Introduction

As February draws to a close, global markets brace for a pivotal week shaped by Germany’s election outcome, the United Kingdom’s Monetary Policy Report Hearings, and an upcoming G20 meeting of finance ministers and central bank governors. Investors will also track major data releases, including Eurozone inflation updates, U.S. economic indicators, and the latest from the Bank of England. Tensions around trade, geopolitics, and inflation remain front and center, setting the stage for potential swings across foreign exchange, equities, and bonds.

1. Germany’s Conservative Victory: Coalition Wrangling Begins

The German national election delivered a win for the conservative bloc on Sunday. While the result pleased markets seeking policy continuity, the coalition-building process remains uncertain. The new government’s stance on budget discipline, European integration, and transatlantic relations will be key focal points:

• Market Impact:
  • EUR/USD could find short-term support if investors anticipate a stable, pro-EU government. Any sign of messy coalition negotiations, however, may renew political risk, pressuring the euro.
  • Equities: German stocks rallied in early trading on Monday, reflecting relief that radical parties performed poorly. Yet prolonged coalition talks might curb further gains.
• Data Watch:
  Germany has a stacked calendar: Ifo business climate, the final reading of Q4 GDP, consumer confidence, retail sales, and CPI. If the data signals a steady rebound, it could reinforce optimism around a centrist government’s ability to pass economic reforms.
• Fitch Review:
  Fitch Ratings will update Germany’s credit rating on Friday. While no downgrade is expected, an unexpectedly cautious outlook could weigh on the euro if political uncertainty escalates.

2. UK’s Monetary Policy Hearings and Fitch Review

Across the Channel, the UK faces a subdued data docket but a high-stakes parliamentary session on Tuesday:

• BoE Hearings: Senior Bank of England officials (including Chief Economist Huw Pill and Deputy Governor Dave Ramsden) will answer lawmakers’ queries on inflation, growth, and rate policy. Traders want hints on how quickly the BoE might ease or tighten if inflation deviates from forecasts.
• Fitch Ratings: The agency will review the UK’s credit rating on Friday. Though a downgrade is not widely anticipated, lingering post-Brexit uncertainties around trade, fiscal policy, and inflation could influence Fitch’s outlook.

3. Fed-Speak and U.S. Data in Focus

The Federal Reserve’s perspective on inflation and growth remains crucial after last week’s batch of mixed data. This week’s releases include consumer confidence, new home sales, weekly jobless claims, durable goods, and the second estimate of Q4 GDP. All culminate on Friday with the Fed’s preferred inflation measure, the core PCE price index, and personal consumption data.

• Fed Voices:
  • Speeches by Fed officials such as Lorie Logan, Thomas Barkin, Jeffrey Schmid, Karen Hammack, and Patrick Harker could shed light on how upcoming data might affect policy. A hawkish tilt—or concerns about stagnating growth—could move Treasury yields and the dollar.
• Key Reports:
  • Core PCE Price Index: A surprise jump may solidify expectations of fewer or slower rate cuts, supporting the dollar. A softer print could spark speculation about additional easing down the line.
  • GDP (Second Estimate): Although typically less impactful than the preliminary reading, significant revisions might shift market sentiment, especially if they contradict earlier signals of economic resilience.

4. G20 Finance Chiefs Meet Amid Trade Tensions

Finance ministers and central bank governors from the Group of 20 convene late in the week, providing a high-profile platform to discuss global growth, inflation, and trade policies. With U.S. President Donald Trump hinting at new tariffs—this time possibly targeting digital taxes or auto imports—currency markets will stay alert:

• Topics to Watch:
  • Global Recovery Prospects: Many advanced economies face headwinds from higher rates and post-pandemic adjustments. Emerging markets remain vulnerable to capital outflows if risk aversion spikes.
  • Trade Rhetoric: Any mention of new or reciprocal tariffs could trigger safe-haven flows into the dollar or yen, while emerging market currencies might retreat.

5. Japan’s Light Calendar and China’s PMI Release

• Japan: Markets are closed Monday for the Emperor’s Birthday, but Tokyo Core CPI, industrial production, and retail sales land Friday. Although not typically massive market movers, these data points may influence the yen if they hint that inflation is hotter or cooler than the Bank of Japan’s forecasts.
• China: Saturday’s official February PMIs will be scrutinized for signs of a manufacturing rebound or further deceleration. A stronger reading could bolster risk-sensitive assets like the Australian dollar; a weaker outcome might feed concerns about China’s post-pandemic recovery.

6. Antipodean Updates: Australia and New Zealand

• Australia: Following a cautious 25-bps rate cut last week, the Reserve Bank of Australia is in the spotlight again with Wednesday’s January CPI release, plus Q4 CAPEX on Thursday. Traders will assess whether the inflation dip is sufficient to justify additional easing in 2025.
• New Zealand: Retail sales and surveys on business and consumer confidence paint a broader picture of the Kiwi economy’s health. With the Reserve Bank of New Zealand recently cutting rates, any sign of resilience could stabilize the NZD, whereas more evidence of a slowdown might intensify the dovish narrative.

7. Canada’s Q4 GDP and BoC Signals

Canada’s final Q4 GDP print arrives Friday, while Bank of Canada Deputy Governor Toni Gravelle speaks Monday. Governor Tiff Macklem previously warned that prolonged U.S. tariffs could “all but wipe out” Canadian growth in 2025–2026, so markets will watch Gravelle’s remarks for confirmation or pushback on that grim outlook. A downside GDP surprise could weigh on the loonie, while stable growth might reassure investors that the BoC can remain patient.

Conclusion

From the immediate impact of Germany’s election result and the UK’s Monetary Policy Hearings to key data from the U.S., China, and Canada—not to mention the G20 meeting—this week’s docket is packed with potential market-moving events. While Europe focuses on building a stable German coalition and the UK eyes its post-Brexit path, the Federal Reserve’s reaction to fresh inflation data will shape broader risk sentiment. Meanwhile, any new tariff threats or concessions at the G20 could send ripples through global supply chains and currency pairs. In this environment, traders must remain nimble, prepared for sudden headlines and data surprises that could define the tone for weeks to come.