February 11, 2025: Global Markets Brace for Inflation Data as UK Retail Sales Surge 2.5%—Powell Testimony in Focus

While UK retail sales jumped 2.5% YoY beating expectations, markets remain on edge ahead of Wednesday's crucial U.S. CPI report. Here's how traders can position themselves for what could be a pivotal week in determining the Fed's rate path.

Key Developments:

  • BRC Retail Sales Monitor (UK) posts 2.5% YoY growth, signaling robust consumer spending
  • NAB Business Confidence (Australia) registers at 4, showing moderate optimism
  • French unemployment holds at 7.3% in Q4, maintaining economic stability
  • NFIB Business Optimism Index (US) hits 102.8, reflecting positive business sentiment

Market Impact:

The financial sector is experiencing heightened volatility as traders await Federal Reserve Chair Jerome Powell's Congressional testimony later today. The UK's strong retail performance has injected optimism into consumer discretionary stocks, while bond yields remain particularly sensitive to upcoming inflation data points. Gold prices are hovering near record highs as trade tensions escalate following new steel tariff announcements.

Trading Strategy Breakdown:

Short-Term Traders:

  • Position for increased volatility around Wednesday's CPI report (consensus: 0.4% MoM)
  • Consider tactical trades during Powell's testimony windows
  • Monitor steel and aluminum sector movements following new 25% tariff implementation

Long-Term Investors:

  • Maintain balanced exposure with emphasis on quality factors
  • Consider increasing allocation to resilient consumer sectors
  • Watch for opportunities in defensive sectors amid trade tension uncertainty

Catalysts to Watch:

  • U.S. CPI Report (Feb 12): Consensus 0.4% MoM
  • U.S. PPI Data (Feb 13): Expected 0.2% MoM
  • GDP Growth Reports: UK (0% QoQ) and Japan (0.2% QoQ)
  • Bank of England policy implications following Mann's speech
  • European Union's response to U.S. steel tariffs

Risk Radar:

  • Potential hawkish shift in Fed rhetoric during Powell's testimony
  • Trade tension escalation with EU retaliation threats
  • January inflation reports historically showing significant price resets

The Week Ahead:

Markets are particularly focused on Wednesday's inflation report, as January typically shows significant price resets that could influence Fed policy direction. With PCE data due later this month and wholesale prices report on Thursday, this week's economic calendar will be crucial for determining market direction.