Forexlive European FX news wrap: Cautious mood as we await the US consumer confidence data

• ECB’s Nagel: We should take one step at a time and not rush rate cuts
• Markets cautious but not fearful on Trump tariffs for now
• Bitcoin not quite down for the count amid latest crypto selloff
• European equities open mostly lower to kick start the day
• What are the main events for today?
• Germany Q4 final GDP -0.2% vs -0.2% q/q prelim
• China CPI will decline moderately in February, says PBOC advisor
• Month-end flows to favour the dollar – Deutsche
• German politics fail to inspire EUR/USD breakout for now
• USD/JPY nudges back lower with bond yields in focus
• FX option expiries for 25 February 10am New York cut

It’s been a quiet session in terms of data releases and newsflow. The mood in the markets continues to be negative following the Friday’s US PMIs and the jump in long-term inflation expectations.

The price action in the US stock markets remains cautious after the selloff triggered by Friday’s data. Treasury yields continue to fall amid the stocks selloff as the market increased the expectation for Fed’s easing to 55 bps by year-end.

The thinking here
might be that in case we get a slowdown, the Fed might not be fast
enough in cutting rates amid inflation remaining above target and uncomfortably
high long-term inflation expectations. That would exacerbate the pain and eventually lead to more aggressive cuts.

The focus now switches to the US consumer confidence report in the session ahead where a breakout of the range created since 2022 could see more risk-off flows. The inflation expectations in the report will also be eyed.

This article was written by Giuseppe Dellamotta at www.forexlive.com.