Markets Weekly Outlook – Tariffs, NFP and ECB Meeting on the Agenda

Markets have been by one other week the place tariffs have been the driving pressure behind market strikes. The information which I had thought can be the main occasion for the week didn’t stoke any actual volatility and that’s testomony to what we’ve got seen in 2025 up to now.

Markets are extra occupied with the strikes of the Trump administration than they’re concerning the information.

US information this week confirmed indicators that the economic system could also be stalling whereas general market sentiment has been dented by tariff chatter and inflationary considerations. This was mirrored within the CB shopper confidence information which confirmed a big uptick within the 12 month rate of interest expectations by shoppers.

U.S. shopper dropped in January for the primary time in virtually two years, and the products commerce hole hit a report excessive as companies sped up imports to keep away from tariffs. This factors to weak financial development or perhaps a potential contraction this quarter.

Information from the Commerce Division additionally confirmed that whereas inflation slowed down yearly, costs stay stubbornly excessive with regular month-to-month will increase. In the meantime, the Trump administration is rising tariffs, which economists warn will result in increased costs as companies move prices to shoppers.

Sources: LSEG Datastream (click on to enlarge)

Inflation expectations amongst shoppers rose sharply in February. The Atlanta Federal Reserve minimize its first-quarter GDP forecast, now predicting the economic system will shrink by 1.5% yearly as a substitute of rising on the earlier estimate of two.3%.

The and struggles continued this week which is not any shock given the present market dynamics. The Worry and Greed index is now in worry territory as tariff chatter ramps up and financial information continues to underwhelm.

Supply: Isabelnet (click on to enlarge)

On the FX entrance,the returned to its king standing this week weighing on US greenback denominated pairs with the dropping floor and retreating from the psychological 1.0500 deal with.

is the most important loser this week and I used to be greatly surprised by the selloff. Principally all the way down to the truth that tariffs have till now been a optimistic for protected haven demand. The one clarification I can see is potential revenue taking and gold merchants involved by the rise in inflation expectations.

costs additionally struggled this week on rising considerations about international development and Oil demand. A disagreement by OPEC + members on an output improve from April supplied a short respite on Thursday however was adopted by one other bearish day to finish the week.

Crypto markets are additionally feeling the pinch with on the right track for its largest weekly drop for the reason that collapse of FTX in 2022.

The Week Forward: Tariffs on the Forefront. Will Trump Observe By?

Asia Pacific Markets

The primary focus this week within the Asia Pacific area for me is China’s Two Classes assembly.

Markets are intently watching China’s Authorities Work Report, which Premier Li Qiang will ship on March 5. It can reveal the nation’s 2025 development goal and description key insurance policies. China is anticipated to maintain its development aim at “round 5.0%,” the identical as in 2024, whereas giving extra particulars about fiscal and financial plans.

This Saturday morning, China will launch its official February buying managers’ index (PMI), with a slight development at 50.1 anticipated. The Caixin PMI will comply with on Monday. On Friday, China Customs will present the primary commerce information for the primary two months of 2025.

Europe + UK + US

In developed markets, the US PCE information launched final week didn’t shake markets as anticipated however the Trump administrations proceed to throw curveballs for International Market individuals to navigate.

Subsequent week is essential for the US, with commerce tariffs on imports from China, Mexico, and Canada presumably beginning on March 4, together with key financial information, just like the February jobs report.

President Trump argues that international international locations will bear the associated fee as a consequence of a stronger greenback, however shopper costs could rise, much like previous tariffs. Shopper confidence is already shaky as a consequence of spending considerations and austerity measures, and extra tariff information may worsen the outlook and dent general market sentiment.

Financial information, together with the ISM stories, is anticipated to point out gradual development. Manufacturing and companies surveys recommend a weaker outlook, and company warning over altering commerce insurance policies could result in solely a small rise in payrolls. Federal job cuts could take months to point out a transparent impression.

Subsequent week, the European Central Financial institution will resolve on rates of interest after reviewing a brand new inflation report. A 0.25% price minimize is anticipated, although inflation may rise in February earlier than easing. With extra hawkish voices within the ECB, debates on the ultimate price for the eurozone are rising extra essential.

Unemployment can also be in focus. Regardless of companies reducing jobs just lately, the unemployment price stays at a report low of 6.3%. Any shift within the labor market may impression how far the ECB can decrease charges.

Chart of the Week

This week’s focus is on the (DXY) after a strong restoration this week which has propelled the DXY again above the 107.00 deal with.

Lots of the transfer was all the way down to the tariff chatter which arose towards the backend of the week and that’s more likely to carry over into Subsequent week.

At the moment the DXY is supported by the 107.00 deal with with the 100-day MA resting at 106.700 additionally seemingly to offer help.

Rapid resistance rests at 108.00 earlier than the 108.49 deal with comes into focus.

US Greenback Index Every day Chart – February 28, 2025