Renewed trade war, Middle East turmoil and key economic data this week
The events of the past week have sent markets on a real financial rollercoaster ride, with geopolitical tensions, central bank uncertainty and trade war fears all shaping the investor narrative.
The week was essentially defined by global pressure.
The escalating tit-for-tat between the US and Iran in the Middle East and the threat of closure of the Strait of Hormuz caused a sudden oil shock, pushing prices to a six-month high.
The escalation of the conflict immediately fueled inflation expectations and led to a strengthening of the dollar as a safe haven, although by the weekend, cautious Iranian leaks suggesting de-escalation had already begun.
This inflation anxiety was further fueled by the Fed's recent minutes, which revealed that policymakers are divided and that the path to the 2% target is quite bumpy, meaning that interest rates are not moving in one direction. Tightening may even be on the table, as central bankers try to balance the productivity boom caused by AI with financial stability risks.
In Europe, by contrast, the fall in British inflation to 3% brought a marked sense of relief and strengthened expectations of interest rate cuts on the island.
In this uncertain macroeconomic environment, the microeconomic picture was also mixed. Although Walmart posted particularly strong quarterly figures, management's cautious forecast immediately raised the question: how long can American consumers withstand the pressure?
The tense atmosphere was finally broken by the most decisive turn of the week, the US Supreme Court's decision to overturn Trump's sweeping tariffs.
The news triggered an immediate, sharp rise in stock markets, while bond yields rose. Although the euphoria was significant, trade policy uncertainty did not disappear without a trace, as the market immediately began to price in possible "Plan B" measures.
While customs duties and oil dominated the headlines, serious cracks were appearing beneath the surface of the gigantic $1.8 trillion US private credit market. A wave of selling swept through the sector when Blue Owl Capital announced that it would tighten investor liquidity following a $1.4 billion sale of credit assets. The move caused the company's share price to plummet, dragging down industry giants such as Blackstone and Apollo Global Management with it. The incident reinforced fears on Wall Street about systemic risks surrounding the non-bank lending market, and in particular the high debt levels of technology and software companies.
On the domestic front, the forint weakened slightly against both the euro and the dollar this week. However, the Polish złoty followed the same pattern, so this can be attributed more to the strengthening of the dollar and the increasingly tense global investor sentiment than to domestic factors.
What will we be paying attention to this week?
On Monday, events will kick off on the domestic scene, with the Hungarian Central Statistical Office (KSH) publishing its fourth-quarter investment data in the morning. Internationally, the German Ifo economic sentiment index and the US Chicago Fed economic activity index will set the tone for European and overseas markets.
On Tuesday, attention will be focused on the National Bank of Hungary's (MNB) afternoon interest rate decision, which will be decisive for the short-term direction of the forint and monetary policy expectations. Globally, China will set its base rate, while in the US, the Richmond Fed index will provide an update on the manufacturing and service sectors.
Wednesday will be a relatively quiet one, with the focus shifting to Europe. Germany will publish its second estimate of fourth-quarter GDP, which could confirm the country's position as the economic engine of the continent.
International events will pick up speed again on Thursday. In the morning, investors will be watching ECB President Lagarde's speech closely, followed by the release of eurozone lending data and inflation expectations. In the afternoon, the number of new weekly unemployment claims in the US will give the markets further insight into the state of the labor market there, while Russia will also announce its interest rate decision.
Friday will see the arrival of the week's big guns, a veritable deluge of global inflation data. We are expecting fresh inflation figures from Japan, France, Spain, Germany, and the United States, which could fundamentally determine global risk appetite and bond yields ahead of the weekend. In addition, French and Turkish GDP data will also be released, while in Hungary, the KSH will close the week with January employment, unemployment, and industrial producer price figures.
Cover photo (for illustration purposes only): Getty Images
