’s forecast profile was a bit more dovish than we anticipated, and noticeably less hawkish than market pricing. Our view was that the RBNZ would bring forward the tightening to December but wouldn’t place much if any weight on an OCR increase before then. We expected that there would be a good chance of a follow-up hike in February 2027. As it happened, while the RBNZ removed the chance of an OCR cut in the first half of 2026 and signalled the possibility of an end of year hike, they didn’t see a follow up hike in the first quarter of 2027. A full hike seems evident by February 2027 vs the mid-2027 implied last time but it will take some time before the neutral 3-3.5% neutral zone is reached (2028/29 in these forecasts).

This modest shift forward in the tightening profile reflects a few key judgements:

• The output gap initially narrows a little bit more quickly than previously but then narrows more slowly such that the timeframe over which it closes completely remains unchanged (see detail below). The RBNZ didn’t assess the stronger Q3 GDP outcome as implying much in terms of reduced spare capacity and they have not upgraded their short-term growth forecasts. This is consistent with the RBNZ thinking their current GDP nowcasts are a fair reflection of how growth will evolve in the next couple of quarters. The RBNZ remains quite cautious around how quickly the economy will recover, emphasising the early stage of the recovery and the significant uncertainties to come. They also played up the rise in the unemployment rate recorded in the December 2025 quarter data.
• House prices are expected to be flat over 2026 and up 3% over 2027 and are seen to be a restraint on household demand.
• Inflation is forecast to remain above 2% over the year ahead, but the RBNZ remains comfortable that the fall in the headline rate expected will bring inflation close to 2%. These forecasts give the MPC time to assess the strength and durability of the economy.
• The RBNZ noted the tightening in financial conditions since November without drawing strong conclusions for the economic outlook. By implication, higher interest rates and the exchange rate likely are leaning against the economic recovery and inflation pressures, but it’s also the case that confidence around the economic outlook has improved a bit.

Commentary from the Governor and her colleagues at the press conference built on the overall dovish message from the forecasts. She noted the forecasts of inflation moving towards 2% in the year ahead, allowing room for the OCR to remain at 2.25% for much of 2026. The MPC sees the forecasts as consistent with a less than full chance of an OCR increase by year-end and there is consensus around that view. The RBNZ noted they were “confident of their position” and that this implied less tightening than market prices.

The Governor noted that there is an expectation that house prices will be flat over 2026 and won’t be as important in driving household consumption growth compared to an improving labour market. The Chief Economist noted that there could be some downside risks to the outlook for consumption growth associated with the house price forecasts.

Westpac’s OCR call.

We continue to expect that there will be no further policy easing this cycle and that the RBNZ will begin to raise the OCR from the December 2026 meeting. The timing of the return of the OCR to higher, more neutral levels will depend on the pace of the eventual recovery and the evolution of inflation.

The MPC seems to feel comfortable that they have time to assess, and the bar to justify OCR “lift-off” remains high. Hence risks of a 2027 start are perhaps a bit higher than we thought before but what’s clear is that risks of a pre-election hike seem low as of now. Much will depend on how economic activity and the labour market evolves over 2026.

Notable quotes.

Some notable quotes from the Statement of Record and MPS were as follows:

Current state of the economy

“ Economic activity began recovering over the second half of last year in response to strong export prices and supportive monetary policy settings.”

Growth outlook

“ There are signs that the recovery is broadening across the economy, although the September quarter GDP likely overstates the true level of momentum in the economy.”

Output gap / excess capacity

“ The Committee noted that there is still significant spare capacity in the economy. The output gap is estimated to be -1.5 percent of potential GDP in the December 2025 quarter.”

“ Spare capacity in the labour market is substantial but stabilising.”

Inflation outlook

“ The Committee is confident, however, that with significant excess capacity in the economy, inflation will fall to around the mid-point of the target range over the next 12 months.”

Inflation expectations

“ Inflation expectations for professional forecasters and business leaders increased slightly across all tenors, but long-term expectations remain close to the target mid-point.”

“ Inflation expectations of households have continued to decline from elevated levels.”

Current policy stance

“ Members agreed that the monetary policy stance would need to remain accommodative for some time to support a sustained recovery in economic activity.” Current financial conditions

“ Domestic financial conditions have tightened since November.”

Risks to the inflation outlook

“Risks to the outlook for inflation are balanced.” Global growth

“ The Committee noted that the global economy was more resilient than expected in 2025.”

“ The Committee continues to expect trade barriers to present a headwind to growth, with trading partner growth expected to weaken slightly over 2026.”

Outlook for monetary policy

“ If the economy evolves as expected, monetary policy is likely to remain accommodative for some time.”

“ Conditional on the central economic outlook, we project that the OCR will remain around its current level in the near term, before gradually increasing from late 2026.”

“ One member supported maintaining the OCR at current levels for now but noted that if economic activity recovers as expected, monetary stimulus could begin to be withdrawn somewhat earlier without compromising the economic recovery.”

Other notable quotes

“ The economic recovery has been uneven across sectors and regions.”

“ The Committee agreed that the economic recovery remains nascent, and a premature normalisation of monetary conditions could dampen the recovery and lead inflation to undershoot the target.”

RBNZ forecast detail.

The RBNZ’s forecasts for economic conditions are softer than our own.

The RBNZ has noted the lift in some economic indicators, supported by earlier monetary policy easing and firmness in commodity export earnings. However, they also noted that the recovery is still in its early stages, and spare capacity will take some time to dissipate.

What stands out is that, beyond the very near-term, the RBNZ expects that the recovery will remain fairly gradual, including continued softness in household spending growth. In part, that reflects the RBNZ’s expectations that unemployment will fall more gradually than we anticipate. We certainly appreciate the risk of the recovery remaining gradual in the near term. However, the pace of recovery in the RBNZ’s forecasts seems surprising given that their forecasts assume that monetary policy remains accommodative. It’s also surprising that despite that assumed accommodative policy stance, the RBNZ doesn’t expect the output gap to close until the end of 2028. In contrast, we expect firming economic activity will see unemployment fall faster and the output gap closing by late-2026/ early 2027.

It's a similar story for inflation. While our forecasts and the RBNZ’s are very similar over the current year, the RBNZ’s longer-term inflation forecast looks low. Much of that is because they expect the strength in administered prices like government charges, which has boosted domestic inflation over the past few years, will dissipate. They also expect more modest price-setting behaviour by firms.

We think the risks on both of those fronts are firmly to the upside. While some specific administered prices might be more modest than in previous years, the strength seen in these costs has not been related to just a few categories. For several years we’ve experienced a rolling maul of large cost increases in a range areas that have pushed domestic inflation higher. And we expect that will continue to be the case over the coming years, limiting the downside for overall inflation. As a result, we continue to expect the medium-term inflation outlook will surprise the RBNZ to the upside, with longer term inflation remaining above 2%.

Key things to watch ahead of the RBNZ’s 8 April Review.

The next RBNZ policy review will take place on 8 April. The domestic data flow between now and then is relatively light. The most important economic releases are:

• The Q4 GDP report (19 March): The outcome of this report will be compared to the RBNZ’s estimate, with any deviation having implications for the RBNZ’s estimate of the output gap and perhaps also its view on near-term growth momentum. The RBNZ’s forecast of 0.5% growth is close to our own view (0.6%q/q).
• The February Selected Price Indexes (17 March): With the Q1 CPI report not released until 21 April, the RBNZ will have limited pricing data with which to assess whether inflation is tracking lower in line with its forecast.
• The January and February filled jobs reports (2 March and 30 March): With the next Household Labour Force Survey not due until 6 May, the Monthly Employment Indicator will provide insight as to whether job growth is likely to be sufficient to put the unemployment rate on a downward path.

In addition to the above, key monthly activity indicators such as the BusinessNZ manufacturing and services indexes and the ANZ Business Outlook survey will also be of interest (the next QSBO survey is not released until 21 April). Developments in retail spending and housingrelated indicators will also be monitored to see whether the economic recovery is broadening. The RBNZ will also monitor movements in key export commodity prices and financial conditions.

FX market overview

Recent developments: solid macro backdrop and monetary policy divergence

Since our last FX Forecast Update on 19 January, the US economy has remained on a solid footing. January's jobs report showed 130k new jobs and unemployment falling to 4.3%, reducing immediate pressure on the Fed to cut rates despite structural headwinds in employment growth. Globally, improving manufacturing data and softer inflation have bolstered risk sentiment. However, AI disruption fears have weighed on part of the technology heavy equity sphere while EM stocks have rallied. Political noise from the Trump administration has eased ahead of the midterms: Warsh's Fed chair nomination has calmed independence fears, immigration policy rhetoric has eased, and tariff threats have diminished. At the same time, monetary policy divergence has emerged as a key theme. The Reserve Bank of Australia hiked rates, while higher-than-expected inflation in Norway has shifted market pricing towards a more hawkish stance. In contrast, the Riksbank and the Bank of England held rates steady, both leaning dovish, though the latter with a narrow vote split.

FX implications: bearish dollar narrative persists

Over the past month, the USD has decoupled from macroeconomic data, allowing EUR/USD to briefly trade above 1.20 before retracing to around 1.19. Recent cross-sectional performance has favoured high manufacturing-beta currencies, with NOK, NZD and AUD emerging as the relative winners in G10 space. In Scandies, NOK has outperformed amid a favourable combination of USD weakness, higher energy prices and strong near-term momentum. SEK has rallied, partly driven by capital inflows into Swedish equity funds, redirecting funds from US and global counterparts.

Outlook: bullish on EUR/USD and EUR/Scandies

Over the medium term, we maintain our outlook for EUR/USD to trend higher, underpinned by narrowing real rate differentials, a recovering European asset market, reduced global demand for restrictive monetary policy, persistent tailwinds from hedge ratio adjustments, and fading confidence in US institutions. For EUR/SEK, we expect a gradual move higher towards 11.00 during the year, as SEK faces headwinds from capital flows and the prospect of a dovish Riksbank. For EUR/NOK, we still believe the trend trajectory is higher - driven by the considerable unit labour costs divergence - but we highlight that volatility around this trend is likely to be considerable.

Key risk to our forecasts: greater downside risk to USD than entailed in our projections

Risks to our forecasts are predominantly tied to the US outlook. If the capital rotation out of US assets continues and a sharp US recession hit, EUR/USD could break substantially higher than our forecast suggests. In this environment, commodity currencies would also face a larger hit. Conversely, persistent resilient US data and/or renewed euro area weakness that could prompt the ECB to cut again this year could keep the USD stronger-for-longer. We highlight that a stagflationary shock to the US economy might not necessarily be positive for the USD. Finally, we will closely monitor geopolitical events, developments and uncertainty related to AI, and broader signs of a turning global cycle.

Full report here. 

The UK Consumer Price Index (CPI) report released today showed a slowdown in inflation. According to Forex Factory, the annual figure came in at 3.0%, compared with 3.4% the previous month.

Media reports note that:

• → this marks the lowest level since March 2025;
• → the easing in inflation was driven by lower prices for petrol, air fares, food and education.

As a result, optimism prevails in the equity market, with expectations of monetary policy easing gaining traction. According to Trading Economics, the bullish trend is particularly evident in defence and mining stocks.

The chart of the UK’s FTSE 100 index (UK 100 on FXOpen) shows the market in a clear uptrend, with a sequence of higher highs and higher lows allowing an ascending channel to be drawn.

Technical Analysis of the FTSE 100 Chart

Bullish strength is highlighted by:

→ the price’s decisive break above the 10,600 level and its ability to hold above it this week;

→ the behaviour of the line dividing the upper half of the channel into two quarters. This line acted as resistance throughout February but was broken to the upside today — and may now serve as support.

The RSI indicator has moved into overbought territory. However, given the strength of the fundamental driver, any pullbacks are unlikely to be deep.

It is reasonable to assume that bullish sentiment will continue to dominate the FTSE 100, with 10,750 — near the upper boundary of the long-term channel — potentially serving as a target for profit-taking.

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The New Zealand dollar weakened today after the Reserve Bank of New Zealand (RBNZ) announced its decision to keep interest rates unchanged.

While the decision itself was widely expected, the accompanying forecasts drew attention due to their dovish tone. According to the official statement:

• → monetary policy is likely to remain accommodative for some time, although the possibility of a rate hike in the fourth quarter was not ruled out;
• → inflation is returning to the target range.

The currency market reacted by pushing the NZD lower against major counterparts. NZD/USD, for example, fell to its lowest level in nearly two weeks.

Technical Analysis of NZD/USD

The New Zealand dollar had been showing bullish momentum since late autumn 2025, resulting in the formation of an ascending channel. Notably, the channel’s median line shifted from acting as resistance to serving as support (highlighted by the thicker lines).

It is worth noting that the reversal from the 21 January peak — where price touched the upper boundary — occurred in a sharp manner. Near the 2025 high, bears appear to have regained confidence and seized the initiative.

• → From a bullish perspective, the aforementioned median line may provide support.
• → From a bearish standpoint, a descending trend line drawn through the lower high of 12 February may act as resistance.

Against this backdrop, it is reasonable to assume that the market could enter a consolidation phase over the coming weeks.

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Market Overview

The crypto market cap has been hovering around $2.34-2.35T for the third day in a row. Volatility seems to have been turned off in this market, while stock indices are much livelier. There, investors are actively buying up dips, relying on support in the form of important moving averages: 50-day for the Dow Jones and Russell 2000 and 200-day for the Nasdaq100. The crypto market is now below its 50- and 200-day curves by 17% and 31%, respectively. If cryptocurrencies still play a role as an indicator of risk appetite, it points to disaster.

By and large, the cryptocurrency sentiment index says the same thing, falling to 8 at the start of the day on Wednesday. The indicator has been in single digits for nine of the last fourteen days. This is worse than the darkest moments of 2020 and 2022. It seems that as the cryptocurrency market matures, it is becoming less optimistic. On the other hand, it is also becoming less volatile.

Bitcoin continues its downward drift, periodically bouncing along the way. At the end of US trading, the price of the first cryptocurrency fell to $66.7K but added about 1,000 at the time of writing. It is alarming that Bitcoin’s dynamics mirror the recent strengthening of the dollar. When investors become convinced that the rise of the dollar is a trend, there may be a sharp increase in volatility.

News Background

Bitcoin’s collapse to $60,000 has put psychological pressure on long-term BTC holders, comparable to the collapse of the Terra (LUNA) ecosystem in May 2022, Glassnode notes. They began to sell off assets at significant losses, which is typical of the later stages of a bear market.

A net outflow of stablecoins from the Binance exchange has been observed for the third month in a row, signalling a continuing liquidity squeeze across the crypto market, notes analyst Darkfost. The last time a similar dynamic was observed was during the 2023 bear market.

Standard Chartered Bank has significantly lowered its forecasts for major cryptocurrencies for 2026 amid market volatility. The forecast for Bitcoin has been lowered from $150,000 to $100,000, for Ethereum from $7,000 to $4,000, for Solana from $250 to $135, and for XRP from $8 to $2.8.

Bloomberg Intelligence commodities strategist Mike McGlone has reiterated his forecast for Bitcoin. According to him, the leading cryptocurrency could plummet to $10,000 this year, heralding a recession in the US economy and a stock market crash.

According to Token Terminal, Polygon has surpassed Ethereum in daily transaction fees for the first time. The Polymarket prediction platform has made the main contribution to the growth in activity.

Stablecoins are increasingly being used for payments, salaries and savings, according to a study by BVNK. The key factor was savings on fees, which average 40% compared to traditional payment services.