Edward Hayden-Briffett
Research Analyst, The Officials
ZEW Economic Sentiment, Eurozone Inflation Confirmed Softer
ZEW sentiment plunges; Fed seen on hold, dollar eases, inflation stays subdued, and Chinese firms boost FX hedging amid yuan strength.
Atrocious ZEW Economic Sentiment in Germany and Euro Area, at -0.5 and -8.5, respectively, the lowest since April 2025. Both massively underperformed expectations as the Middle East war seriously damages optimism.
ADP showed 9k jobs added per week on average in February. Dollar rally beginning to fade this week, DXY dropped from high of 100.5 on Friday to 99.5 today, showing some consolidation in today’s session so far. OIS now pricing only 27 bps of cuts by the Fed by year-end, no cut expected at today’s FOMC – not until December meeting.
Eurozone inflation was confirmed softer in the final February release, but the market impact should be limited given consensus was already anchored to the flash print. Headline CPI held at 1.9% y/y, core at 2.4% y/y, and monthly inflation at 0.6%. Inflation remains relatively subdued and continues to sit close to target.
Chinese firms are ramping up FX hedging as yuan strength pressures exporters, with net outstanding forward contracts hitting a record $107bn at end-February (highest since 2010). USD/CNY has strengthened toward 6.90, though positioning leaves firms exposed if the dollar rebounds amid rising volatility.
Data today: FOMC, US PPI, Factory orders.
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