Ahead lies the final week of February. All attention of EUR/USD traders will be focused on statements from Fed representatives (who may comment on the contradictory macro reports from last week), the January US PPI figure, and the consumer confidence index.
Additionally, throughout the week, the IFO indices and German inflation data will be published. However, let's take it step by step.
Monday
On Monday, the market will react to recent statements by Donald Trump, who decided to raise the additional 10% tariff on all imports to the US, introduced on Friday, to 15%. Recall that the US Supreme Court ruled on Friday that the extensive tariffs imposed by the President on most countries were illegal. The judges ruled by a majority that their unilateral introduction exceeded the president's powers and must therefore be revoked. In response, Trump replaced the tariffs struck down by the court with a 10% tax on all goods imported into the United States. The following day, on Saturday, he raised the tariff rate to 15%.
Given that Trump elevated the stakes (both literally and figuratively) over the weekend, volatility may increase at the start of the week—likely not in favor of the US currency.
Also on Monday, the IFO indices will be published in Germany. Positive dynamics are expected here. According to preliminary forecasts, the business climate indicator is set to rise to 88.4 this month (the highest value since October last year) after remaining at 87.6 for two months. The current situation assessment from IFO is expected to rise to 86.1 points (the highest since August), while the economic expectations indicator is expected to increase to 90.5 points (up from 89.5).
If the IFO data comes in at the forecast level or in the green zone, it will complement the positive fundamental picture for the euro, against the backdrop of strong PMI data released last week. Recall that the composite purchasing managers' index (PMI) in Germany stood at 53.1 in February (against a forecast of 52.2 and a previous value of 52.1), the manufacturing PMI surged to 50.7 (exceeding the 50-point level for the first time in a long while), and the services index rose to 53.4. Thus, all three indicators were in the expansion zone. Strong IFO indices can provide additional support for the euro.
Tuesday
The key release for Tuesday is the Consumer Confidence Index from the Conference Board, which is based on a survey of households' confidence in the current state of the economy and future economic conditions. In January, this index unexpectedly and quite sharply decreased, landing at 84.5. This is a 12-year low—the lowest value for the index since May 2014. According to forecasts, the index is expected to rise slightly to 88.2 in February. However, if it turns out to be lower than the January level, contrary to expectations, the dollar will come under significant pressure, especially in the context of weak US GDP growth in the fourth quarter of last year (1.4% against a forecast of 3.0%).
Also on Tuesday, many members of the Fed will express their positions: Boston Fed President Susan Collins, Chicago Fed President Austan Goolsbee, Atlanta Fed President Raphael Bostic, Richmond Fed President Thomas Barkin, and Fed Board members Christopher Waller and Lisa Cook.
Their rhetoric could tip the scales in favor of or against the dollar. If most Fed representatives express concern about inflation risks (amid the acceleration of the core PCE index to 3.0% in December), dovish expectations will weaken, and the greenback will experience increased demand once again. However, if members focus on the weak data on the growth of the American economy (against the backdrop of a January CPI slowdown, both overall and core), the dollar will face additional pressure.
Wednesday
On Wednesday, the final estimate for inflation growth data in the Eurozone will be published. According to forecasts, the final estimate will match the initial one (a slowdown of the overall CPI to 1.7% and the core CPI to 2.2%). The release will impact EUR/USD only if the actual result deviates from the announced figures.
A certain influence on the pair may also come from the GfK Consumer Climate Index in Germany. This indicator has been in negative territory for a long time, but last month it recorded a "rise" to -24.1. This month, a further increase to -23.1 is also expected. If the index comes in the green zone, it will complement the positive fundamental picture for the euro, especially if the aforementioned IFO indices also exceed expectations.
During the US session on Wednesday, two Federal Reserve representatives will speak: Kansas City Fed President Jeffrey Schmid and St. Louis Fed President Alberto Musalem. The tone of their rhetoric will have an appropriate impact on the EUR/USD pair.
Thursday
During the European trading session on Thursday, ECB President Christine Lagarde is expected to deliver a speech. Recall that last week, the media reported that she would leave her position early, allowing the current leaders of Germany and France to agree on a candidate for her successor before the French presidential elections (scheduled for April 2027). The European Central Bank has neither confirmed nor denied this information, stating that its president is "focused on current issues." However, if during her speech Lagarde hints at her early departure from the position, the euro could come under pressure.
The most important macroeconomic report on Thursday will be the Unemployment Claims. Last week, the number of initial claims for unemployment benefits fell sharply again to 206,000, after hovering around 230,000 for two weeks. For the current week, the indicator is expected to rise slightly to 211,000. A further decline will provide support for the US currency.
Also on Thursday, a speech from Fed Vice Chair Michelle Bowman is expected, who consistently expresses "dovish" rhetoric. For example, last week she expressed concerns about the state of the US labor market and advocated further easing of monetary policy. In this context, it will be interesting to hear her comments regarding the dynamics of US GDP and the core PCE index.
Friday
The most important release for Friday (and the entire week) is the US Producer Price Index (PPI). Against the backdrop of slowing CPI and accelerating PCE, this inflation indicator may play a significant role, tipping the scales in favor of or against the US currency. According to preliminary forecasts, the overall PPI is expected to slow slightly to 2.9% year-on-year, down from the previous figure of 3.0%. The core index is expected to remain at December's level of 3.3% in January. A "green" result from this release will provide substantial support for the greenback.
Additionally, preliminary data on inflation growth in Germany for February will be published on Friday. The overall consumer price index is expected to drop to 2.0% year-on-year (after rising to 2.1% in January). The harmonized index (EU Harmonised) is expected to remain at the previous month's level, specifically at 2.1%. This report acts as a kind of "barometer" ahead of the release of eurozone-wide data, and its publication may provoke volatility in the EUR/USD pair, especially if the results fall into the green/red zone.
Geopolitics will also play a role in EUR/USD pricing. The focus is on Iran, particularly as reports suggest conflicting plans from Washington regarding the "Iran case." According to Bloomberg, the US has yielded in negotiations with Iran regarding uranium enrichment, abandoning the demands for it to cease. This means the parties are a step away from a deal. Meanwhile, some other media outlets (notably the German publication BILD) report that the United States may strike Iran in the next couple of days. Unconfirmed reports suggest that the attack could occur "on Monday or Tuesday."
If diplomacy prevails, market interest in risk may increase, and consequently, in the European currency. However, if "the guns start to speak," serious turbulence may arise in the markets—particularly in the EUR/USD pair, where demand for the dollar as a safe-haven asset will rise.
From a technical standpoint, the pair is positioned on the daily chart between the middle and lower lines of the Bollinger Bands, below the Tenkan-sen and Kijun-sen lines, but above the Kumo cloud. On the 4-hour chart, it is between the Kijun-sen and Tenkan-sen lines and below the Kumo cloud. Unfortunately, there are no clear technical signals. Uncertainty persists for the pair both technically and fundamentally.
