Written by the Market Insights Team
Dip buyers save the day
Boris Kovacevic – Global Macro Strategist
Yesterday’s market session was split into two distinct phases, as investors began the week by selling risk assets amid growing concerns of a U.S. slowdown. Recession fears intensified following weaker-than-expected leading indicators from the Chicago and Dallas Federal Reserves. U.S. equities fell, bond yields plunged, and the dollar followed suit, pressured by deteriorating sentiment.
However, dip buyers stepped in during the U.S. session, helping equities and the Greenback recover some losses. Overall, the impact of the day’s news and data appeared to be net-neutral for markets. That said, recent growth concerns could become a bigger problem for risk assets if soft economic data persists, making secondary indicators increasingly important to monitor.
The dollar ended the day slightly lower after briefly touching its weakest level since mid-December. As we highlighted in our feature for Fortune, the dollar remains under pressure for two key reasons: the absence of new tariffs reducing safe-haven demand and the Fed’s pause being linked to rising inflation expectations rather than strong macro data. With recent data reaffirming these trends, the dollar has struggled to benefit from steady rates, currently sitting at its lowest level this year, down 3.4% from January’s peak.
For a meaningful rebound, dollar bulls will need either stronger U.S. economic data or renewed tariff enforcement by Trump. The latter could materialize today, as Trump reiterated overnight that tariffs on Canadian and Mexican goods will be implemented once the delay expires.
New government, old problems
Boris Kovacevic – Global Macro Strategist
The euro briefly climbed above $1.05, reaching its highest level in nearly a month before retreating to $1.0460. Investors see the potential for increased fiscal spending, particularly in defense, as a way to support economic activity. However, fiscal constraints may limit the impact, as political hurdles complicate efforts to boost spending. Meanwhile, business sentiment is showing cautious optimism, though immediate economic conditions remain subdued. We will continue to monitor political developments and key macro releases, as they will play a crucial role in shaping EUR/USD’s near-term direction.
Following the German election outcome, Chancellor-designate Friedrich Merz is actively engaging with the Social Democrats (SPD) to accelerate defense spending in response to escalating geopolitical tensions. However, the rise of fringe parties, securing a minority with blocking rights, has complicated efforts to amend the constitutional “debt brake”, which restricts government borrowing. To navigate these constraints, Merz is considering pushing reforms through the current parliament before the new session begins on March 24. These political maneuvers have added uncertainty to the euro’s performance, as markets assess their potential economic impact.
On the macro front, the Ifo Institute’s latest survey indicates a modest improvement in business expectations, with the index rising to 85.4 in February, up from 84.3 in January, and exceeding forecasts of 85.0. However, current conditions worsened, highlighting that while businesses are hopeful about the future, they continue to struggle with present challenges..
Pound running into resistance
Boris Kovacevic – Global Macro Strategist
The pound climbed to a nine-week high of $1.2690 before encountering resistance near $1.27. Strong UK data and persistent inflation in recent weeks continue to provide support, leaving room for further gains—especially if U.S. economic momentum slows in parallel.
However, geopolitical risks remain a key factor. Trump’s tariff agenda, while not directly targeting the UK, could disrupt global trade flows, particularly with China and the eurozone, leading to potential spillover effects for Britain. Meanwhile, elevated UK inflation still supports GBP, but a renewed rise in gilt yields—back toward January highs—could shift rate expectations from a tailwind to a headwind if fiscal concerns resurface.
This morning, the pound is trading in the lower $1.26 area, as a risk-off mood takes hold following Trump’s overnight comments. The administration is set to raise tariffs on major trading partners and is considering further restrictions on China’s access to advanced chips, adding fresh uncertainty to markets..
Dollar continues to decline
Table: 7-day currency trends and trading ranges
Key global risk events
Calendar: February 24 -28
All times are in GMT
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.