The second week of February was packed with key macroeconomic events that shaped global financial markets. Traders navigated a volatile landscape dominated by surging U.S. inflation, shifting Federal Reserve expectations, and escalating trade tensions. The U.S. dollar strengthened amid higher inflation readings, while other major currencies responded to central bank interventions and geopolitical developments.
Commodities and indices also saw significant movements, with oil rebounding after a three-week slump and global equities reacting to policy shifts and economic data. This analysis breaks down the week’s major events, highlighting their impact on forex markets and broader financial trends.
U.S. Inflation and Federal Reserve Stance
On February 12, data revealed that U.S. inflation accelerated to a 3% annual rate in January, driven by increases in shelter, food, and gas prices. This persistent rise in inflation prompted Federal Reserve officials to signal that high interest rates are likely to persist longer than previously anticipated, delaying any potential rate cuts. Fed Chair Jerome Powell emphasized the commitment to bringing inflation back to the 2% target, noting the strength of the economy and labor market.
Trade Policies and Tariffs
The week was also dominated by trade policy developments. President Donald Trump announced new 25% tariffs on all steel and aluminum imports, aiming to protect U.S. manufacturing. This move prompted the UK to expedite the publication of its “Plan for Steel” green paper, addressing issues like high energy costs and international instability. Business Minister Jonathan Reynolds emphasized the urgency behind the early publication and indicated efforts to persuade the U.S. to exempt UK steel and aluminum products from the tariffs.
In response to differing production standards, the European Union planned to implement import curbs on certain foods, mirroring the reciprocal trade policies of the U.S. The initial targets included U.S. crops like soybeans, cultivated using pesticides not permitted for EU farmers.
Currency Movements
The U.S. dollar experienced fluctuations during the week. The rise in inflation bolstered the dollar as expectations grew for prolonged higher interest rates. However, trade tensions and tariff announcements introduced volatility. The British pound faced pressure due to concerns over the UK’s trade relations with the U.S., especially following the steel tariff announcements.
The Indian rupee logged its best week in 19 months, closing at 86.8225 per U.S. dollar, a 0.7% weekly gain. This strength was attributed to significant intervention by the Reserve Bank of India (RBI), which sold an estimated $10–$11 billion in the spot market to stabilize the currency after it reached a record low earlier in the week.
Commodities and Indices
Commodity markets reacted to the week’s events, with oil prices set to snap a three-week losing streak as trade war fears eased. Gold prices remained relatively stable, balancing between inflation concerns and a stronger dollar.
Global indices experienced mixed performances. U.S. stocks steadied after weak retail sales data, with Wall Street on track for a weekly gain as markets focused on tariff developments.
Conclusion
The interplay of rising U.S. inflation, proactive central bank interventions, and evolving trade policies significantly influenced the forex market during the week of February 10–14, 2025. Traders closely monitored these developments, adjusting their strategies to navigate the dynamic economic landscape.