The flow of economic news increased dramatically with the start of 2025 and reached another level as Trump’s presidency officially began. The world is trying to adapt to the new balance, both geopolitically and economically. 

As we move into March, markets remain busy processing vast amounts of news and data. A possible U.S. government shutdown, incoming tariffs, worsening sentiment in the U.S., rising inflation expectations, updates on central bank forecasts, and political changes in Europe are just some of the key topics that will have a significant impact on markets in March. 

Macro View 

Trump’s second term started with a series of major moves, but the most significant of them all is tariffs. Tariffs dominated discussions throughout February, with new measures being widely debated. 

The latest confirmed tariffs include a 25% tariff on imports from Canada and Mexico, with a 10% rate applied to energy resources. An additional 10% tariff has been imposed on Chinese imports, along with a 25% tariff on aluminum and steel to everyone. 

In addition to these confirmed measures, the White House is also considering raising tariffs on Chinese imports to 20% and imposing a 25% tariff on the European Union, specifically targeting the automotive sector and other unspecified sector. Copper imports are under review for potential tariffs, and reciprocal tariffs are set to take effect in April. 

The tariff plan has caused some tremors in the economy. First, businesses increased their imports in late 2024 to build up inventory ahead of the tariffs, a process that is likely still ongoing. Households also likely accelerated purchases in anticipation of rising prices due to the incoming tariffs. This effect kept GDP elevated in the final quarter but also contributed to persistently high inflation levels. 

As seen in the chart above, with the start of the new year, long-term inflation expectations have begun to rise, while consumer confidence has started to decline. This stagflationary effect could pose a significant risk to the U.S. and global economy if it intensifies further. 

While consumers expect higher inflation over the long term, bond market’s inflation expectations remain anchored, at least for the long term. The 2-year inflation expectation has reached 2.7%, while the 5-year expectation stands at 2.6%. This suggests that both market participants and consumers do not expect inflation to reach the Fed’s 2% target anytime soon. Instead, they anticipate that tariffs will impact inflation over the next five years but not over the next ten years, coinciding with the end of Trump’s term. 

If the Fed fails to manage inflation expectations effectively, higher price levels could be triggered. Both ISM Manufacturing and ISM Services sub-indices have already indicated rising price expectations. If these pressures begin to affect consumers more directly, inflation expectations could rise further, creating additional challenges for both the Fed and the U.S. government. 

In March, aside from FOMC decisions and tariffs, markets will focus on a potential government shutdown and possible discussions around tax cuts. Funding for the federal government is set to expire on March 15 unless a deal is reached. While Republicans hold a slim majority in both the Senate and the House, the narrow margin means that every vote will count. Currently, Republican lawmakers are divided on budget priorities, complicating negotiations. 

Elon Musk’s DOGE-related moves and Trump’s tax cut promises could present additional hurdles to reaching an agreement, increasing the risk of a government shutdown. Historically, long shutdowns have been rare, but if one occurs just before the end of the quarter, it could disrupt economic data releases. If the shutdown extends into April, market conditions could begin to shift significantly. 

The PMIs of China, the Eurozone, the U.S., and the UK have converged just above 50, indicating weak global economic growth. Services PMIs have somewhat stabilized at lower levels, while manufacturing PMIs have started to recover, except in the UK, where they remain subdued. The retreat in U.S. ISM and PMI data, combined with declining economic confidence, has begun to worry traders. 

The March FOMC meeting will be particularly important. Given the rising inflation expectations, falling confidence, and slowing economic activity, the Fed’s updated economic forecasts will be crucial for market sentiment. Additionally, the FOMC will take place just days after the government shutdown deadline, meaning that significant developments could occur in the span of a few weeks, potentially affecting both U.S. and global markets. 

In February, the European Union saw an eventful period. Following the French budget deal and one of Germany’s most favorable election outcomes in recent years (at least from an EU stability perspective), the political landscape showed signs of recovery, even if only slightly. However, the U.S.’s stance on Ukraine-Russia and its tariff policies have sparked serious concerns across European nations. Europe no longer feels the same level of trust as an ally of the U.S., leading to renewed discussions about increasing military spending. 

Beyond geopolitical concerns, the EU, led by France, has decided to invest in AI, a move that could pose challenges related to budget deficits. As a result of wanting AI investment and increased military spending, European countries may need to create a unified EU debt system to finance these initiatives. However, this AI investment plan could also serve as a necessary step toward revitalizing Europe’s stagnating economic growth and strengthening intra-EU unity. If Germany is able to form a coalition government quickly, the EU’s response to both U.S. tariff and Ukraine policies will likely become more coherent and impactful. 

In this highly uncertain economic environment, the ECB will update its forecasts in the first week of March. Isabel Schnabel, one of the most respected members of the ECB’s Executive Board, recently suggested that it may be time to discuss where to pause or halt rate cuts. The ECB has already lowered the target rate to 2.75% and is almost certain to cut it again to 2.50% this week. Market participants are currently debating whether the final rate cut target should be 2% or 1.75%. Schnabel’s shift in tone may be an early sign that the rate cut cycle is approaching its end. Because of this, and given the upcoming economic forecast updates, the March ECB meeting will carry significant weight on market movements. 

Central Bank Meeting Calendar 

Technical View

The U.S. 10-year government bond yield approached 5% in January, formed a lower high around 4.70% in mid-February, and has been retreating rapidly since then. Falling economic confidence and rising uncertainty have increased the flow of money into government bonds. 

February’s data contained stagflationary signals, though not a true stagflation scenario, rather, an environment where inflation remains above target while economic growth slows sharply. Markets initially reacted to signs of a potential slowdown by rushing to buy bonds and sell stocks. However, this trend may not continue at such a fast pace, as discussions around tax cuts and the impact of tariffs on yields could shift sentiment. 

A more prolonged consolidation phase, with yields mostly staying between 4% and 5%, with only minor fluctuations beyond this range, is the base-case scenario. From a technical standpoint, 4.10% is the key support level at the moment. 

Brent oil’s surprise attempt to break above $80 did not last long, as expected. The $70-$72 support zone is now being tested once again. OPEC has managed to navigate the market effectively, keeping prices above this support level for years. 

However, Trump’s drilling policies, the slowing growth of global trade due to tariffs and potential trade wars, and the weakening U.S. economy all signal that demand could remain weak throughout 2025. 

Precious metals rose during the first two weeks of February but experienced two consecutive weeks of declines afterward. Gold managed to hold on to some of its gains, finishing the month with a 2% return, while silver retreated by 0.49%. Palladium continued to diverge negatively, extending its underperformance. 

Gold broke above 2790 at the start of February and tested the upper boundary of the trend channel. After several days of testing, gold was unable to break through and began to retreat. 

When the stock market declines sharply, gold, despite being considered a safe haven, often follows stocks downward, and the same pattern is occurring now. The 3000 resistance level and 2790 support level could be key for gold in the coming weeks. If 2790 breaks, gold could drop to the lower boundary of the channel, which is currently at 2688. 

Strong physical demand for gold in the U.S. is helping to keep prices elevated. Tariff fears appear to be the biggest driver behind the heightened demand for gold. 

Silver remained weaker relative to gold. Pulled by gold’s momentum, silver tested the 32.95 resistance level three times but failed to make a daily close above it. Now, the retreat toward 30 is in progress. The 29.75-30 zone will be the key support level to watch if silver is to regain momentum. 

The Dollar Index failed to hold above the 107-108 zone, retreating to the 105.50-106 range, which it has since used as support. With increased tariff rhetoric and the Trump-Zelensky spat on live TV, the Dollar Index surged from the 105.50-106 support zone. 

Currently, a short-term downtrend remains in effect from 110, characterized by lower highs and lower lows. If the Dollar Index recaptures 108 and stabilizes above it, another attempt toward the 110 level could begin. Otherwise, the short-term downtrend is likely to continue. 

Stock markets globally declined in February. The MSCI World Index posted a negative return of 0.81%, with U.S. markets dragging the index lower, led by Nasdaq’s sharp decline. 

Following the DeepSeek event, Nasdaq’s recovery remained weak and uncertain. With intensifying tariff discussions, rising uncertainties, and high valuations, stock markets have finally started to price in the negatives. Meanwhile, European and Chinese markets diverged positively, supported by lower valuations. 

The VIX Index is showing small signs of distress in the stock market. The 23.65 resistance level is holding. The year-to-date average of the VIX has reached 16.86, which is 8% higher than last year’s average of 15.60 so far. 

The S&P 500 remains in an uptrend despite the recent selloff. Upward momentum has completely faded, but the trend is still holding for now. On the last day of February, the trend was tested, but an upward reaction followed. 

If the trend breaks, the next key support level is at 5725, and if that fails too, the decline could escalate into panic selling. To regain upside potential, the S&P 500 may need to see daily closes above the 34-day moving average. 

Dollar Index fluctuations have increased volatility for currency pairs globally. EURUSD ended the month nearly flat after a sharp selloff in the final hours of February, triggered by the Trump-Zelensky argument on live TV. 

GBP performed better, supported by stronger-than-expected economic data from the UK. JPY was one of the strongest currencies last month, as the Japanese economy showed more signs of inflation, and wages rose better than expected. 

EURUSD has shown increased volatility within a tighter range. Price movements have become sharper but lack a clear direction. The steep trend has ended, and price is now contracting, signaling the potential for an impending breakout. The question is: which direction will it take? 

There is no shortage of fundamental catalysts in March that could push EURUSD in either direction, including Fed and ECB decisions, tariffs, Germany’s coalition talks, and geopolitical tensions in Ukraine. 

On the downside, 1.0340 is the first key support, followed by 1.02, which has been tested twice this year, each time triggering a strong rebound. On the upside, 1.0535 is a critical resistance level, as it has sparked selloffs the last three times it was tested. A breakout above 1.0535 could trigger further upside moves. 

Until one of these levels is broken, EURUSD is likely to continue experiencing sharp, indecisive movements. 

USDJPY broke out of its upward wedge formation and retreated to the 38.2% retracement level, driven by strong economic data from Japan and the pullback in the dollar. 

148.70 is the first key support level to watch. Any upward reaction may remain limited unless economic data starts to indicate slowing inflation. The 200-day moving average can be followed as resistance, below the critical 155-156 zone.