- Over the month of February Fed policymakers have stressed that the Fed will be cautious as the central bank continues to work to lower inflation levels. Fed Chair Jerome Powell told Congress that “the Fed does not need to be in a hurry to adjust our policy stance.” Traders will now be looking at January's PCE data due on Friday for further indications of when the Fed may decide to move again. In addition, investors are likely to be worried by the budget negotiations, particularly the debt ceiling and what the proposed new spending cuts may be as their size and effect on the deficit is still not known. The Fed is expected to hold rates at its next meeting on 19 March with its next cut not likely to happen before June at the earliest.
- The dollar index has been down in February is approximately -1.7% MTD. The dollar fell over February due to weak economic data and uncertainty over US tariff implementation. The US Treasury Secretary, Scott Bessent, has said that the economy was more fragile than economic metrics suggest due to interest rate volatility, sticky inflation resulting from government overspending and overregulation, and dependence on the government sector. He believes tariffs are an important source of revenue.The US labour market moderated in January with the NFP increasing by 143,000 in January after upward revisions to the prior two months. The unemployment rate came in at 4.0%, down slightly from December’s 4.1%. However, as noted by Bloomberg news, nationwide, initial claims have been generally consistent with levels seen pre-Covid in 2019, supporting the Fed keeping interest rates on hold until inflation progress resumes.
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