Global Economic Snapshot

• US consumer confidence dropped sharply to 84.5, the lowest level since 2014, signaling growing caution among households.
• US durable goods orders surged 5.3%, well above expectations, supported by strong capital goods demand.
• US factory orders rose 2.7%, reinforcing the picture of resilient manufacturing activity.
• US trade deficit widened to $56.8bn, reflecting strong imports.
• US jobless claims edged up to 209k, broadly consistent with a cooling but stable labor market.
• The Federal Reserve kept rates unchanged at 3.75%.
• Germany Q4 GDP grew 0.3% q/q, slightly beating estimates, though sentiment softened as the Ifo index slipped.
• France Q4 GDP met expectations at 0.2% q/q.
• Tokyo CPI eased to 1.5% y/y, while Japan’s services PPI continued to slow.
• The Bank of Canada held rates at 2.25%.
• Australian quarterly CPI surprised higher at 3.8% y/y, complicating the inflation outlook.
• China’s industrial profits rebounded 5.3% y/y, marking a sharp turnaround from earlier declines.

Gold’s Bull Case Expands as Demand Becomes Structural

UBS significantly raised its gold price targets, citing strong investment inflows, steady central bank buying, and heightened geopolitical risk. The bank now sees gold at $6,200/oz through most of 2026, with a bullish scenario reaching $7,200/oz. While prices may ease slightly later in the year, UBS argues structural demand remains firmly supportive.

Pressure and Diplomacy Run in Parallel on Iran

President Trump said the US is preparing for talks with Iran, even as military tensions in the region remain elevated. His comments combined references to increased naval deployments with public openness to diplomacy. Markets interpreted the remarks as classic pressure-and-negotiation tactics, keeping geopolitical risk firmly in focus.

Fed Holds Steady, Pushes Back on Political Noise

Speaking after the FOMC decision, Chair Jerome Powell said consumer spending remains resilient but acknowledged weakness in housing and slower hiring momentum. He noted that inflation has eased but is still above target and reiterated that policy decisions are not on a preset path. Powell stressed that the Fed would continue to act independently and remain focused on its mandate.

Political Pressure on the Fed Intensifies

Trump again criticized Powell for keeping rates too high, arguing that tariffs and falling inflation justify substantially lower borrowing costs. His comments reinforced concerns around political pressure on the Fed and kept central bank independence firmly in the spotlight for markets.

Trade Frictions Resurface in Asia

Trump announced a tariff hike on South Korean goods to 25%, citing stalled approval of a previously agreed trade deal. The move targets key sectors including autos and pharmaceuticals and raises fresh trade uncertainty across Asia.

Euro Strength Starts to Bite European Exporters

German Chancellor Friedrich Merz warned that the sharply weaker US dollar is weighing heavily on Germany’s export-driven economy. With the euro near multi-year highs, exporters face declining competitiveness, particularly smaller firms with limited currency hedging capacity. Merz also voiced support for accelerating work on a digital euro.

ECB Flags Currency Strength as a Policy Risk

ECB policymaker Martin Kocher said sustained euro strength could eventually force a policy response if it meaningfully drags down inflation. ECB’s Cipollone added that while the euro-area economy remains resilient, persistent geopolitical risks could weigh on investment and growth, reinforcing the need for financial autonomy.

China Softens Stance on Advanced AI Chips

China approved the first imports of Nvidia’s H200 AI chips, marking a notable shift in its stance on advanced AI hardware. The initial approvals reportedly cover several hundred thousand units, mainly allocated to large Chinese tech firms. The move eases near-term concerns for Nvidia’s China exposure.

Market Highlights

• Gold and silver reversed sharply after recent record highs.
• Meta shares jumped 8% as revenue guidance supported continued AI investment.
• Microsoft fell 11.5%, its biggest drop since 2020.
• Amazon is reportedly in talks to invest up to $50bn in OpenAI.
• Kevin Warsh is emerging as Trump’s preferred candidate for next Fed chair.
• The US has opened investigations into claims that WhatsApp chats lack full privacy.
• Boeing posted a 57% jump in quarterly sales.
• S&P 500 futures pushed above 7,000, hitting a fresh record high.

Disclaimer

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