The latest weekly labor market data were released the day before: initial jobless claims were revised from 210,000 to 209,000, above the forecast of 206,000; the four-week average rose from 204,000 to 206,250; and continuing claims declined from 1.865 million to 1.827 million, versus expectations of 1.860 million. Meanwhile, President Donald Trump announced plans to revoke the certification of Bombardier Global Express business jets and impose 50% tariffs on all aircraft produced in Canada if the country’s regulator does not certify aircraft from U.S.-based Gulfstream Aerospace Corp. Investors are also increasingly focused on the upcoming change in leadership at the Federal Reserve in May, when Chairman Jerome Powell’s term expires. While analysts had previously expected Kevin Hassett, a proponent of aggressive dovish rhetoric, to succeed him, the White House has now opted for Kevin Warsh, a former Fed governor (2006–2011). Warsh is considered a supporter of monetary discipline and higher real interest rates, which could support long-term dollar strength.

Eurozone

The euro is strengthening against the yen but weakening versus the pound and the U.S. dollar.

Investors are assessing preliminary GDP data for the EU: in the fourth quarter, growth reached 0.3% quarter-on-quarter versus expectations of 0.2%, and 1.3% year-on-year instead of 1.2%, supported by stronger domestic consumption and investment that offset weaker exports. Germany is showing signs of recovery: GDP rose 0.3% QoQ against forecasts of 0.2% and 0.4% YoY instead of 0.3%. Meanwhile, January consumer inflation accelerated from 0.0% to 0.1% month-on-month and from 1.8% to 2.1% year-on-year, remaining close to the ECB’s 2.0% target. EU unemployment also declined from 6.3% to 6.2%, further confirming economic resilience.

United Kingdom

The British pound is strengthening against the yen and the euro but weakening versus the U.S. dollar.

In December, approved mortgage loans rose by 61,010, below both forecasts of 65,000 and the previous reading of 64,070, while total lending increased by £4.6 billion, exceeding expectations of £4.5 billion. Consumer credit declined from £2.143 billion to £1.524 billion, while lending to individuals eased from £6.6 billion to £6.1 billion, remaining relatively stable. The mortgage sector continues to show weakness as the housing market slows following the removal of tax incentives. Meanwhile, during Prime Minister Keir Starmer’s visit to China, several agreements were reached: starting February 2, China will cut tariffs on British whisky imports from 10% to 5%, providing support for UK spirits producers.

Japan

The yen is weakening against the euro, the pound, and the U.S. dollar.

Investor focus is on January inflation data for the Tokyo metropolitan area: the headline CPI fell from 2.0% to 1.5% year-on-year, while core CPI declined from 2.3% to 2.0%, approaching the Bank of Japan’s target and marking a 15-month low, driven by lower fuel and food prices. Nevertheless, this data is unlikely to significantly alter the BOJ’s hawkish stance in the near term. In addition, December industrial production came in at –0.1% versus forecasts of –0.4%, while retail sales fell –0.9% instead of the expected +0.7%.

Australia

The Australian dollar is strengthening against the yen but weakening versus the pound, euro, and U.S. dollar.

Wholesale inflation data were released today: in the fourth quarter, the producer price index slowed from 1.0% to 0.8% quarter-on-quarter instead of rising to the expected 1.1%, while remaining at 3.5% year-on-year, well above the Reserve Bank of Australia’s target range of 2.0–3.0%. This significantly increases the probability of a 25 basis point rate cut at the RBA’s meeting next week.

Oil

An initial decline in oil prices was replaced by a rebound, while the fundamental backdrop remains supportive for further gains.

This week, the U.S. continued to build up military forces near Iran, raising the risk of direct military involvement and significantly increasing the likelihood of supply disruptions from the region. A potential blockade of the Strait of Hormuz could remove around 20 million barrels per day from global supply. On the other hand, Reuters sources report that OPEC+ is likely to extend its pause on production increases into March, while most leading economists surveyed forecast an average annual Brent crude price of $60 per barrel.