The economic policies of the Trump administration are beginning to crystallize, offering a clearer perspective on future trajectories. Concerns surrounding President Donald Trump's trade war gradually eased towards the end of the week, as markets adjusted to new realities. Meanwhile, BNB trading volume soared to 5.13 billion, with the long-to-short ratio reaching its highest level in over a month. Christine Lagarde, President of the European Central Bank (ECB), commented on the conditions for economic recovery, acknowledging potential risks to inflation from both ends of the spectrum.
In the United States, December's Consumer Price Index (CPI) was revised upward from 0.4% to 0.7%, indicating stronger-than-expected inflationary pressures. This was further compounded by January's CPI report, which exceeded expectations and spurred speculation that the Federal Reserve would maintain interest rates at current levels for an extended period.
“With our policy stance now significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance,” – Jerome Powell
Federal Reserve President Jerome Powell reiterated the central bank's firm approach, indicating that despite a healthy US economy, more progress on inflation is a priority. This assertion came against a backdrop of a 0.9% decline in January retail sales, starkly contrasting with a -0.1% forecast.
Across the Atlantic, economic indicators depicted a mixed picture for the Eurozone. The Sentix Investor Confidence index rose to -12.7 in February from January's -17.7, reflecting improved investor sentiment despite challenges. However, the region's industrial production contracted by 1.1% on a monthly basis in December, highlighting lingering economic vulnerabilities.
Germany’s inflation remained stable with the January Harmonized Index of Consumer Prices (HICP) confirmed at 2.8% year-over-year, aligning with previous estimates. Meanwhile, the EUR/USD exchange rate flirted with the 1.0500 mark, suggesting potential for further recovery amid these economic developments.
The US dollar experienced a notable surge driven by risk-aversion as President Trump announced new tariffs on steel and aluminium imports, effective Tuesday, with no exceptions. These measures marked another chapter in Trump's trade policy narrative and underscored his administration’s protectionist inclinations.
The Federal Open Market Committee (FOMC) is set to release the minutes of its January meeting this Wednesday, providing further insights into the Fed’s strategic direction. Investors and analysts will closely examine these minutes for clues regarding future monetary policy adjustments.
Christine Lagarde expressed cautious optimism about the Eurozone’s recovery prospects but emphasized existing risks. Her comments followed a tumultuous period characterized by fluctuations in key economic indicators across Europe.