As we approach the final week of an eventful February, the FX markets have once again experienced significant turbulence. Former President Donald Trump continues to send shockwaves across global markets with an ongoing stream of statements on geopolitical and economic issues. As a result, predicting market movements has become increasingly challenging.
This past week saw relatively light economic data, with the first major release arriving on Tuesday morning in the form of the UK’s latest Claimant Count figures. Forecasts had anticipated a notable increase to 10,000, up from the previous reading of -15,100. However, the final figures exceeded expectations, coming in at 22,000. This serves as one of the clearest indicators yet that the UK labour market is beginning to feel the strain of higher taxes imposed following Labour’s autumn budget. On the other hand, there was a rise in wages, offering a mixed picture of the economy.
On Wednesday, the UK was once again in focus with the release of key CPI inflation data. Forecasts had predicted an increase from 2.5% to 2.8%, but the actual year-over-year reading came in even higher at 3.0%. This reinforces the stance taken by many Bank of England members that inflation, particularly in the food and travel industries, remains stubbornly high. With unemployment on the rise and food prices continuing to soar, it appears increasingly unlikely that the Bank of England will implement an interest rate cut in March.
The next major data release arrived today with PMI readings for the UK, Eurozone, and the US. Before that, however, UK Retail Sales figures were released. Forecasts had expected a return to positive territory at 0.4% following a disappointing previous reading of -0.6%. The final figures significantly exceeded expectations, coming in at a strong 1.7%.
The Eurozone PMI data was the first to be released, with manufacturing once again failing to surpass the key threshold of 50 across all three reports. However, the services sector remained above this level, except in France. The UK followed with a similar pattern—services held above the critical marker, while manufacturing continued to lag below. Later today, the US is set to release its own PMI figures, with both the services and manufacturing sectors expected to remain above 50.
Looking ahead, next week is expected to be relatively light in terms of economic data. The key focal points will include US Consumer Confidence, preliminary GDP figures, and Germany’s preliminary CPI release. Despite the quieter data calendar, market volatility is likely to persist, given the upcoming German elections on Sunday, as well as ongoing geopolitical tensions surrounding the Ukraine-Russia conflict and Israel-Hamas prisoner exchanges. Driving this chaotic market, the unpredictability of Trump remains a key factor, adding another layer of uncertainty to an already fragile global economic landscape.
