Pound Sterling Trades Cautiously as Investors Shift Focus to Uk Employment And Inflation Data

Economic

Forex

Summary:

The Pound Sterling remains uncertain against its major peers on Friday as investors worry about the UK's economic performance. Investors await the UK labor market and inflation data for fresh cues on BoE’s policy outlook next week. The US Dollar weakens as US President Trump did not impose reciprocal tariffs immediately.

The Pound Sterling (GBP) trades with caution against its major peers on Friday. The British currency struggles for a firm footing as investors are concerned over the United Kingdom's (UK) economic outlook despite upbeat Gross Domestic Product (GDP) data for December and the last quarter of the previous year.

In the latest monetary policy meeting, the Bank of England (BoE) halved its GDP forecasts for the year to 0.75%, which was a big blow for Chancellor of the Exchequer Rachel Reeves, who has been promising to lift economic growth. The BoE stated that higher global tariffs would slow down their growth rate.

The UK Office for National Statistics (ONS) reported on Thursday that the economy surprisingly expanded by 0.1% in the fourth quarter of 2024, while economists projected it to have contracted at a similar pace. In December, the GDP growth rate was robust at 0.4%.

Going forward, the next triggers for the Pound Sterling will be the labor market data for the three months ending December and the Consumer Price Index (CPI) data for January, which will be released on Tuesday and Wednesday, respectively. Both economic indicators will influence market speculation about whether the Bank of England (BoE) will reduce interest rates again in the March meeting. The BoE cut its key borrowing rates by 25 basis points (bps) to 4.5% on February 6.

Daily digest market movers: Pound Sterling holds onto Thursday’s gains against US Dollar

The Pound Sterling trades near Thursday’s high around 1.2560 against the US Dollar (USD) in Friday’s European session. The GBP/USD pair exhibits strength as the US Dollar weakens after United States (US) President Donald Trump directed the Commerce Department and trade representatives to devise a plan to match tariffs on each product with every country.

President Trump said in the Oval Office on Thursday, "I've decided for purposes of fairness that I will charge a reciprocal tariff." Trump added, "It's fair to all, no other country can complain." The President further added that tariffs will “level the playing field for all US companies.”

This scenario weighed heavily on the US Dollar, as market participants anticipated that Trump would impose reciprocal tariffs immediately. These assumptions were based on his tweet at Truth Social, “Three great weeks, perhaps the best ever, but today is the big one: reciprocal tariffs!!! Make America great again!!!", which came in early North American trading hours on Thursday.

In Friday’s European session, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, appears fragile near an over two-week low at around 107.00.

Market participants expect higher tariffs to accelerate local manufacturing activities in the US. This scenario would boost labor demand and push price pressures higher, forcing Federal Reserve (Fed) officials to maintain a restrictive monetary policy stance for longer.

According to the CME FedWatch tool, the Fed is expected to keep interest rates steady in the next three policy meetings. There is an almost 50% chance that the Fed can cut interest rates in the July meeting.

In Friday’s session, investors will focus on the US Retail Sales data for January, which will be published at 13:30 GMT. The US Census Bureau is expected to report that Retail Sales, a key measure of consumer spending, declined by 0.1% after expanding 0.4% in December.

Technical Analysis: Pound Sterling gains ground above 1.2500

The Pound Sterling revisits a six-week high at around 1.2570 against the US Dollar. The GBP/USD pair strengthened after breaking above the 50-day Exponential Moving Average (EMA), which stands around 1.2490, on Thursday.

The 14-day Relative Strength Index (RSI) advances to near 60.00. A bullish momentum would activate if the RSI (14) sustains above that level.

Looking down, the February 3 low of 1.2250 will act as a key support zone for the pair. On the upside, the 38.2% and 50% Fibonacci retracements at 1.2610 and 1.2767, respectively, will act as key resistance zones.

Source: FXSTREET

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Warren Takunda

Stocks

Asian stocks were mostly up Friday on the back of a near-record rally on U.S. stocks, as investors paid little attention to U.S. President Donald Trump’s latest tariff threats.

Hong Kong’s Hang Seng index surged 3.14% to 22,499.72, while the Shanghai Composite was up 0.43% to 3,346.72. The Nikkei 225 slid 0.79% to 39,149.43. Meanwhile, the S&P/ASX 200 in Australia was up 0.19% to 8,555.80 and South Korea’s KOSPI was up 0.31% to 2,591.05.

“There are much tailwinds for risk sentiments in the region to tap on, with the positive handover in Wall Street, weaker US dollar and lower Treasury yields,” Yeap Jun Rong, a market strategist at IG, wrote in a note.

“However, Japan’s Nikkei lagged, likely pressured by a stronger yen,” he said.

Chinese technology stocks listed on the Hong Kong stock exchange all gained on Friday, with stocks from video games firm Tencent, e-commerce firm Alibaba and online services firm Meituan rising over 5%.

Chinese technology firms have enjoyed renewed interest since Chinese AI company DeepSeek released an artificial intelligence model that rivals those of OpenAI while being trained on cheaper hardware. Companies like Alibaba have in recent weeks also released new iterations of their own AI models, and search engine firm Baidu said Friday that it would make its Ernie Bot AI chatbot available for free to public.

“With Beijing doubling down on AI as a national priority, investors are rushing to reprice China’s tech and innovation potential. This is no longer just a stimulus-driven bounce — it’s a paradigm shift,” said Stephen Innes, managing partner at SPI Asset Management.

“If momentum holds, the Hang Seng Index could finally break out of its multi-year slump, reigniting global appetite for Chinese equities.”

On Thursday, the S&P 500 climbed 1% to pull within 0.1% of its all-time high set last month. The Dow Jones Industrial Average gained 342 points, or 0.8%, and the Nasdaq composite jumped 1.5%.

U.S. stocks rose after officials in Washington said reciprocal tariffs would take time to implement.

In energy trading, benchmark U.S crude added 14 cents to $71.43 a barrel. Brent crude, the international standard, rose 37 cents to $75.39 a barrel.

In currency trading, the U.S. dollar weakened to 152.57 Japanese yen from 152.82 yen. The euro cost $1.0459, remaining largely unchanged.

Source: AP

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Warren Takunda

Economic

On Thursday, Trump directed the US Trade Representative and Commerce secretary to investigate the proposed reciprocal tariffs.

The investigation will include other nations’ levies on US goods and non-tariff barriers such as unfair subsidies, value-added taxes (VAT), and exchange rates. Howard Lutnick, the head of the Commerce Department, said that the study should be complete by 1 April, meaning the White House could act immediately thereafter. The sweeping tariffs are set to be the toughest action of the Trump administration following the 25% levy on steel and aluminium, and an additional 10% tariff on China.

“They charge us a tax or tariff and we charge them the exact same,” Trump said in a press conference in the Oval Office, “Nobody knows what that number is unless you go by country.” He also mentioned that tariffs on autos, computer chips and pharmaceuticals would be charged for higher rates, which would be “over and above” the reciprocal tariffs.

Challenges for the EU

The European Union’s VAT is expected to be particularly targeted in the White House’s studies. Trump has repeatedly complained about the unfair trading relationship between the EU and the US. In 2024, the value of goods traded between the two parties amounted to $1.3 trillion (€1.24 trillion), with the deficit for America recorded at $267 billion (€255 billion), according to the US Census Bureau. However, the EU noted previously that the bloc imports more services from the US.

Once implemented, the European pharmaceutical sector will be hardest hit by the reciprocal tariffs. According to the US Trade Census, the US imported $127 billion (€121.4 billion) worth of pharmaceutical products in 2024. The GLP-1 weight-loss drugs accounted for a major percentage of imports from the EU to the US, where Novo Nordisk’s Wegovy held a significant market share.

In addition, European-made vehicles will also be heavily impacted, as the White House cited unfair trade and tax practices between the two economies. Trump also called for the EU to purchase American ammunition to maintain the NATO alliance.

European markets surge to new highs

Trump’s delay in imposing reciprocal tariffs, alongside a Trump-Putin talk aiming to end the Ukraine war, propelled European stock markets to become the top performers again among the world’s major exchanges. On Thursday, the Euro Stoxx 600 surged 1.1% and Germany’s DAX leaped more than 2% to their new record highs. Both the euro and the British Pound jumped against the dollar amid a potential end of a three-year military war between Russia and Ukraine. However, European leaders from Britain, France, and Germany stated that they must be part of any future negotiations.

“While the markets remain on a tightrope when it comes to both issues, the Trump administration's approach so far has been relatively measured and leaves scope for negotiations, lowering the prospect of tit-for-tat, race to the bottom dynamic emerging,” Kyle Rodd, a senior market analyst at Compital.com, wrote in an email.

On Wall Street, three benchmark indices-the Dow Jones Industrial Average, the S&P 500, and the Nasdaq, all finished higher. The US dollar index weakened following a decline in the US government bond yields, pushing up metal prices. Gold prices continued to rise after a brief one-day retreat, nearing their all-time highs two days ago.

Source: Euronews

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Owen Li

Commodity

WTI price edges higher as a JPMorgan report reveals global Oil demand has risen to 103.4 million barrels per day.

President Trump has instructed officials to review reciprocal tariffs on countries imposing tariffs on US goods.

Oil prices may face downward pressure due to a possible relaxation of restrictions on Russian producers.

West Texas Intermediate (WTI) crude Oil price extends its gains for the second successive day, trading around $71.50 per barrel during early European hours on Friday. Oil prices find support from increasing fuel demand and a delay in US tariff plans.

According to a report by JPMorgan on Friday, global Oil demand has risen to 103.4 million barrels per day, marking a 1.4 million bpd increase year-over-year. "After a slow start, demand for mobility and heating fuels picked up in the second week of February, suggesting the gap between actual and projected demand will soon close," the report noted.

On Thursday, US President Donald Trump directed commerce and economic officials to study reciprocal tariffs against countries imposing tariffs on US goods, with recommendations due by April 1. This delay allows for negotiations, potentially reducing trade tensions.

However, the upside of the Oil prices was limited amid easing supply risks and speculation over a potential relaxation of restrictions on Russian producers. This follows Trump’s directive for US officials to initiate peace talks after Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskiy expressed interest in ending the conflict in separate phone calls with him.

Dollar-denominated crude Oil may face demand concerns from the United States (US), the world’s largest Oil consumer, as rising inflation strengthens expectations that the Federal Reserve (Fed) will maintain its hawkish policy stance.

Source: FXSTREET

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Alex

Economic

New Zealand shares advanced Friday in lockstep with Wall Street as investors weighed the latest development in the US' crackdown on what it calls unfair trade practices by other nations.

The S&P/NZX 50 Index was up 0.6%, or 83.20 points, to close at 12,989.18.

The benchmark index has risen 0.9% over the last five trading days.

Nearly all sectors recorded an increase Friday, with electronic technology and non-energy minerals taking the lead. Commercial services shares slipped 0.2%.

Shares in Asia were mixed, with Hong Kong's Hang Seng rallying 2.2%, the Shanghai SSE advancing 0.3%, and Japan's Nikkei 225 down 0.5%.

Overnight, the Nasdaq Composite increased 1.5%, the S&P 500 rose 1%, and the Dow Jones Industrial Average was up 0.8%.

US President Donald Trump signed a memorandum ordering the development of a "Fair and Reciprocal Plan" to tackle "unfair trade practices."

In domestic news, the BusinessNZ Performance of Manufacturing Index rose to 51.4 in January from 46.2 in the prior month, marking its highest level since September 2022 and the first expansion in 23 months.

Food prices in New Zealand rose 1.9% month on month in January, a leap from the 0.1% uptick in December 2024 to mark the highest increase since July 2022, Stats NZ data showed Friday.

In corporate news, Manawa Energy said the High Court ordered the company to dispense with formal service the amended application for its scheme of arrangement with Contact Energy . Manawa's shares finished almost 2% lower.

SKY Network Television rose past 1% after it moved the expected completion of its satellite migration to April from May.

Source:MT Newswires

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Michelle

Economic

Forex

EUR/JPY continues to lose ground for the second successive session, trading around 159.60 during the Asian hours on Friday. The currency cross depreciates as the Japanese Yen (JPY) continues to gain support following Thursday’s release of stronger-than-expected Producer Price Index (PPI) data from Japan, reinforcing expectations of further rate hikes by the Bank of Japan (BoJ).

Japan's Producer Price Index climbed 4.2% year-over-year in January 2025, up from a revised 3.9% in December and exceeding market forecasts of 4.0%. This marks the 47th consecutive month of producer inflation and the highest level since May 2023. The data underscores growing inflationary pressures in Japan, reinforced by recent wage growth figures, bolstering the case for further Bank of Japan rate hikes.

Additionally, the hawkish stance on the Bank of Japan’s (BoJ) monetary policy also continued to support the JPY. While there is uncertainty regarding whether the BoJ will raise interest rates again in March, the central bank is widely expected to implement further rate hikes later this year.

On Friday, Japan's Economy Minister Ryosei Akazawa stated that the authorities will respond appropriately to US reciprocal tariffs. Akazawa further stated that the weak Japanese Yen (JPY) has a variety of impacts on Japan's real economy.

The Euro could face potential headwinds as European Central Bank (ECB) policymaker Boris Vujčić indicated on Thursday that markets are pricing in three rate cuts this year, a forecast he described as reasonable, according to Reuters. Vujčić also suggested that the ECB could remove its reference to a "restrictive policy" in the March statement, citing expectations of a swift decline in services inflation in the coming months.

Source: FXSTREET

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Warren Takunda

Economic

London stocks were set for a steady open on Friday following losses in the previous session.

The FTSE 100 was called to open broadly unchanged at 8,765.

Kathleen Brooks, research director at XTB, said: "The market was waiting for a tariff announcement on Thursday that did not come. Tariffs are still on Trump’s agenda, however, rather than smother the global economy with blanket tariffs, the President has signed a directive to get the US Trade Representative to impose tariffs on a country-by-country basis.

"This is extremely complicated to administer, and reports suggest that the first reciprocal tariffs could be implemented on April 1st. New tariffs could go beyond just reciprocal tariffs. For example, they may also include non-tariff barriers like what the Americans consider to be unfair national subsidies, VAT, regulation and exchange rates. The list goes on, from a market perspective, how are traders meant to price this in?

"The short answer to this question is that they are unwilling to do so. This is evident not only at the index level - with decent rallies for most of the global blue-chip indices on Thursday, bar the FTSE 100, but also the lack of concern in bond markets: US Treasuries and global bonds rallied on Thursday, and the Vix, Wall Street’s fear index, remains below the 12-month average of 15.93.

"Is the market being too complacent? Do traders believe that reciprocal tariffs could take much longer to plan and won’t be ready for April? Or is the market focusing on fundamentals rather than politics? We think that it is a mixture of all three."

In UK corporate news, annual profit at NatWest beat expectations as operating costs and tight margins weighed on earnings.

Pre-tax operating profit rose 0.3% to £6.2bn in the 12 months to 31 December compared with estimates of £6.1bn.

Net interest margin - the difference between loan and savings rates - was 1 basis point higher at 2.13%.

NatWest said it expected to achieve a return on tangible equity in the range of 15-16% this year.

Elsewhere, Bloomberg cited people familiar with the matter as saying that HSBC will initiate a fresh round of layoffs at its investment bank as early as Monday.

The first cuts will be carried out in Asia and then be expanded to the rest of the lender's staff. The number of redundancies was not clear.

Wood Group flagged full-year adjusted EBITDA of $450m to $460m and adjusted EBIT of $205m to $215m in an update, saying it was actively managing costs and working capital to offset weaker-than-expected fourth-quarter trading.

The company noted that the ongoing independent review was expected to lead to prior year adjustments related to the projects business unit, but was not anticipated to materially impact its cash position.

It projected double-digit profit growth in 2025, but was now expecting negative free cash flow of $150m to $200m, with planned asset disposals to maintain debt levels.

Source: Sharecast

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Pound Sterling Trades Cautiously as Investors Shift Focus to Uk Employment And Inflation Data

Daily digest market movers: Pound Sterling holds onto Thursday’s gains against US Dollar

Technical Analysis: Pound Sterling gains ground above 1.2500

Source: FXSTREET

Stock Market Today: Asian Stocks Mostly Up After Near-Record US Stock Rally

Source: AP

Trump Delays a Sweeping Reciprocal Tariff Plan as Global Markets Rally

Challenges for the EU

European markets surge to new highs

Source: Euronews

WTI Rises to Near $71.50 Amid Increasing Fuel Demand

Source: FXSTREET

New Zealand Shares Rise Amid Wall Street Gains

Source:MT Newswires

EUR/JPY Depreciates to Near 159.50 as Japanese Yen Rises Amid Hawkish Boj

Source: FXSTREET

London Pre-Open: Stocks Seen Flat; NatWest in Focus

Source: Sharecast

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