Market Outlook (February 10-14, 2025)

As we start a new week, the price of gold continues to reach record levels. Last week, inflation figures were released in Turkey. Inflation came in slightly above expectations at 42.12% on an annual basis. Critical inflation figures are also expected from the Eurozone, and it was announced at 2.4%, slightly below the 2.5% expectation. The US Dollar Index tested the 110.00 region again last week, but with the tariff uncertainty surrounding Trump, it pulled back to 108.00 levels.

Both the European Central Bank and the Central Bank of the Republic of Turkey are expected to continue with interest rate cuts. These rate cuts are causing a loosening of the exchange rate policy, and the USD/TRY is trading at around 36.20 in the free market, while the EUR/USD has retreated to 1.02 levels.

On the US front, last week we followed reports related to the labor market. The Job Openings and Labor Turnover Survey (JOLTS) was expected to show 8 million openings but came in at about 7 million, missing the expectations by 1 million. Later, Non-Farm Payrolls were reported to be 143K, lower than the expected 169K, and the Unemployment Rate was reported to be around 4.00%, just below the expected 4.1%. While there was some deterioration in the labor market, the possibility of an interest rate cut by the Fed was further supported.

This week, especially on the US front, critical inflation data is expected to be released on Wednesday. The annual inflation is expected to be 2.9%, while the monthly expectations are slightly lower, at 0.3%. A decrease in inflation could strengthen the likelihood of a Fed rate cut.

Markets are pricing in that decisions by the 47th President, Donald Trump, could create uncertainty and revive inflation. As Trump imposed a 25% tariff on steel and aluminum imports in the US, and with gold trade restrictions being added to the tariff list, we saw prices of COMEX Future contracts rise by +$80. The uncertainty has also revived the domestic market in Turkey, where gold prices started to show positive premiums again. On an ounce basis, gold began to be sold with a premium of around +$50 compared to the London market. The markets are focused on both the decisions that Trump will make and the US inflation report!

According to the CME FED Watch, the probability of a 0.25 basis point rate cut in June is priced at around 42%.

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