Trump fires warning shot at Powell

European markets are on the rise this morning despite a theme around weakening global employment as highlighted by the latest Australian and UK jobs report. Yesterday’s volatility came thanks to yet another stunt out of the Oval office, with the claim that Powell would be sacked providing the President with a helpful guide on exactly which markets would move where should he ultimately follow through on that threat. Warnings from the CEO’s of JP Morgan and Goldman Sachs highlight the widespread belief that to do so would provide a particularly bad signal to financial markets. It does raise questions of the degree of independence that will be evident under Powell’s successor, with the likes of Waller & Bowman seemingly pushing for a swifter rate cut potentially in a bid to move for the top job. In any case, Trump will be appointing according to the perceived willingness to shift the Fed onto a more dovish stance, highlighting the potential erosion of independence whether Powell is removed now or simply replaced in May.

This morning has provided yet another harsh reality check for the BoE and Rachel Reeves, with the latest jobs report seeing a four-year high for unemployment, the highest claimant count change in 11-months, and the lowest wage growth in almost three-years. Coming hot off the heels of yesterday’s unwelcome CPI rise that puts the UK as having the highest inflation rate in the G7, the BoE are clearly in a sticky situation. Between negative growth, rising inflation, a black hole in the public finances, and now higher unemployment, we are looking at an economy that needs help but where both the treasury and central bank have their hands tied.

Looking ahead, today sees a notable data docket out of the US, with retail sales and the Philly Fed manufacturing survey providing insights over consumers, businesses, and inflation in the face of Trump’s tariffs. This week’s inflation data failed to provide a smoking gun to show a notable pickup in prices across a raft of metrics. Yes, we have seen some gains for specific goods, but not enough to throw markets off their optimistic trajectory for the time being. The strength of the US economy has been notable of late, with the Fed under little pressure as long as we see strong jobs numbers and a strong consumer. With that in mind, keep an eye out for retail sales as a gauge of spending patterns in the face of the somewhat uncertain economic environment under Trump thus far.