FXTRADING Economic Data Summary (Asia-Pacific | 02/11)

ECB signals a steady policy stance

ECB President Christine Lagarde recently stated that the current level of interest rates is broadly consistent with the inflation outlook, and policy effects are gradually taking hold. With external uncertainties still elevated, the central bank prefers to adjust policy step by step based on incoming data rather than providing a predefined path. Medium-term inflation is still expected to stabilize around the 2% target, leaving little urgency to alter the existing policy framework.

Bundesbank President Joachim Nagel has also taken a cautious tone, noting that recent inflation fluctuations are largely temporary and do not change the medium-term trend. Only a persistent and significant deviation in inflation expectations would warrant a reassessment of policy. At present, such risks have not materialized, and the priority remains to keep expectations anchored and prevent markets from overreacting to short-term data. FXTRADING Analysis: The ECB has effectively entered a wait-and-see phase. With inflation expectations stable, near-term room for rate adjustments is limited, and the euros direction will depend more on external growth dynamics and the US dollar cycle.

Australias policy pace turns more cautious

Australian consumer sentiment declined in February, mainly reflecting the immediate impact of the first rate hike in more than two years. However, compared with historical patterns, the drop was relatively modest, and confidence remains well above the depressed levels seen in recent years. While household sentiment has softened, there is no sign of a sharp deterioration, suggesting the economy still retains some resilience to higher interest rates.

Looking ahead, markets widely expect the Reserve Bank of Australia to place greater emphasis on incoming data. Although another near-term rate increase cannot be completely ruled out, a pause to assess conditions appears more likely, with the quarterly inflation report expected to provide clearer guidance. Given policymakers‘ focus on core inflation measures, May could become the next adjustment window if price pressures fail to ease meaningfully. FXTRADING Analysis: Australia’s policy stance has shifted from proactive tightening to a data-dependent approach. Near-term rate uncertainty is rising, and the Australian dollar will be increasingly driven by inflation data and global risk sentiment.

The Bank of England highlights longer-term inflation risks

Officials at the Bank of England have begun cautioning markets against excessive optimism over potential declines in inflation in the coming months. Some of the expected easing reflects policy effects and base comparisons rather than a genuine reduction in underlying price pressures. Adjustments in energy prices and fiscal measures may create short-term distortions that mask more persistent cost dynamics.

Policymakers remain focused on trends rather than single-month readings. Just as the Bank showed patience during temporary inflation increases in the past, it is now taking a similarly cautious approach toward possible short-term declines. The recent decision to hold rates at 3.75% already reflects growing internal divisions, with policy entering a delicate balancing phase between avoiding excessive tightening and preventing a premature shift toward easing. FXTRADING Analysis: UK monetary policy is likely to remain cautiously restrictive, with rate cuts proceeding more slowly than markets expect and the policy rate unlikely to fall significantly in the near term.

Eurozone recovery expectations strengthen

Latest data show a clear improvement in Eurozone investor sentiment, with confidence indicators returning to positive territory, suggesting that market expectations for the economic outlook are gradually improving. Both current conditions and forward expectations have risen, with institutional investors showing particularly strong gains in optimism. This indicates that markets increasingly believe the previous downturn phase may be nearing its end.

More importantly, inflation concerns have not re-emerged despite volatility in commodity markets. Investors generally see limited risk of renewed price pressures, giving the ECB additional room to maintain its current policy stance. With growth expectations improving and inflation risks contained, the monetary environment is likely to remain relatively stable, providing some support to financial markets. FXTRADING Analysis: The Eurozone is entering a phase characterized by improving sentiment and policy stability. If economic data continue to strengthen, the medium-term attractiveness of euro-denominated assets could gradually improve.