The outcome of the German election has led to complex coalition negotiations which may influence fiscal policy. The uncertainty of coalition dynamics raises concerns about whether economic stagnation will be effectively addressed or if political fragmentation will hinder progress.

Economic trajectories will depend on leaders prioritising growth instead of party interests. A critical issue remains whether proposed reforms can overcome ideological barriers amid potential internal divisions.

Several coalition scenarios emerge, each with potential economic implications. A CDU/CSU and SPD coalition could provide tax relief without reducing social spending, possibly establishing a vehicle for infrastructure funding.

A CDU/CSU, SPD, and Greens coalition may struggle due to deep divisions, potentially maintaining high energy costs and affecting industrial competitiveness, while slightly enhancing EU cooperation on funding.

A coalition including CDU/CSU, SPD, and FDP would prioritise fiscal restraint, likely limiting investment initiatives and focusing solely on defence funding rather than broader infrastructure projects, reflecting a conservative approach to EU spending.

The choices made in Berlin over the next few weeks will set the course for economic policy, shaping business sentiment and fiscal stability. How negotiations unfold will determine whether Germany commits to addressing economic stagnation or remains caught in political infighting that sidelines investment.

Angela and Olaf must navigate difficult compromises, with disagreements on tax policy and public expenditure standing as immediate tests. If they remain entrenched in party-specific goals, any agreement reached will likely be fragile, risking policy reversals that could unsettle markets. Stability requires a unified stance on economic priorities rather than simply negotiating power dynamics.

Potential alliances present distinct policy directions. A partnership between Angela and Olaf could create room for tax restructuring without cutting social benefits, which would likely support domestic demand. This structure might also offer a controlled approach to debt-funded investment, possibly creating targeted spending on infrastructure while balancing fiscal responsibility.

However, adding Annalena to the mix would complicate matters. Disagreements on business regulations, environmental policies, and energy pricing could reduce the scope for business-friendly reforms. If consensus on energy transition policies remains out of reach, manufacturing costs may stay elevated, adding pressure to export-driven industries. That said, Annalena’s involvement could strengthen cooperation on EU-wide financial policies, increasing the likelihood of greater fiscal alignment within the bloc.

If Christian enters the equation instead, negotiations would take a different turn. He would likely demand stricter spending limits, leaving little room for broad stimulus measures. While this might reassure those worried about debt accumulation, it would also signal to businesses that direct public investment in infrastructure will not increase. Though defence spending would likely see sustained support, there would be little expectation for an expansion of public expenditure beyond that domain.

With the path ahead dependent on political concessions, businesses and investors should prepare for a period where uncertainty may weigh on sentiment. Policy announcements in the coming weeks will provide clearer indications about fiscal direction, shaping expectations for both domestic markets and broader economic stability across Europe.

New Zealand’s retail sales for the fourth quarter increased by 0.9%, outperforming forecasts of 0.6%. This growth indicates a stronger consumer spending trend than anticipated.

Sales data reflects the economic activity within the region, suggesting resilience in the retail sector. This information is significant for understanding market conditions and consumer behaviour in New Zealand.

A stronger-than-expected rise in retail sales suggests households are still spending at a steady pace. A 0.9% increase may not seem dramatic, but when compared to the expected 0.6%, it hints at more resilience in consumer demand. This matters because retail activity often reflects broader economic conditions. If people are still making purchases despite higher prices or other financial pressures, it signals that household finances remain stable—at least for now.

For traders, these figures can shift expectations around monetary policy. If spending remains strong, central bank officials might see less need to cut interest rates soon. That, in turn, influences bond yields, currency values, and ultimately how various asset prices move. It’s not just about what the retail data says today—it’s about what monetary policymakers do with that information in the coming weeks.

On another note, persistent consumer demand can keep inflation from cooling as quickly as some might hope. If prices remain sticky due to steady purchasing activity, that could push central bankers to hold rates higher for longer. Markets often try to predict these moves ahead of time, so anyone following derivatives should be paying attention to how this plays out.

Domestic spending is one thing, but global factors mix into the equation too. A steady retail sector at home is only part of the picture. Exchange rates, demand for exports, and economic conditions in key trade partners also shape future market moves. If international risks put pressure on growth elsewhere, even a strong retail showing might not shift bigger market trends alone.

One way to approach this is by watching upcoming data releases. Are wages keeping up with spending? Is credit card debt piling up faster than before? Does business confidence reflect the same strength as consumer activity? A single retail report is useful, but the broader pattern over time matters even more.

Policymakers will weigh this alongside inflation reports and employment figures. If other indicators align with the retail increase, forecasts on interest rates may shift again. Traders looking ahead should keep an eye on central bank commentary. If officials hint that strong consumer activity supports a wait-and-see approach on rate cuts, that could move markets before any official decision is even made.

Looking at global market reactions can also provide some context. If other economies show weaker retail figures, this retail growth stands out even more. A stronger domestic economy versus a weaker global backdrop often influences currency strength and investor behaviour. Market participants reacting to this will be watching for any ripple effects in equities, commodities, and beyond.

For now, this data point suggests spending has held up better than expected. How long that trend continues will depend on wages, savings rates, and other economic influences. The next set of data releases should clarify whether this was just a good quarter or the start of something more sustained. Either way, traders have another factor to consider when positioning for what’s next.

Francois Villeroy de Galhau, head of the Bank of France and a member of the ECB Governing Council, indicated that the European Central Bank may lower its deposit rate to 2% by summer. He mentioned that current projections suggest this rate could be achieved by mid-year.

On January 30, the ECB cut its deposit rate by 25 basis points to 2.75%. Policymakers have indicated that they may consider another reduction in March, driven by concerns over economic growth surpassing worries about inflation.

If these expectations hold, it would mark a shift in monetary policy that traders will need to adapt to quickly. A deposit rate of 2% by summer would mean a gradual adjustment, rather than abrupt movements, which often provoke stronger reactions in financial markets. Given that the ECB has already lowered rates once this year, additional moves in the coming months would reinforce the idea that policymakers are prioritising economic stability over short-term price pressures.

Francois is not alone in this sentiment. Several within the Governing Council have signalled openness toward bringing rates lower if economic conditions warrant it. The fact that some are already discussing a cut in March indicates a growing sense that the current rate environment may be less sustainable than previously thought. This stands in contrast to previous months, when inflation concerns dominated discussions. If market participants were expecting prolonged caution from central bankers, this shift alters those assumptions.

The decision in January to lower the deposit rate to 2.75% was not unexpected, but it set the stage for what may follow. If policymakers follow through with another cut in March, and forecasts remain aligned with Francois’ expectations, then positioning for a 2% rate by summer would be the natural course. Markets tend to price in rate adjustments well in advance, and traders will have already begun shifting expectations accordingly.

Recent data has fueled speculation that economic weakness is now the central concern. Inflation, while still a talking point, appears to be losing its grip on policy discussions. If this continues, upcoming ECB statements will likely reinforce a narrative that prioritises growth. By the time the next rate decision approaches, the debate may no longer centre on whether to cut, but on the pace at which reductions should occur.

If expectations become reality, then reactions across asset classes may follow a predictable pattern. Yields on European bonds, which have already begun adjusting, could continue their downward trajectory. The euro may see pressure if easing accelerates faster than in other regions. Equity markets, particularly rate-sensitive sectors, may find support if borrowing costs shrink further. Each of these elements feeds into how traders approach positioning in the short term.

With ECB policymakers hinting at fewer obstacles to further rate cuts, any deviation from these expectations could cause short-term volatility. A decision in March that does not align with what has been signalled so far would prompt repositioning. If, however, rate reductions proceed as indicated, then a steady adjustment across markets would be more likely.

The coming weeks will reveal how committed central bankers are to this trajectory. Speeches, economic indicators, and inflation prints will all serve as checkpoints. The reaction to each new piece of information will shape market dynamics well before policymakers make their next move.

Germany’s Federal election has seen the CDU/CSU secure 28.7% of the votes, while the far-right AfD garnered 19.8%, according to ZDF projections. Market participants are closely monitoring coalition formation to assess potential fiscal reform.

Several coalition options are possible, including a CDU-SPD-Greens alliance. The AfD’s performance was weaker than anticipated, which may influence future policy directions.

Concerns over Germany’s “debt brake” persist, with limited scope for reform amid rising defence spending pressures. The election results are expected to impact European defence funding and could initiate debt brake reforms that may bolster the euro and eurozone stocks.

The uncertain entry of the FDP into parliament may complicate coalition negotiations, which could delay reforms and introduce market unpredictability. Following the election result, the EUR/USD has experienced a modest increase, reflecting optimism for improved economic conditions.

With the political direction of Germany now clearer, attention turns to policy negotiations that may influence markets in the weeks ahead. How a coalition comes together and the compromises made along the way will shape expectations for European fiscal policy.

Friedrich will need to navigate delicate talks, especially given the FDP’s uncertain presence in parliament. Without their input, discussions on tax cuts and budget plans may shift, introducing the possibility of heavier state intervention. If the FDP clears the threshold, their role in any alliance could act as a stabilising factor against expansive fiscal measures. Traders considering positioning around German debt or the euro should be watching these developments closely.

One of the core points of concern remains restrictions on borrowing. Defence expenditures are set to rise, putting pressure on fiscal limitations that some believe are too rigid. Reform would require broad support, which remains uncertain given the CDU and other key players’ cautious stance. A coalition deal that signals minor changes rather than a structural overhaul could constrain fiscal flexibility in the years ahead, something that may influence bond markets across Europe.

The AfD underperformed relative to earlier polling, which may indicate shifts in voter sentiment or weaknesses in their campaign strategy. While this reduces concerns about radical policy moves, their strength in Eastern states could still make them influential at regional levels. Investors in companies with exposure to German domestic policy—especially those in regulated industries—might be factoring in a somewhat more stable policy climate than initially expected.

Meanwhile, the upward movement in EUR/USD following the results suggests market confidence in an outcome that avoids extreme policy shifts. Yet, this relief could be short-lived if coalition talks drag on without clear commitments. Ursula’s team will need to manage expectations carefully, particularly as speculation around European Central Bank policy and broader EU fiscal coordination continues.

Beyond Germany, the broader European defence sector may see renewed attention. If defence spending commitments become firmer following this election, companies operating in this space could attract fresh interest. Investors will be weighing whether increased military budgets translate into stronger stock performance or whether regulatory constraints and procurement delays temper those expectations.

In the coming days, volatility may persist in German equities, particularly for firms sensitive to domestic policy decisions. Currency markets will reflect not just election outcomes but also wider economic sentiment, especially if coalition discussions progress slower than expected. For those trading short-term movements, the balance between political clarity and market confidence will be essential to assess carefully.

New Zealand’s retail sales for the fourth quarter will be closely monitored. The Reserve Bank of New Zealand is anticipated to implement two or three cuts of 25 basis points by July.

If sales exceed expectations, it could shift forecasts towards two reductions instead of three. Conversely, disappointing sales results could suggest a stronger case for three cuts.

Retail sales in New Zealand will play a key role in shaping expectations for upcoming decisions by the Reserve Bank. With forecasts pointing towards a reduction in interest rates, the strength of consumer spending may determine whether adjustments lean towards two cuts or extend to three by mid-year.

If reported sales figures surpass predictions, the argument for only two reductions would gain support. Such an outcome would indicate that consumption remains relatively strong despite prior economic adjustments. On the other hand, if spending data falls short, it would reinforce the case for a total of three cuts, as softer demand might suggest that monetary policy needs to offer further support.

Market participants will need to weigh these figures carefully. Changes in rate expectations tend to influence currency valuation, short-term bond yields, and broader financial sentiment. Investors should be prepared for market swings if the actual data deviates from consensus projections.

Ahead of this release, attention will remain on signals from the Reserve Bank itself. Shifts in messaging, particularly in response to domestic conditions, could either reinforce or challenge existing forecasts. Clarity from policymakers would provide stronger guidance, but if uncertainty persists, traders must remain agile.

Beyond sales data, other economic indicators may contribute to adjusting rate expectations. Inflation trends, labour market developments, and external influences on the economy will need continued scrutiny. Each of these elements could either accelerate or slow the pace of monetary adjustments.

With expectations leaning towards a loosening cycle, any signs of resilience in consumer activity may alter timing and magnitude. If spending holds up better than expected, the urgency for deeper cuts diminishes. However, should demand falter, pressure for an accommodative stance intensifies.

Given these shifting dynamics, positioning in interest rate-sensitive instruments will require close attention. Staying ahead of adjustments means continuously evaluating new information, as markets will react swiftly to any shift in expectations.

Market liquidity remains low at the start of the new FX week, with prices subject to fluctuations as more Asian centres become active. Indicative exchange rates show minimal changes from late Friday:

* EUR/USD 1.0483
* USD/JPY 149.21
* GBP/USD 1.2652
* USD/CHF 0.8981
* USD/CAD 1.4224
* AUD/USD 0.6367
* NZD/USD 0.5742

The recent German election results indicate a Conservative victory but suggest challenging coalition discussions ahead. This news has led to a slight increase in the value of the euro.

Although price swings are to be expected when market liquidity remains thin, we should pay close attention to how trading volumes increase as Asia fully joins the session. Monday mornings often bring muted activity, but as more participants engage, any pent-up interest from the weekend can begin to show up in price shifts.

With the euro barely moving after the German election results, the reaction appears measured for now. A Conservative win was anticipated, yet attention now shifts to the ongoing coalition talks. If negotiations reveal deep divisions, uncertainty could weigh on the common currency. Any indication of a prolonged or unstable government formation process may deter confidence. That said, unless major political turbulence emerges, initial investor caution may fade in the coming days.

Meanwhile, the dollar maintains strength across several pairs. USD/JPY remains near 149, suggesting markets continue to monitor intervention risks from policymakers in Tokyo. Authorities have previously stepped in when abrupt yen weakness occurred, meaning traders will remain alert for any rhetorical shifts from officials. If verbal warnings escalate or actual intervention materialises, price action could become erratic in short bursts.

Sterling holds near 1.2650 against the dollar, with little movement so far. Market focus stays on the upcoming economic data releases from the UK, which could provide fresh direction. Recent inflation readings suggested gradual moderation, but any surprises here could quickly shift momentum. Should figures indicate persistent price pressures, speculation over policy responses might follow.

Commodity-linked currencies, such as the Australian and New Zealand dollars, show few signs of breaking away from their lower ranges. The lack of strong buying momentum reflects ongoing caution around economic growth concerns. Without clearer signals from global demand trends, interest in pushing these pairs higher remains limited.

With traders assessing political developments in Europe, intervention risks in Japan, and economic indicators from key regions, market behaviour will likely hinge on new information. At this stage, patience matters more than chasing short-lived price moves.

TD notes that AI-related spending and data centre capital expenditures have driven market activity, though concerns are emerging regarding financial viability. Reports indicate that Microsoft has cancelled leases in the US, reducing capacity by a couple of hundred megawatts with at least two private operators.

Further checks reveal that Microsoft has deferred converting several agreements into leases, which traditionally leads to data centre construction. There are indications of a slowdown in international spending reallocated to the US, hinting at a potential oversupply scenario.

Additionally, Microsoft has exited negotiations for multiple large deals and allowed several letters of intent to expire. Their scaling back seems connected to shifting demands related to OpenAI workloads, suggesting excess capacity against a new forecast.

Despite worries over a decrease in AI investment and market bubble deflation, CEO Satya Nadella maintains that hyperscalers will thrive in high-demand computing environments. Uncertainties surrounding the Microsoft and OpenAI partnership continue to contribute to market apprehensions.

Given the pullback in leasing activity, it’s becoming clear that previous growth forecasts might have been optimistic. If spending adjustments continue at this pace, we may see ripple effects across broader market expectations. Developers and financiers who were banking on sustained expansion could face a reassessment of near-term commitments.

Satya’s stance remains firm on long-term demand, but actions speak louder than words. Deferring lease conversions and scrapping negotiations signal a recalibration of capital outlays. While high-performance computing loads remain a priority, they’re no longer expanding at the breakneck pace that many anticipated. The shifting allocation of resources suggests that expenditure is being fine-tuned rather than outright abandoned.

The decision to focus heavier investment within US markets, at the expense of international projects, reflects a reassessment of risk. If excess capacity builds up domestically, pricing power may come under pressure. For firms that have structured agreements around aggressive growth assumptions, these adjustments may lead to repricing or even unused commitments.

Meanwhile, uncertainty around OpenAI’s compute demands continues to create unease. If current projections prove unreliable and workloads require fewer resources than expected, further cutbacks could follow. Those monitoring capacity trends should remain particularly attentive to any downward revisions in cloud infrastructure guidance. Even subtle shifts in deployment schedules could be an early indication of further tightening.

Broader market sentiment is at a delicate point. On one hand, confidence in AI-driven expansion remains, bolstered by ongoing advances in model training and inference workloads. On the other, any deviation from prior projections could dampen enthusiasm. The more data that emerges around spending discipline, the easier it will be to pinpoint whether this is a temporary slowing or the start of a longer adjustment period.

Economic conditions will also play a role. If capital costs remain elevated, operators may become more discerning with large-scale commitments. Balancing growth with efficiency will be increasingly important, particularly as cautious investors scrutinise return expectations more closely. The extent to which firms can fine-tune expenditures without sacrificing future capability will determine how this recalibration unfolds in the weeks ahead.

AMD’s stock is under analysis as it approaches NVIDIA’s earnings report. Two potential movements are noted: support may form around $109-$110 for a breakout push, or it could drop to $106-$103 before recovery.

A structured buying plan has been implemented, with two of three buy orders already executed. The first buy zone is at $111.08 for 20 shares, followed by a second at $106.87 for 40 shares, and a pending third at $101.38 for 60 shares.

The calculated Weighted Average Entry Price (WAP) for full execution is $104.13, with a stop-loss set at $95.80. Key support and resistance levels should be monitored for future price direction. Patience is advised for those considering further investment.

The price action ahead is drawing attention. With the stock approaching a threshold where it could either find footing or slip further before regaining ground, traders attentive to these scenarios are preparing accordingly. The outlined approach is structured around measured entries, reducing exposure to abrupt fluctuations.

The first two purchase orders have already been fulfilled, one at $111.08 and another at $106.87, acquiring 20 and 40 shares, respectively. A third remains open at $101.38 for 60 shares, ready to complete the plan if the stock experiences additional weakness. This method ensures entries are not overly dependent on a single price point, distributing risk more effectively.

A complete fill of the orders would set the Weighted Average Entry Price at $104.13, offering a calculated cost basis for the position. If downward movement extends beyond expectations, protection is in place, with the stop-loss defined at $95.80. Observing how price behaves around support near $109-$110, and whether deeper levels near $106-$103 are briefly visited, will provide insight into potential trading opportunities.

Patience is necessary. Market responses to upcoming announcements could influence whether further investment is warranted. Careful attention should be paid to how price interacts with key zones already identified. Staying flexible while adhering to the existing framework remains the priority.

DeepSeek, a Chinese AI startup, has gained attention for its efficient AI model design and commitment to open-source technology. By employing a Mixture-of-Experts architecture, it claims to train AI models at a fraction of the typical cost, utilising reinforcement learning to enhance performance over time.

DeepSeek’s open-source approach allows broader access to advanced AI, encouraging innovation while raising concerns about potential misuse. Its efficiency could threaten NVIDIA’s demand for high-end GPUs if companies opt for cost-effective alternatives.

Additionally, DeepSeek’s rise could foster greater AI integration across various industries. The ongoing competition in AI represents important geopolitical implications and challenges existing industry norms, making the future of AI’s landscape an area of keen interest as NVIDIA prepares to report earnings on February 26.

DeepSeek’s approach is based on a model design that relies on Mixture-of-Experts, enabling it to reduce costs compared to conventional training methods. This structure distributes computational tasks across specialised components rather than requiring a single network to handle everything. By refining these models through reinforcement learning, it can improve accuracy and efficiency over time. Given the high computational expenses typically associated with training advanced AI systems, any approach that cuts costs while maintaining performance could shift demand patterns within the hardware sector.

The company’s commitment to open access makes its technology widely available, potentially accelerating adoption in various industries. While this encourages collaboration and technological progress, it also opens the door to unintended applications beyond its control. This is a recurring concern whenever advanced AI tools become easily accessible. For businesses, the availability of such models could lower entry barriers, making cutting-edge AI more attainable for smaller firms that might otherwise struggle with resource constraints.

For NVIDIA and entities reliant on AI infrastructure, rising efficiency in model training presents a direct challenge. High-performance GPUs are a key component in developing and running sophisticated AI, but cost-conscious firms may explore alternatives if powerful models can be trained with reduced hardware demands. If more organisations embrace architectures that optimise resources, the need for top-tier chips could shift, altering demand forecasts. In the short term, this may not cause immediate disruptions, but long-term adoption patterns could diverge from previous expectations.

Beyond individual companies, broader industry dynamics could see adjustments if more firms follow a similar methodology. AI has already been expanding into numerous fields, from finance to healthcare, and any development that increases accessibility could accelerate this trend. The geopolitical dimension is equally relevant, as nations and corporations compete over advancements in artificial intelligence. Control over AI capabilities has repeatedly surfaced as a strategic priority, meaning any shift in accessibility or efficiency will likely draw attention from multiple stakeholders.

As NVIDIA’s earnings report on 26 February approaches, traders focusing on derivatives linked to AI firms must weigh these factors. Uncertainties surrounding hardware demand, regulatory considerations tied to open-source models, and broader shifts in industry adoption all contribute to potential price movements. Keeping a close watch on industry reaction, corporate guidance, and any adjustments in forward-looking statements will be necessary for those navigating this period.

The upcoming week features key economic events across various countries. Monday marks the German IFO index, followed by US Consumer Confidence on Tuesday, projected at 103.0, down from 104.1.

On Wednesday, the Australian Monthly CPI is expected to remain stable at 2.5%. The RBA’s recent interest rate cut was paired with cautious guidance amid solid labour market data.

Thursday includes multiple US reports: Jobless Claims are anticipated at 220K, maintaining the range seen since 2022. Finally, Friday will present rates such as Tokyo Core CPI at 2.3% and US PCE projected at 2.5%.

The data releases in the days ahead will provide insight into both inflation trends and consumer sentiment, shaping expectations for monetary policy adjustments.

Germany’s IFO index, out on Monday, serves as a measure of business sentiment, revealing how firms perceive current conditions and their outlook for the future. Any deviation from forecasts could prompt recalibration of interest rate expectations for the eurozone. A weaker reading may fuel conversations about possible policy support, while a stronger print could reinforce confidence in existing rate settings.

Tuesday’s US Consumer Confidence report follows, offering a gauge on whether households remain optimistic despite persistent cost pressures. A reading lower than the previous 104.1 suggests growing concern, which could translate into lower consumer spending down the line. That, in turn, may be factored into expectations around future Federal Reserve movements, given the economy’s reliance on consumption.

Midweek, Australia’s Monthly CPI holds steady at an expected 2.5%, highlighting an inflation environment that remains within the central bank’s comfort zone. The Reserve Bank of Australia has kept a cautious stance, acknowledging robust labour market conditions while proceeding with rate adjustments. Any unexpected shift in inflation may force a re-evaluation of policy assumptions.

Thursday brings a collection of US data, with jobless claims holding at 220K. This reinforces the view that the labour market remains firm, as figures have stayed within a tight band for over two years. Stability in this area suggests that wage pressures may persist, which could complicate inflation management.

Friday’s data releases will add final points of reference for the week, including Japan’s Tokyo Core CPI at 2.3%—a key leading indicator for nationwide price trends. Additionally, the US PCE index is expected at 2.5%, closely tracked by policymakers as a preferred inflation measure. If PCE data diverges from forecasts, markets will swiftly reassess interest rate expectations.

The days ahead will dictate whether central banks shift their rhetoric, reinforcing existing expectations or prompting fresh policy discussions. Understanding these movements will allow us to adapt before real adjustments take place.