Kier Starmer's recent visit to the White House has proven fruitful, with the US President expressing openness to a favorable trade deal that could eliminate tariffs on UK exports to the United States. This development comes as the global economic community focuses on upcoming economic data releases, including the US Bureau of Economic Analysis's Personal Consumption Expenditures (PCE) Price Index data for January, which is scheduled for release on Friday at 13:30 GMT. Meanwhile, market speculation around potential interest rate cuts has increased, reflecting a 50% likelihood of additional reductions this year.
In the foreign exchange market, GBP/USD trimmed its losses to trade near 1.2600 during the European session on Friday. This movement was influenced by mixed economic signals, including upbeat German Retail Sales and Import Prices data that failed to boost the Euro significantly. Germany, however, faces challenges ahead, notably the looming threat of a 25% tariff on EU car imports that could impact its economy.
Inflation remains a key theme in economic discussions. Signs of inflation are emerging within the manufacturing sector, while the services sector shows signs of cooling, as indicated by the latest Purchasing Managers' Index (PMI). The core PCE Price Index, excluding volatile food and energy prices, is projected to rise by 0.3% on a monthly basis in January. Meanwhile, French Consumer Price Index (CPI) data slumped to 0.8% for February, indicating a potential downward trend in eurozone inflation in the coming months.
In addition to trade negotiations with the UK, the US President confirmed that 25% tariffs on Canada and Mexico will be implemented by March 4, alongside an additional 10% levy on Chinese imports. These tariff measures contribute to uncertainty, weighing on the risk-sensitive Pound against the safe-haven US Dollar. In response to these developments, US yields have dropped further, diminishing gold's status as a traditional safe haven amid tariff concerns.
German and US inflation data remain eagerly awaited by investors and analysts alike. These figures are expected to provide further insights into the inflationary pressures affecting major economies. As these data points unfold, they will likely influence central bank policies and market sentiment.
Despite positive retail sales and import prices from Germany, the Euro continues to face challenges in maintaining its strength. The impact of potential tariffs on EU car imports adds further uncertainty to Germany's economic prospects. Economic observers will closely monitor these developments as they unfold in the coming weeks.