Following last week’s turbulent session brought on by tariff concerns, the market is calmer now that the matter has been postponed for 30 days because both the neighbours of the US have indicated that they are open to negotiations.
The delayed 25% tariffs on Canada and Mexico are now anticipated to take effect on March 1. However, in yet another interesting development on Friday, the US President stated that he would announce retaliatory tariffs on more countries this week, but he did not identify them.
According to estimates, imposing tariffs will have a detrimental impact on US GDP and raise costs.
More importantly, the tariff issue has not been discussed between the US and China.
Implementing a 10% duty on Chinese imports, however, would take some time. If the plan doesn’t change, China is likely to start imposing tariffs on February 10.
The risk is that increased economic unease may result from tariff uncertainty for an extended period.
Determining the monetary policy position of the participating countries is extremely difficult for their policymakers.
The release of non-farm payrolls, a crucial economic indicator, occurred last week in the US. Against the 169.000 expectation, it came in at 143.000. On the other hand, the jobless rate decreased from 4.1 percent to 4 percent. The previous month’s payroll was increased to 307.000, and MoM wages were 0.5 percent.
Reinforcing the belief that the economy is robust enough to justify the Fed’s decision to keep interest rates unchanged at its upcoming meeting in March or, if the present rate of growth persists, even in May.
The possibility of tariffs combined with robust economic growth has raised expectations of higher inflation, which might have a direct impact on consumers. Following the release of the Federal Reserve’s semi-annual monetary policy report, the market will be watching the US consumer price index and Fed Chairman Powell’s speech before Congress next week.
As anticipated, the Bank of England also lowered its policy rate by 25 basis points to 4.5 percent. This time, however, all nine votes supported the cut. A 50 bps cut was demanded by two out of seven voters. This indicates a dovish sentiment.
The UK economy is struggling because there are no indications that it will get better.
Inflationary pressure and slower growth are bad symptoms. The sole advantage is that it is not in a situation similar to the Eurozone because of the low level of trade with the US. The UK is therefore less vulnerable to tariff risk than its neighbours in Europe.
Gold, meanwhile, benefited considerably from global uncertainty and tariff hurdles, rising to test the new all-time high of $ 2886, before dropping at the New York closing.
But because gold, which is extremely overbought, hasn’t moved towards the USD 2890-95 zones, it has finished at about USD 2863.
Before it resumes its upward trajectory into the USD 2900 levels, this writer is of the view that it will make some corrections this week.
Any news concerning tariffs, economic uncertainty, or the geopolitical front will affect gold prices.
However, under the current circumstances, the metal’s use as an inflation hedge is not supported by any delay in the Fed’s announcement of a US rate cut. Customers consider it more as a safe haven asset.
Aside from Powell’s two-day hearing before the Senate Banking and Housing Financial Services Committee, the market will be concentrating on the US producer price index (PPI), weekly jobless claims, and retail sales this week.
It is tough as the UK economy is not showing any signs of improvement. Lower growth and higher inflation are not good indicators.
The sole advantage is that, as a result of minimal trade with the United States, it is not in a scenario like the scenario facing the Eurozone. As a result of which, the UK is not as vulnerable to tariff risk as its European neighbours.
WEEKLY OUTLOOK - Feb 9-14
#GOLD @ $ 2860- Although gold may hold @$2884, it must break @$ 2846 in order to reach $ 2832. Or upside break risks for possible test break of $ 2,898 for further gains.
#EURO @ 1.0330- Support area 1.0240 might be tested. Avoiding falling below risk recovery. A clear 1.0440 break will push it towards 1.0520. Otherwise, pay attention to 1.0180.
#GBP @ 1.2410- Perhaps the lows for the Pound Sterling occurred last week. A break of 1.2310 will see further gains towards 1.2510 or 1.2620. Break of support level could push it to 1.2250
#JPY @ 151.40- I assume 150.50 will hold. A break of 152.70 will motivate 153.50. If the level of support is broken, it will move towards 149.50 to 70.
Copyright Business Recorder, 2025
The writer is former Country Treasurer of Chase Manhattan Bank. The views expressed in this article are not necessarily those of the newspaper
He tweets @asadcmka
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