Weekly labor market data were released yesterday: initial jobless claims rose to 213.0K, slightly below expectations of 214.0K. The four-week average declined from 216.0K to 212.0K instead of the forecast 215.0K, while continuing claims fell from 1.871 million to 1.850 million. Overall, the key sector of the U.S. economy continues to demonstrate resilience, reducing the likelihood of near-term monetary easing by the Federal Reserve.
Meanwhile, President Donald Trump once again called on the regulator via the Truth Social platform to immediately cut interest rates in order to finance prolonged and costly military operations.
Experts note that in previous geopolitical confrontations policymakers often accommodated the wishes of the Commander-in-Chief. However, this time most members of the Federal Reserve Board consider inflation to be a more serious issue and view a dovish approach as inappropriate. In February, the consumer price index stood at 2.4% year-over-year, while the core figure reached 2.5%. Analysts at Goldman Sachs have revised their inflation forecasts upward, suggesting that by December the indicator could average around 2.9%.
Meanwhile, the White House has initiated an investigation against sixty countries under Section 301 of the Trade Act of 1974. According to U.S. Trade Representative Jamieson Greer, if evidence is found that trading partners use forced labor in the production of goods, Washington could impose additional tariffs. Experts believe the move is primarily aimed at increasing pressure on China ahead of Donald Trump’s upcoming meeting with Chinese President Xi Jinping.
Eurozone
The euro is weakening against the yen and the U.S. dollar but strengthening against the pound.
January data on EU industrial production were released today. Output declined by –1.5% month-on-month compared with expectations of +0.6%, and by –1.2% year-on-year versus the expected 1.4% growth. The largest contraction was recorded in Germany, the bloc’s largest economy, as well as in Italy and Spain. The statistics raise doubts about a rapid recovery of the sector, especially given rising energy costs caused by the escalation of the Middle East conflict.
In addition, Germany’s wholesale price index fell from 0.9% to 0.6% month-on-month versus expectations of 0.3%, while remaining at 1.2% year-on-year. According to a Reuters survey of leading economists, most respondents believe the European Central Bank (ECB) will keep the deposit rate at 2.0% until the end of the year despite growing inflation risks.
United Kingdom
The pound is weakening against the euro, the yen, and the U.S. dollar.
Investors and forex traders are assessing the latest GDP data: in February the indicator remained almost unchanged, while economists expected growth of 0.2%. Markets are now increasingly concerned about the risk of recession, as the UK economy is more exposed than most developed economies to the negative impact of rising oil and gas prices.
January industrial production data also disappointed traders, declining by –0.1% instead of the expected 0.3%. Meanwhile, according to a Bank of England survey of British households on long-term inflation expectations, most respondents believe the average consumer price index over the next five years will reach around 3.7%.
Japan
The yen is strengthening against the euro and the pound but weakening against the U.S. dollar.
Finance Minister Satsuki Katayama stated today that the government is ready to take necessary measures at any time in response to sharp fluctuations in currency and financial markets caused by rising hydrocarbon prices. She confirmed that similar issues were discussed at the recent G7 meeting attended by U.S. Treasury Secretary Scott Bessent. These comments are intended to warn investors about the possibility of government intervention in the near future.
Australia
The Australian dollar is weakening against the yen and the U.S. dollar, strengthening against the pound, and showing mixed dynamics against the euro.
Investors are preparing for next week’s Reserve Bank of Australia (RBA) monetary policy meeting. Most analysts expect the regulator to remain cautious and keep the interest rate at 3.85%, although markets are pricing in a possible 25-basis-point increase in May, with traders estimating the probability at around 80%.
Earlier this week, RBA Deputy Governor Andrew Hauser stated that policymakers are likely to discuss the possibility of tightening credit conditions at the upcoming meeting. The uncertainty caused by the escalation of the Middle East conflict remains extremely high, increasing the likelihood of adjustments to borrowing costs in the near future.
Oil
The initial surge in oil prices has been replaced by a decline, although the market remains influenced by several opposing factors.
On one hand, prices continue to be supported by the ongoing blockade of the Strait of Hormuz, which has reduced global hydrocarbon supplies by roughly 20%. Investors are also concerned about U.S. President Donald Trump’s statement that the country has “unlimited ammunition and time” to continue military operations, suggesting the conflict in the Persian Gulf could be prolonged.
On the other hand, the White House is taking emergency measures to limit the rise in oil prices. Officials announced the release of 172.0 million barrels of fuel from strategic reserves. In addition, Washington granted trading partners a 30-day waiver allowing the purchase of Russian energy resources currently under sanctions. U.S. Treasury Secretary Scott Bessent described these steps as measures aimed at stabilizing the global energy market.
