The major assets took cues from their individual catalysts as traders priced in trade war concerns, increased oil demand projections, and at least one Fed rate cut this year.
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Headlines:
- Japan producer prices for January: 4.2% y/y (4.0% forecast, 3.9% previous)
- Australia Melbourne Institute inflation expectations accelerated from 4.0% to 4.6% in January
- RBNZ inflation expectations eased from 2.12% to 2.06% in Q4 2024
- U.K. preliminary GDP for Q4 2024: 0.1% q/q (-0.1% forecast, 0.0% previous)
- NIESR: U.K. GDP estimate improved from 0.1% m/m to 0.3% m/m in January
- Switzerland CPI for January: -0.1% m/m (-0.1% forecast and previous)
- USD slipped as traders looked beyond U.S. headline PPI to Fed policy outlook
- U.S. initial jobless claims for the week ending Feb 8: 213K (217K forecast, 220K previous)
- IEA Oil Market Report forecasts 1.1 mb/d in 2025, much higher than 870 kb/d in 2024
- Trump signed a sweeping reciprocal tariff plan, to go into effect after Commerce Secretary Howard Lutnick determines appropriate tariff levels by April 1
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
The major assets juggled several key catalysts, from hotter-than-expected U.S. PPI data to a surprising upside in UK GDP growth and shifting trade policy dynamics.
Despite the PPI headline beat, traders zeroed in on softer core components, sending U.S. 10-year yields tumbling and fueling expectations for Fed rate cuts. Across the pond, stronger-than-expected Q4 GDP growth in the UK eased recession fears, but the FTSE lagged as weak corporate earnings weighed on sentiment.
Gold hit record highs, riding a weaker dollar and increased safe-haven demand, extending its multi-week rally on inflation concerns and geopolitical risks. Bitcoin clawed back early losses, rebounding from $95,400 to settle around $96,400 as risk appetite improved.
WTI crude traded in a tug-of-war—reports of peace talks between Russia and Ukraine pressured prices, but uncertainty around trade policy and the IEA’s upgraded 2025 demand growth forecast (now at 1.1 million bpd from 0.87 million) helped provide support.
Tech stocks led a strong rally on Wall Street, while European markets mostly gained, with German equities standing out and UK stocks trailing their continental peers.
FX Market Behavior: U.S. Dollar vs. Majors:
Overlay of USD vs. Major Currencies Chart by TradingView
The U.S. dollar started the day on the back foot, likely as Asian session traders caught up to the dollar-bearish momentum from Wednesday’s U.S. CPI reports.
By early European trading, the Greenback found some support, possibly as traders squared positions ahead of the U.S. PPI release.
In the U.S. session, USD slipped despite hotter-than-expected headline PPI numbers, as traders focused on the softer components feeding into the Fed’s core PCE price index. Expectations of Fed rate cuts this year kept the dollar under pressure, dragging it to fresh intraday lows across the board.
Later in the session, the dollar briefly spiked after Trump announced retaliatory tariff plans, but the gains quickly faded. His more gradual-than-expected timeline for implementation eased global trade war concerns, sending USD to fresh daily lows by the end of the day.
Upcoming Potential Catalysts on the Economic Calendar:
- Germany wholesale price index at 7:00 am GMT
- Switzerland PPI reports at 7:30 am GMT
- Eurozone flash employment change at 10:00 am GMT
- Eurozone flash GDP at 10:00 am GMT
- Canada manufacturing sales at 1:30 pm GMT
- Canada wholesale sales at 1:30 pm GMT
- U.S. retail sales at 1:30 pm GMT
- U.S. import prices at 1:30 pm GMT
- U.S. capacity utilization rate at 2:15 pm GMT
- U.S. industrial production at 2:15 pm GMT
- U.S. business inventories at 3:00 pm GMT
- FOMC member Logan to give a speech at 8:00 pm GMT
Today’s European session focuses on Germany’s wholesale price index and Eurozone GDP and employment data, which could move the euro if growth surprises or labor conditions weaken.
In the U.S. session, retail sales, import prices, and industrial production will influence Fed expectations, while FOMC member Logan’s speech, trade-related developments, or Trump-related headlines could inspire increased volatility among the major assets.
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