The US economy added 151,000 jobs, but the unemployment rate rose to 4.1%. This is a key economic indicator for the Federal Reserve, indicating a slowdown in the momentum.
Additionally, the Bureau of Labor Statistics reported that Elon Musk’s Department of Government Efficiency (DOGE) laid off 10,000 federal employees.
With inflation not easing as hoped, these two data points present a troubling scenario that goes against the idea of cutting interest rates.
The tariff situation is undoubtedly impacting the US economy, complicating the assessment of future economic repercussions. Following recent decisive actions by the US president regarding tariffs, notable changes have emerged globally.
China was not the only country to respond quickly to the US’s trade announcements. Both the European Union and the UK are also strategizing counter-measures.
It has been announced that the newly elected Chancellor of Germany, after the elections, will be granted fiscal space to invest in defense and infrastructure, potentially increasing the debt-to-GDP ratio by about 1% beyond the established limit.
This will allow the Chancellor to borrow Euro 500 billion, about US$ 525 billion. The European Commission has proposed a Euro 150 billion loan package for EU governments to enhance military capabilities in response to concerns about Russia. This has sparked some optimism for economic activity in Europe, which has struggled in recent years.
There are some legitimate concerns that Germany, known as Europe’s economic powerhouse, is edging closer to recession due to its own economic weaknesses and the sluggishness in the Euro area.
Nevertheless, recent developments favouring fiscal stimulus have led to a sharp rise in German bond yields and a record increase in the European currency’s (Euro’s) value over the past week, surpassing a decade old benchmark.
Factors such as hopes for peace talks between Russia and Ukraine, a softer US dollar driven by enhancing sentiments in Europe, which could also extend to the UK and the weaker economic conditions in the US, are bolstering the Pound Sterling. Traders also believe that the European Central Bank (ECB) and the Federal Reserve (FED) will likely cut interest rates before the Bank of England (BOE) takes action.
Cruypto currencies
In another significant development, the new US administration is poised to reveal its plans for Digital Assets. It seems that a strategic reserve for crypto currencies will be managed differently from Foreign Exchange Reserves and will include Altcoin in addition to Bitcoin.
Unfortunately, the harsh reality is that severe liquidity constraints persist. The governments around the globe are struggling to impose higher taxes on the wealthy to tackle deficits and reduce debt.
In my view, crypto currencies might offer just a minor short-term solution.
Take example of quantitative easing, combined with a relaxed monetary policy it has only served as a short-term temporary alternative but has increased the debt in various forms.
The viable way to close the debt gap lies in substantial cuts to spending, securing a current account surplus, and raising taxes.
The only remaining options are either money printing or borrowing from external resources, which ultimately lead to a proportionate increase in the debt burden.
The main challenge will be regulating the market, restoring public trust in institutions, and addressing cyber-security concerns; essentially, figuring out how to manage the crypto economy. Mining may contribute to inflation due to its excessive energy requirements during production.
Before launching any digital ledger technology, there must be a comprehensive plan, particularly regarding how it will be utilised to bolster the economy through capital, manufacturing, and industrial production, which could be the primary objective.
This week’s market
Meanwhile, discussions about the potential for selling gold to buy Bitcoin, an idea officials have denied, could contribute to gold’s excessive volatility, which is already experiencing erratic behaviour due to tariff issues, economic uncertainty in the US, and interest rate considerations.
As concerns about tariffs, a slowdown in US economic growth, and a potential recession mount, market attention will shift toward upcoming US inflation data set to be released this week. Important economic reports due this week include US JOLTS job openings, the Consumer Price Index (CPI), the Producer Price Index (PPI), US weekly jobless claims, and the University of Michigan preliminary consumer sentiment survey.
Weekly outlook—March 10-14
GOLD @ $ 2910— Gold’s volatility is expected to persist. A break above $ 2938 will create opportunity to reach $ 2960-65 levels. However, a dip below $ 2886-88 is the critical support level that could lead to a decline to $ 2875 zones.
EURO @ 1.0832— There is potential for gains. However, it may fail to rise above 1.0920, which could trigger a corrective move. For the Euro to test the 1.0670-80 range, it will need to drop below 1.0760-70 levels.
GBP @ 1.2920— Pound Sterling may continue to show strength, but it must hold above 1.2780, with any declines presenting a buying opportunity. Nonetheless, if it breaks past 1.2970, the next challenge will be at 1.3030, which could prove to be a tough resistance level to break.
JPY @ 148.03— USD has support around 147.30 and 146.50. It could find support earlier, but it must surpass 150.40 to reach 151.20 levels.
Copyright Business Recorder, 2025
The writer is former Country Treasurer of Chase Manhattan Bank. The views expressed in this article are not necessarily those of the newspaper
He tweets @asadcmka
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