Trump & Putin Stun Europe with Ukraine Peace Plan
- Feb 13
- 3 min read
GBP : GDP better than expected
The fourth-quarter UK GDP numbers released today were marginally higher than anticipated, but the underlying data paints a different picture. A significant increase in inventories—a very erratic indicator that doesn't accurately represent the health of the economy—was a major factor in the improvement. Net trade numbers were disappointing, household spending stayed the same, and business investment significantly decreased despite earlier strength. The UK Treasury is under more pressure to find fiscal reductions as a result of this poor performance. The optimistic 2% growth prediction for 2025 is probably going to be lowered, as the Office for Budget Responsibility (OBR) had predicted 0.4% growth for the fourth quarter.
EUR : Euro rebounds as Russia and Ukraine agree for peace talks
The most recent Trump-Putin stories were a major factor in yesterday's significant increase in EUR/USD, even though short-term US inflation rates increased. The news that EU officials were negotiating with their US colleagues to avoid tariffs had already caused the Euro to rise before those reports appeared. The European economy might benefit greatly from any progress made toward peace in Ukraine, which could reduce energy prices and increase investment—possibly through a massive program akin to the contemporary Marshall Plan.
However, businesses and consumers are unlikely to feel confident that trade risks have decreased anytime soon because the ongoing threat of US tariffs continues to cast uncertainty over the region. Although positioning is not excessive and interest rate differentials favoring the USD are maintained by the backdrop of sticky US inflation, it appears that traders are lowering their short bets in euros. Because of this, any additional growth in the EUR/USD pair is probably going to be gradual and difficult, with resistance positioned around $1.0500 and 1.0530 and a remote possibility of touching $1.0575. The EUR/CHF exchange rate can keep rising in the interim. Given that Swiss inflation is expected to drop to 0.2% YoY in the second quarter, the Swiss National Bank (SNB) may be happy to see the CHF weaken.
USD : Brief news away from tariffs
Ordinarily, yesterday's unexpectedly high US inflation figures would have put pressure on risk assets and strengthened the USD overall. For a few hours, that was the case—until rumors surfaced that Donald Trump and Vladimir Putin had a 90-minute phone conversation about a possible end to the conflict in Ukraine. Financial markets are currently ignoring worries about the potential security implications of a move toward US isolationism in Europe. Pete Hesgeth, the recently nominated US Defense Secretary, declared in Brussels that US forces would not be included in any peacekeeping operation in Ukraine and would not be protected by NATO's Article 5 guarantee.
Investors are instead concentrating on the possible financial advantages of de-escalation, especially increased European confidence and less interruptions to the energy system. Consequently, yesterday saw a significant decline in the price of European natural gas and crude oil, which was somewhat detrimental to the USD and favorable to the global economy. Meanwhile, Chinese asset markets are showing signs of cautious optimism. Following the DeepSeek revelation, local IT companies have somewhat increased in value, and there are growing hopes that Chinese policymakers would unveil new economic support measures during their meeting in early March. As a result, USD/CNY is already back below ¥7.3000.
The persistent threat of tariffs keeps market corrections in check, even while these factors promote a more optimistic outlook for global growth and may encourage the unwinding of short positions in commodities and emerging market (EM) currencies. The key question is still whether Trump's upcoming executive orders, which are anticipated around 18:00 GMT, will impose tariffs on nations with significant tariff barriers, such as South Korea, Brazil, and India. Additionally, markets will be keeping an eye on whether any tariffs come with a grace period for negotiations prior to their implementation. `
In the US, attention is now focused on first unemployment claims and Producer Price Index (PPI) statistics rather than geopolitics and trade threats. Any positive PPI surprise could affect the core PCE deflator, which is scheduled for release on February 28 and could give the USD some support.
