Last week’s tariff tantrums may be just the beginning. U.S. President Donald Trump has doubled down on his aggressive trade stance, vowing to shrink America’s trade deficit. While last-minute negotiations helped avoid immediate tariffs on Mexico and Canada, the trade war with China is escalating, and Trump’s focus is now shifting toward the EU and broader geopolitical deals. As markets brace for turbulence, key central bank updates and economic data releases will be in the spotlight this week.
Fed’s Powell Takes Center Stage
On Wednesday, Federal Reserve Chair Jerome Powell will testify before Congress as the Fed releases its semi-annual Monetary Policy Report. Markets will be closely watching for any signs of a shift in the Fed’s stance. According to ING, the report will highlight the uncertainty created by Trump’s policy moves.
While the Fed remains open to easing, it needs data-driven justification. With 100 basis points of easing priced in for late 2024, an imminent rate cut seems unlikely. Instead, the focus will be on whether inflation and economic growth warrant further action.
Bank of Canada: Standing Pat, But Ready to Act?
Midweek, the Bank of Canada (BoC) will publish its Summary of Deliberations from its January meeting. According to BofA, the report is expected to outline the BoC’s thoughts on potential tariffs and their impact on monetary policy.
Analysts believe the BoC will remain on hold for the rest of 2025, given the economy’s strong momentum. However, if the U.S. imposes tariffs on Canadian goods, the BoC has room to cut rates to support growth.
Bank of England: Post-Rate Decision Focus
Across the Atlantic, Deutsche Bank’s Sanjay Raja noted that markets will be laser-focused on Bank of England policymakers this week. Of particular interest is Catherine Mann’s speech following her vote for a 50bps rate cut.
Mann’s justification for such a move, along with her stance on future adjustments to the Bank Rate, will be key. Additionally, external MPC member Megan Greene is set to speak, adding another layer of insight into the BoE’s decision-making process.
Key Economic Data to Watch This Week
Tuesday, February 11
📢 Speakers: Fed’s Powell, Hammack, Williams, Bowman | BoE’s Mann, Bailey | ECB’s Elderson, Schnabel | Riksbank’s Seim
Wednesday, February 12: U.S. CPI Report
📊 Consensus Estimates:
- Headline CPI (YoY): 2.9% (Prev: 2.9%)
- Core CPI (YoY): 3.1% (Prev: 3.2%)
Citi analysts believe this report will be a market mover. They expect 0.34% m/m core CPI, translating to 0.31% m/m core PCE. While still above the Fed’s target on a monthly-annualized basis, a lower YoY reading would signal that core inflation is cooling.
The biggest driver? A sustained slowdown in shelter prices, which could push inflation toward the Fed’s comfort zone by the May FOMC meeting.
📢 Speakers: Fed’s Powell, Waller | BoE’s Greene | ECB’s Elderson, Nagel | Riksbank’s Bunge
Thursday, February 13: UK GDP & EU Industrial Data
📊 UK December Monthly GDP
- Consensus: 0.1% (Prev: 0.1%)
The ONS will release the preliminary Q4-24 GDP growth report. According to HSBC, annual 2024 GDP growth is expected to be confirmed at 0.7%, while Q4-24 GDP is projected to show a -0.1% quarterly decline.
Key drags on the economy:
- Weak retail sales
- A struggling manufacturing sector
- Shrinking construction output
📊 Eurozone Industrial Production (Dec)
- Consensus: -0.6% (Prev: 0.2%)
SocGen believes the industrial sector will remain weak in early 2025. The European Commission’s order books-to-inventories ratio remains low at -0.6, despite some improvement from December’s multi-year low of -0.8.
📢 Speakers: Fed’s Powell, Bostic | BoE’s Greene | ECB’s Nagel, Cipollone | Riksbank’s Jansson
Friday, February 14: U.S. Retail Sales
📊 Consensus:
- Retail Sales (M/M): -0.1% (Prev: 0.4%)
ING expects soft retail sales, mainly due to a 7%+ drop in auto purchases and bad weather curbing consumer activity. However, the “control” group, which excludes food service, autos, gasoline, and building materials, is expected to post modest 0.3% m/m growth.
Industrial production, on the other hand, could see a decent gain, thanks to a strong manufacturing ISM reading, though weather-related disruptions pose a risk.
This week, global markets will be on edge as policymakers, economic data, and trade tensions shape the economic outlook. The Fed’s Powell, Bank of Canada’s deliberations, and UK GDP data will be key for traders and analysts. Meanwhile, inflation trends, industrial output, and retail sales figures will provide crucial insights into whether central banks will stay the course or pivot in the coming months.
IBAFIN 
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