My February market analysis: Trends, volatility, and what’s next

February brought no shortage of surprises in the financial markets. Some assets made massive moves, while others struggled to find direction amid shifting economic policies and global uncertainties. From extreme price swings in commodities and crypto to stock market volatility driven by trade tensions, there was plenty to keep an eye on. In this report, I’ll break down the biggest trends, key correlations, and the events that could shape the markets in March.

Key takeaways

1. Some assets saw huge price swings in February, but did they capitalize on their full range?
2. Trade tensions and shifting tariff policies created uncertainty—how did markets react?
3. Crypto had a rollercoaster month, initially surging before erasing gains—what changed?
4. Oil struggled with oversupply concerns, while gold found strength—what’s next for commodities?
5. Correlations between key assets shifted unexpectedly—what does this mean for traders?
6. Major central bank meetings are coming up—how could they shape market sentiment in March?

How the markets performed in February

In February, I observed significant price movements across various asset classes, with the top gainers and losers far exceeding XAUUSD's (Gold) trading range, except for FR40 (France Stock Market Index). The standout performers were XNGUSD (US Natural Gas) and ETHUSD (ethereum), both experiencing fluctuations of over 38%. However, while XNGUSD managed to capitalize on 60% of its trading range, closing 24.29% higher, ETHUSD faced a steep decline of 32.22%.

Major currency pairs and crosses showed limited movement, aligning closely with XAUUSD’s range. In contrast, European and Asian indices exhibited heightened volatility as global economic uncertainties impacted investor sentiment.

Market participants continue to evaluate the ramifications of tariff changes on global inflation trends. This ongoing assessment has led to reduced currency volatility while exerting pressure on stock markets due to increased risk-off sentiment. In the short term, I believe clearer insights into inflationary trends and corporate performance could determine the directional momentum for both currency and equity markets.

Seasonal patterns and what they tell us

Indices

USTEC, which historically benefits from a bullish seasonal trend, may face challenges sustaining this momentum. Concerns surrounding high valuations, coupled with escalating trade tensions, could dampen its appeal to investors.

Meanwhile, China’s National People's Congress (NPC) meeting on 5 March offered insights into the government’s economic priorities. Policies aimed at stimulating domestic demand and addressing local government debt could mitigate downside risks for HK50 (Hong Kong Stock Market Index), which remains susceptible to economic slowdowns.

Cryptocurrencies

The cryptocurrency market faced headwinds amid escalating trade tensions. Newly imposed US tariffs and retaliatory measures from major trading partners have spurred risk aversion, prompting a selloff in high-risk assets.

Bitcoin and ethereum, which initially rallied on optimism surrounding US President Trump’s proposal to include cryptocurrencies in the national strategic reserve, erased their gains as trade war fears took precedence. The uncertainty surrounding global supply chain disruptions further contributed to the selloff in digital assets.

Currencies and commodities

• USOIL: Oil prices continued their downward trajectory, aligning with bearish seasonal tendencies. Concerns over weak demand and an oversupply scenario intensified, particularly as OPEC proceeds with its planned production output increase.
• Gold (XAUUSD): The precious metal benefitted from safe-haven demand and its role as an inflation hedge. Ongoing macroeconomic uncertainties and geopolitical risks further bolstered its attractiveness among investors.
• US Dollar Index (DXY): The dollar’s traditionally strong seasonal trend faces headwinds due to risks associated with Trump’s economic policies. Any signs of a slowing US economy could undermine the greenback’s strength in the coming months.
• USDJPY: The yen remains vulnerable despite the Bank of Japan’s hawkish stance, which signals potential rate hikes. While a stronger yen could be expected, Japan’s export-driven economy makes it susceptible to external risks, potentially limiting the downside for USDJPY.
• EURUSD: The euro surged to its highest level in three months, primarily driven by plans for substantial defense spending increases. The currency remains in focus as I evaluate the impact of geopolitical developments on European economic stability.

What’s driving asset relationships?

When analyzing correlation trends between major asset classes, I observed some key relationships:

• DXY and BTCUSD: The medium-term correlation (MTC) showed no significant relationship (correlation = 0). However, the short-term correlation (STC) surged to 0.90, primarily due to increased institutional investments in bitcoin, mainly through spot Bitcoin ETFs. Additionally, the evolving perception of both assets as 'stores of value' has led to similar directional movements in the short term.
• XAUUSD and US500: A strong medium-term correlation of 0.92 was observed, influenced by market expectations surrounding the Federal Reserve’s rate cut cycle. However, in the short term, this relationship weakened as optimism surrounding Trump's policies fueled a rally in US equities while leaving XAUUSD’s direction uncertain.

Focus of the month: Key events and market impact

March FOMC meeting – impact on USD pairs

The upcoming Federal Open Market Committee (FOMC) meeting is expected to maintain the current interest rate stance. However, persistent inflation concerns and ongoing trade policy uncertainties could prompt the Fed to signal a cautious approach toward future rate cuts. This stance is likely to support the US dollar.

Additionally, peace talks in Eastern Europe and declining oil prices may help alleviate inflationary pressures. Nevertheless, Trump’s shifting tariff policies could keep the dollar elevated in the near term, making USD pairs a focal point for traders.

ECB meeting – impact on EUR pairs

The European Central Bank (ECB) is expected to cut deposit rates by 0.25% to 2.50%. Markets anticipate further cuts ranging between 0.50% and 0.75% over the course of the year. However, internal divisions among ECB policymakers and escalating trade tensions cast uncertainty on the pace of monetary easing. As a result, the euro's direction remains ambiguous, and I will closely monitor any shifts in ECB policy guidance.

Bank of Japan policy outlook – impact on JPY pairs

The Bank of Japan (BoJ) is unlikely to implement any rate changes this month. However, market expectations point toward potential rate hikes later in the year, driven by robust wage growth stemming from spring labor negotiations. This could bolster economic expansion while keeping inflation elevated, strengthening the yen. That said, Japan’s reliance on exports makes it susceptible to external economic shocks, which could cap USDJPY’s downside.

Bank of England policy and inflation concerns – impact on GBP pairs

The Bank of England (BoE) has maintained a cautious approach toward inflation management. Rising energy price caps are expected to contribute to higher headline CPI figures starting in April. However, softer economic indicators and the implications of new tariff policies could weigh on overall market sentiment. While the outlook remains uncertain, GBP pairs will likely experience heightened volatility in the near term.

Final thoughts

February’s market landscape was characterized by sharp movements in commodities, cryptocurrencies, and equity indices, while currency markets exhibited relative stability. Seasonality trends suggest that global economic uncertainties, trade policies, and central bank decisions will continue to shape market dynamics in March. 

As these shifts unfold, it’s a great time to put your trading strategies to the test. Open an Exness demo account and practice navigating market movements in real-time—without any risk. Stay ahead of the trends and refine your approach before stepping into live trading.