8 min readWeekly recap:
The S&P 500 gained 1% last week, while the USD gained 0.9%. The gains came despite a deepening crisis in the Middle East, which sent oil prices to six-month highs. U.S. President Trump also dominated the news following a Supreme Court decision upholding a ruling that Trump’s reciprocal tariffs were imposed illegally. Trump protested the move by introducing a universal 10% tariff on all imports and then lifting this to 15% over the weekend, insisting on its legality.
On the data front, the US core PCE, the Fed’s preferred inflation gauge, rose to 3% YoY in December, up from 2.8%. However, US Q4 GDP was significantly weaker than forecast as the hit from the US government shutdown was larger than expected. US Q4 GDP slowed to 1.4% annualised, down from 4.4% in Q3 and missing forecasts of 3%. These data points followed the minutes of the January FOMC meeting, which were more hawkish than expected, raising questions about the Fed’s outlook for rates.
Trade tariff uncertainty
President Trump said he would impose 10% tariffs on global imports for 150 days under Section 122 of the US trade law, following the US Supreme Court’s ruling that the earlier tariff regime was illegal. Trump then raised this to 15%, the maximum allowed under the statute, intensifying worries of retaliatory measures and potential disruptions to global supply chains.
The announcement is weighing on the risk appetite at the start of the week, with investors backing the “Sell America” trades. US futures are lower, as is the USD dollar, while Gold is rising on safe-haven flows. Investors will continue to monitor developments, with rising trade uncertainty likely to drive a risk-off response.
Geopolitical tensions
US-Iran geopolitical tensions ramped up last week and will be in focus as the Iranian leadership weighs up whether to resist US demands for a nuclear deal. At the same time, the US is considering limited military strikes on Iran. President Trump has ordered a massive buildup of naval forces in the Middle East, including repositioning aircraft carriers and other warships, leading to fears of an imminent war. It’s not clear whether this is intended as an intimidation tactic, and the picture could become clearer this week.
On Thursday, Trump gave Tehran a deadline of 10 to 15 days to reach a deal to resolve the longstanding nuclear dispute or face really bad things. The two sides are preparing for a third round of talks this week. Oil rose 5.5%, and gold rallied 1.2% last week as tensions ramped up. Oil trades 1% lower on Monday and remains a key barometer for the situation.
Fed speak and consumer confidence (Tuesday)
The Fed is currently stuck in limbo, with the chance of another rate cut under Federal Reserve chair Jerome Powell seemingly diminishing due to recent strong US data releases. Core CPI, the Fed’s preferred inflation gauge, remains sticky, and the recent nonfarm payroll report showed that the US labour market was stabilising. Even the weak Q4 GDP is likely to be a one-off owing to the U.S. government shutdown impact.
Attention will be on Fed speakers this week, with investors likely to react more favourably to dovish rhetoric, which could limit the dollar’s upside. The US economic calendar is quiet with Tuesday’s consumer confidence and Friday’s PPI index as the two releases likely to provide further insight into economic trends.
Australian CPI (Wednesday)
Australia’s January CPI data will be closely watched by investors and policymakers alike for signals on the monetary policy outlook, following the RBA’s first rate hike in more than 2 years earlier this month amid a pickup in inflation. December’s monthly data showed consumer prices rose faster than expected, 3.8% year on year, up from 3.4% previously.
Quarterly figures showed headline CPI matched estimates and remained above the central bank’s 2% to 3% target band. Continued elevated CPI readings could prompt the RBA to consider additional rate hikes, which would lift AUD/USD.
NVIDIA earnings (Wednesday)
NVIDIA will report earnings on Wednesday after the market close, with investors watching results closely given its leadership in AI. NVIDIA continues to benefit from significant capital expenditure from hyperscalers, including Amazon, Google, Meta, and Microsoft, which committed $622 billion in Capex in 2026. Meanwhile, CEO Jensen Huang has reiterated the strong trajectory for AI chip demand. Expectations are for adjusted EPS of $1.53 on revenue of $65.69 billion, with gross margins expected to rise to 74.97%, up from 73.6% in Q3, and data centre revenue expected to be $59.9 billion, up from $51.2 billion.
Looking ahead, projections for Q1 of 4 EPS of $1.66 on revenue of 70.96 billion. The earnings come after recent market nerves surrounding AI and sectors expected to be disrupted, versus those expected to benefit. With this in mind, solid Nvidia earnings could help support the tech sector more broadly and the Nasdaq, which has underperformed its major peers.
Tokyo CPI (Thursday)
Tokyo CPI for February is due this week and is seen as a leading indicator for national price trends, with investors watching for any further cooling after January’s slowdown. Previously, data showed that Tokyo CPI cooled to 1.5% from 2%, below the 1.8% expected, while core inflation fell to a 15-month low of 2%.
The data comes after GDP data was also weaker than expected. Slowing inflation and activity could keep the Bank of Japan in wait-and-see mode, with the central bank unlikely to rush into rate hikes whilst inflation is cooling. Easing inflation could weigh on the yen and boost USD/JPY.
German inflation (Friday)
Recent data from Germany and the eurozone have not challenged the current ECB rate expectations outlook, keeping both the doves and the hawks quiet. The highlight this week will be Friday’s German preliminary CPI report. A very weak print may hurt the euro’s appeal and pull EUR/USD lower.
However, the ECB is not expected to cut rates this year. The data comes amid rumours that ECBB President Lagarde could be stepping down before the November 2027 end of her term. A departure by Lagarde could mean that, for the first time, both the Fed and ECB heads will be replaced in the same year, adding uncertainty to the market.
US PPI (Friday)
US wholesale inflation rose by 0.5% MoM in December, marking the largest increase in 5 months and bringing the annual inflation rate to 3%. Driven by services, the figures suggest persistent inflation pressures. The January reading follows the FOMC minutes, which showed that some policymakers suggested the Fed may need to raise interest rates if inflation remains above target.
This means inflation indicators are once again sharply in focus, including PPI. Hotter PPI data could push back rate cut expectations and boost the USD, impacting USD crosses.
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