On February 25, local time Tuesday, Chicago Fed President Austan Goolsbee stated that it would be inappropriate to implement further interest rate cuts until more evidence confirms that inflation is on a sustained downward path. While U.S. inflation has retreated significantly from its peak, it remains above the Federal Reserve's 2% target. Data released by the U.S. Commerce Department last week showed that the PCE inflation rate stood at 2.9% in December, with core PCE at 3%. Goolsbee emphasized that policymakers have learned from past mistakes of misjudging inflation as transitory and should avoid repeating them. Speaking at the National Association for Business Economics annual conference in Washington, he noted, "In this situation, it would not be prudent to front-load or concentrate rate cuts. There is broad consensus that prices are among the most urgent concerns for people. We must take this seriously. Before stimulating the economy with additional rate cuts, we must be certain that inflation is returning to the 2% target." Last month, the Fed maintained the federal funds rate in the 3.5%–3.75% range, following three consecutive rate cuts last autumn. Traders widely expect the Fed to hold rates steady again in March.

Meanwhile, recent signs indicate that traders in U.S. futures and options markets are increasingly betting on the Fed continuing to cut rates next year, rather than raising them. Previously, traders had widely anticipated that the Fed would resume rate hikes in 2027 after two 25-basis-point cuts this year. However, growing debates over the impact of artificial intelligence on the labor market may be prompting a reassessment of this outlook. On Tuesday, Fed Governor Lisa Cook warned that the central bank may be unable to counter a potential rise in unemployment triggered by the widespread adoption of AI. Since last weekend, the flattening trend in SOFR spreads has accelerated noticeably, coinciding with heightened concerns within the industry about AI's disruptive effects, which have affected a wide range of stocks and driven up prices of long-term government bonds. "The key question is how AI could trigger inflation, and the long-end of the yield curve may already be sensing this," said Jack McIntyre, a portfolio manager at Brandywine Global Investment Management. "The only inflationary aspect of AI likely stems from data center construction and related energy demands, which are already evident."

Key data to watch today include Germany's revised quarter-on-quarter GDP growth for the fourth quarter, Germany’s GfK Consumer Confidence Index for March, and the eurozone’s harmonized CPI year-on-year for January.

**USD Index** The U.S. dollar index edged higher yesterday, recording a slight gain on daily charts, with the spot rate currently trading around 97.80. Hawkish comments from Fed officials, which tempered expectations for near-term rate cuts, were the primary driver behind the rebound. Additionally, stronger-than-expected U.S. economic data released during the session provided further support. Resistance is seen near 98.30 today, while support lies around 97.30.

**EUR/USD** The euro traded within a narrow range yesterday, closing slightly lower on daily charts. The spot rate is currently hovering around 1.1780. Selling pressure near the technical resistance level of 1.1800, combined with a stronger U.S. dollar fueled by reduced expectations for Fed rate cuts and positive economic data, weighed on the euro. Resistance is anticipated near 1.1850 today, with support around 1.1700.

**GBP/USD** The British pound consolidated with minimal movement yesterday, ending the day with a marginal loss. The spot rate is currently trading near 1.3500. A stronger U.S. dollar, supported by diminished expectations of Fed rate cuts among other factors, exerted downward pressure on the pound. Rising expectations for interest rate cuts by the Bank of England also contributed to the currency's weakness. Resistance is expected near 1.3600 today, while support is situated around 1.3400.