Weak US Jobs Data & Geopolitical Risk Sharpen CPI-Focus.
Summary
February's US non-farm payrolls delivered a significant miss, with the economy shedding 92,000 jobs and unemployment rising to 4.4%, sharpening focus on this week's CPI release as the next critical data point for Fed policy
US CPI for February is due Wednesday and will be closely watched given rising energy costs from the ongoing Middle East conflict
UK GDP data for January is due Friday, offering the first read on how the economy has performed since the Q4 2025 growth figure of just 0.1%
The US-Israeli military campaign against Iran continues to drive volatility across energy, equity and currency markets, with no resolution in sight
The conflict between the United States, Israel and Iran, which began with strikes on Iranian military and leadership targets on 1 March, remained the dominant driver of global market sentiment heading into this week. Oil prices surged sharply in the days following the initial strikes, with Brent crude climbing over 7% as fears around Strait of Hormuz disruptions intensified. OPEC+ announced a production increase of 206,000 barrels per day from April, but this has done little to fully offset the risk premium priced into energy markets. The broader inflationary implications of sustained higher oil prices are now a central concern for central banks across the US, Eurozone and UK.
Friday's US jobs report added another layer of complexity. Nonfarm payrolls fell by 92,000 in February against a consensus estimate of approximately 58,000, while the unemployment rate rose from 4.3% to 4.4%. January's figure was also revised down from 130,000 to 126,000, and December was revised to a loss of 17,000 jobs. Federal government employment continued to decline, falling by a further 10,000 in February. The result has strengthened calls for the Federal Reserve to resume rate cuts, though with inflation risks from the geopolitical situation pulling in the opposite direction, the Fed's path forward is far from clear.
Wednesday's US CPI release for February will be the most closely watched data point of the week. January's CPI came in at 2.4% year-on-year, down from 2.7% in December, with core CPI at 2.5%. The February reading will be the first to begin reflecting the energy price spike that followed the start of the conflict. Any upside surprise could further complicate the case for near-term easing, even against a weakening labour market backdrop.
In the Eurozone, inflation ticked up to 1.9% in February from 1.7% in January, according to Eurostat's flash estimate released on 3 March. Services inflation accelerated to 3.4% year-on-year, while energy prices continued to fall compared to a year ago, though at a slower pace than in January. The Eurozone faces a similar tension to the US: disinflation had been progressing, but the conflict-driven rise in energy costs risks reversing that trend in the months ahead.
The UK enters this week in a subdued position. Q4 2025 GDP growth came in at just 0.1%, with construction output falling over 2% on the quarter. UK CPI for January held at 3.0% and unemployment edged up to 5.2% as of December. Chancellor Rachel Reeves delivered the Spring Statement on 3 March, confirming a range of fiscal measures including frozen tax thresholds, defence spending increases and an OBR forecast pointing to gradual improvement in growth through the year. Friday's monthly GDP estimate for January will be a key early indicator of whether that improvement is beginning to materialise.
The Bank of England meets on 19 March. Rate-cut expectations have been volatile given the combination of persistent domestic inflation, a fragile growth backdrop and geopolitical uncertainty feeding through to energy prices.
Events to Watch This Week
Wednesday 11 March: US CPI
Friday 13 March: UK GDP Monthly Estimate; US Core PCE Price Index; US GDP Second Estimate; University of Michigan Consumer Sentiment
Conditions across major currency pairs remain sensitive to both data surprises and geopolitical developments. With US inflation, UK growth and the evolving situation in the Middle East all capable of driving sharp moves, businesses with upcoming international transfers should seek guidance on timing. Contact the Orbis dealing team to discuss your options.
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