Global Markets React to Economic Shifts & Data

Key Economic Updates Across the Global Markets

• The USD Index (DXY) ended Wednesday in the red, reversing Tuesday’s gains.
• UK GDP shrank by 0.2% annually in Q4, missing the expected 0.1% growth.
• Australian unemployment increased to 4.1% in January, with minimal job growth.
• Japan’s economy contracted by 0.1% in Q4, indicating a slowdown.
• US inflation rose to 3.1% year-on-year in January, affecting global markets.

The USD Index (DXY) measures the dollar’s strength against a basket of major currencies. It declined on Wednesday, failing to capitalize on the previous day’s gains. This shift in momentum reflects global market sentiment and concerns over economic indicators. Concurrently, the yield on 10-year US Treasury bonds receded from a multi-week peak of 4.3%, later shedding more than 1% on Wednesday and inching closer to 4.2% early Thursday. These movements underscore investor caution amid fluctuating economic forecasts and policy expectations.

UK Economic Contraction Surprises Analysts

The United Kingdom’s economic performance raised concerns as GDP contracted at an annual rate of 0.2% in the fourth quarter, following a modest 0.3% expansion in the preceding period. This downturn, contrary to the anticipated 0.1% growth, signals potential challenges for the UK economy. Additionally, despite a monthly increase in manufacturing and industrial production in December, the overall negative growth rate raises questions about the country’s economic resilience and recovery trajectory.

Employment Data from Australia and Japan’s Economic Downturn

Australia’s labour market faced headwinds, with the unemployment rate climbing to 4.1% in January from 3.9%, alongside a negligible employment change of +0.5K, vastly underperforming against the +30K forecast. This indicates a cooling in the job market, potentially influencing monetary policy decisions. Meanwhile, Japan’s economy contracted by 0.1% quarterly in Q4, reflecting subdued economic activity and posing challenges for policymakers aiming for sustainable growth.

US Inflation Hits 3.1%, Surprising Global Markets

U.S. inflation exceeded forecasts, with the CPI rising 3.1% in January year-on-year, above the expected 2.9%. Consequently, this reduces the chances of a March rate cut. With a 60% probability the Fed will hold rates in May, investors are revising their strategies for the changing economic scene.

Meanwhile, Bitcoin saw a modest rise, reaching a new 25-month high. This indicates growing optimism and interest in global markets.