Economic Data in Focus & FX Outlook – March 3, 2025

The first trading day of the new month brings a packed economic calendar, with key manufacturing data from Europe, Switzerland, the UK, and the United States, alongside critical inflation figures from the Eurozone and updates on US construction spending and GDP tracking. Traders navigating today’s session will need to pay close attention to how these releases shape expectations for monetary policy and economic performance in the months ahead.

Eurozone Manufacturing PMIs – Signs of Fragile Recovery?

The HCOB Manufacturing PMI readings across Spain, Italy, France, Germany, and the Eurozone composite all hover near or below the 50 threshold, indicating continued challenges in the industrial sector. While Spain’s PMI is forecast at 51.3, barely in expansion territory, Germany (46.1) and France (45.5) are still firmly contractionary.

Implications for EUR:

• This data highlights the ongoing divergence between services resilience and manufacturing weakness in the Eurozone.
• EUR/USD will likely remain under pressure if actual data confirms contraction, reinforcing expectations that the ECB’s restrictive policy may have already peaked.
• The Eurozone’s manufacturing recovery remains fragile, and a deeper industrial downturn would justify dovish ECB rhetoric, weighing on the euro.
• Conversely, any surprise upside in Germany’s or the composite Eurozone PMI could support a corrective bounce in EUR/USD, especially if coupled with softer US data.

Eurozone Inflation – Cooling but Still Sticky

At 12:00 EET, the Eurozone’s Core CPI YoY is forecast to slow to 2.5% from 2.7%, with headline inflation expected at 2.3%, cooling from 2.5%. The month-on-month figure is forecast at -0.3%, indicating seasonal weakness, typical for February.

Implications for EUR:

• A sharper-than-expected drop in core inflation would solidify expectations that the ECB can adopt a more dovish stance by mid-2025, particularly if economic data continues to soften.
• With the ECB already facing pressure from some policymakers to consider rate cuts, lower inflation figures will add to that pressure, weighing on EUR crosses.
• Conversely, if inflation surprises to the upside, it could delay ECB easing, offering some support to the euro, particularly against lower-yielding currencies like the yen or Swiss franc.

UK Manufacturing PMI – Industrial Slump Weighs on GBP

At 11:30 EET, the UK’s S&P Global Manufacturing PMI is expected at 46.4, significantly below the 50 threshold, pointing to ongoing contraction in Britain’s manufacturing sector. This would mark a fifth consecutive month of contraction, highlighting how elevated borrowing costs and weak global demand are eroding industrial output.

Implications for GBP:

• A weaker-than-expected reading could reinforce expectations that the Bank of England’s next move will likely be a rate cut, particularly as UK inflation slows.
• GBP/USD would likely slip toward support near 1.2610, particularly if US data prints stronger.
• However, a surprise improvement (above 47) could provide short-term relief for GBP, though the broader economic backdrop remains challenging.

US Manufacturing – ISM Holds the Key for USD Sentiment

At 17:00 EET, the US will release the ISM Manufacturing PMI, expected at 50.6, just above the key 50 line that separates expansion from contraction. Alongside the headline index, traders will focus heavily on:

• ISM Manufacturing Employment, forecast at 50.3, which will offer clues about labor market conditions within the sector.
• ISM Manufacturing Prices, forecast at 56.2, indicating whether input prices are accelerating again, which would impact inflation expectations.

Implications for USD:

• A stronger ISM print, particularly if employment and prices rise, would reinforce the narrative that the Fed can afford to remain patient before considering rate cuts. This would be USD supportive, particularly against the euro and commodity currencies.
• Conversely, a below-50 print, combined with weaker prices, would amplify fears of a broader slowdown, softening Fed policy expectations and likely pushing DXY lower toward support near 103.50.

US Construction Spending – Monitoring Investment Trends

At 17:00 EET, US Construction Spending for January is forecast at -0.1%, following a 0.5% gain in December. Given the importance of residential and infrastructure investment to the broader economic outlook, any sharp downside surprise would reinforce recession concerns.

Implications for USD:

• A weak print could weigh on USD, especially if coupled with softer ISM data.
• Stronger-than-expected spending, particularly in residential or public construction, would suggest underlying economic resilience, offering modest support to USD.

Atlanta Fed GDPNow – Growth Expectations in Focus

At 20:00 EET, the Atlanta Fed will update its GDPNow estimate for Q1 2025, currently forecast at -1.5%, signaling potential contraction.

Implications for USD:

• A downward revision (worse than -1.5%) would further stoke recession fears, likely dragging the USD lower, particularly against safe havens like gold and the yen.
• If the estimate improves closer to zero or positive territory, it would indicate resilience in Q1, supporting USD strength, particularly against lower-yielding currencies.

German Bundesbank Vice President Speech – Peripheral Event

At 17:00 EET, German Bundesbank Vice President Buch is scheduled to speak. While unlikely to move the market significantly, any hawkish rhetoric supporting a higher-for-longer ECB stance could offer minor support to the euro.

Key Takeaways for Traders

Conclusion

Today’s calendar is a critical barometer for how global manufacturing is faring in early 2025. Europe’s industrial sector remains fragile, the UK faces ongoing manufacturing weakness, and the US outlook is increasingly dependent on whether the manufacturing sector can sustain modest expansion.

For traders, the interplay between European disinflation, US growth expectations, and the broader Fed-ECB policy divergence will drive major forex pairs, particularly EUR/USD and GBP/USD. Meanwhile, gold remains a prime hedge, particularly if US data triggers renewed recession fears.

Stay tuned for real-time updates and analysis as these key events unfold.

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