Barclays Cuts U.S. Growth & Raises Inflation Forecast

Economic

Summary:

Adds another Federal Reserve rate cut to expectations.

Barclays has revised down its U.S. economic growth forecast for 2025 while raising its inflation projections, citing escalating trade policy uncertainty and higher tariffs under the Trump administration.

The bank now expects U.S. GDP growth to slow to 0.7% (Q4/Q4) in 2025, down 0.8 percentage points from its previous projection. At the same time, Barclays raised its core PCE inflation forecast for the year to 3.2% (Q4/Q4), a 40-basis-point increase, while core CPI inflation is seen reaching 3.6% (Q4/Q4), up 30 basis points.

“President Trump has shown more appetite to impose widespread tariffs than we had previously anticipated,” Barclays economists wrote in a note. The firm now assumes a trade-weighted tariff rate of 15%, up from its prior estimate of 10%, as Washington moves ahead with steep duties on Chinese goods, aluminum, steel, automobiles, pharmaceuticals, and semiconductors.

FOMC Policy Adjustments

Despite the elevated inflation outlook, Barclays sees the Federal Reserve cutting rates twice in 2025, in June and September, as a weaker labor market forces the central bank’s hand. The bank had previously forecast only one 25-basis-point cut in June. The unemployment rate is now projected to rise to 4.2% by the end of 2025.

“For 2026, we expect three additional 25bp rate cuts, in March, June, and September,” Barclays noted, bringing the Fed’s policy rate back to a neutral range of 3.00-3.25%.

Trade Policy Uncertainty Weighs on Investment

The report highlights the impact of heightened trade policy uncertainty, which Barclays believes is already dragging down business investment and consumer confidence.

Surveys from the University of Michigan, the Conference Board, and ISM suggest that firms are delaying capital expenditures (capex) while households curb spending due to rising import costs and economic unpredictability.

“Trade policy uncertainty has surged, and it is exerting a drag on consumption and business investment,” Barclays said.

Market Implications

The higher tariffs are expected to reduce purchasing power, increase production costs, and trigger retaliatory measures from trading partners, all of which could weigh on corporate earnings and financial markets.

Equity markets have so far reacted cautiously to the trade developments, but Barclays warns that credit spreads and rate expectations could shift further if economic data weakens.

Barclays' downward revision comes amid broader concerns over the trajectory of U.S. economic growth in a protectionist trade environment. Investors will be closely watching upcoming inflation prints and Fed communications for signs of how monetary policy might evolve in response.

Source :Poundsterlinglive

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Warren Takunda

Cryptocurrency

Bitcoin’s price was up 3% after constant drawdowns since the end of January. The top cryptocurrency managed to rebound above $80,000 after a brief decline below the range on March 11. Will Bitcoin Price Reclaim $95K Before the End of March?_1

Will Bitcoin Price Reclaim $95K Before the End of March?_1

Bitcoin weekly chart. Source: Cointelegraph/TradingView

After the US core Consumer Price Index (CPI) came in lower than expected at 3.1% on March 12, Bitcoin's market structure now sees the possibility of a quick bullish turnaround.

Bitcoin liquidity clusters at $84K-$85K

After Bitcoin's price tumbled on March 9, it rebounded to test the overhead resistance zone between $84,000 and $85,000 three times, spurring traders to aggressively build short positions in this range.

The liquidation heatmap data suggested that more than $300 million in short positions were piled in this price region, which would be liquidated if the price moved above the $85,000 resistance. Will Bitcoin Price Reclaim $95K Before the End of March?_2

Will Bitcoin Price Reclaim $95K Before the End of March?_2

Bitcoin 1-week liquidation heatmap. Source: CoinGlass

With a lack of downside liquidity below $77,000, the probability of BTC moving toward upside liquidity increased. Moreover, triggering liquidations above $85,000 could fuel further bullish momentum, allowing Bitcoin to form a higher high and turn this level into new support.

A CME Bitcoin futures gap from the previous weekend also remained unfilled between $85,000 and $86,000. With a 100% record of six gaps filled in the past four months, this setup further increased the chances of flipping the overhead resistance into support at $85,000. Will Bitcoin Price Reclaim $95K Before the End of March?_3

Will Bitcoin Price Reclaim $95K Before the End of March?_3

Bitcoin 4-hour chart. Source: Cointelegraph/TradingView

If this happens, the next major resistance lies at $90,000, which could liquidate over $1.6 billion in short positions for a retest of the $95,000 resistance level above, i.e., a 12% jump from the current price.

Bitcoin analyst Mark Cullen underlined a similar outlook for Bitcoin but warned that the price continues to move “correctively,” implying further sideways movement before a short squeeze.

On the contrary, Valeria, a crypto analyst and funded trader, said that BTC was showing signs of distribution near the $85,000 range, which is short-term bearish. The trader highlighted that the BTC price might thread lower below $80,000 before a bullish breakout occurs.

Coinbase, Binance diverge on orderbook trends

Spot traders on Binance have been aggressively selling over the past few days, according to data from Aggr.trade, with selling pressure peaking during the local lows at $76,650.

Conversely, Coinbase spot buyers placed bids here, leading to BTC’s rebound above $80,000. Will Bitcoin Price Reclaim $95K Before the End of March?_4

Binance, Coinbase orderbooks. Source: Aggr.trade

On March 12, a similar discrepancy was observed, with Binance spot traders selling near the $85,000 resistance, as Coinbase traders defended the price at $81,000 during the early US trading session, avoiding further downside.

While Coinbase has led BTC’s rally in the past, an opposing stance between the two leading exchanges might slow BTC’s momentum to move swiftly through the resistance levels.

Thus, for Bitcoin to reclaim higher highs at $85,000, $90,000 and $95,000 over the next couple of weeks, spot trading activity between the two major exchanges may need more collective direction.

Source: Cointelegraph

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Warren Takunda

Economic

US President Donald Trump said he would respond to the European Union’s retaliatory tariffs as a global trade war escalates.

He did not specify how he would respond to the countermeasures but said, “Of course, I’m going to respond,” when asked by reporters at the White House on Wednesday.

Trump threatened to double tariffs on Canadian steel and aluminum to 50% before retreating to a 25% rate after Ontario suspended the electricity surcharge to the US earlier in the day.

Responses from trading partners

Trump proceeded with the blanket 25% tariffs on steel and aluminum to other countries on Wednesday, prompting immediate countermeasures from the EU and Canada.

The EU hit back with import duties on €26 billion worth of American goods “matching the economic scope the US tariffs,” marking a major retaliatory action to the recent Trump administration’s tariff escalation.

The European Commission will resume countermeasures from 2018 to 2020 during Trump’s first term against €8 billion worth of US goods on 1 April, followed by a new package of tariffs on €18 billion in mid-April.

In the statement, the European Commission said: “The Commission regrets the US decision to impose such tariffs, considering them unjustified, disruptive to transatlantic trade, and harmful to businesses and consumers, often resulting in higher prices.”

It also added that “the EU remains ready to work with the US administration to find a negotiated solution,” and the countermeasures “can be reversed at any time should such a solution be found.”

Canada responded with 25% new tariffs on US-made goods worth C$30 billion (€19 billion), effective at midnight EST (6 am CET) on Thursday. The levies will be matching the US tariffs “dollar for dollar”.

In total, the countermeasures will impact C$12.6 billion (€8.05 billion) of steel products, C$3 billion (€1.9 billion) of aluminum, and C$14.2 billion (€9.1 billion) on other items. Canada is the biggest steel exporter to the US, followed by Mexico, Brazil, and China in 2024.

Other countries did not take immediate countermeasures against Trump’s metal tariffs, but most expressed a willingness for dialogue.

UK Prime Minister Keir Starmer said Britain will “keep all options on the table” and is “negotiating an economic deal which covers and will include tariffs if we succeed.”

Australian Prime Minister Anthony Albanese said Trump’s tariffs are “entirely unjustified” and that Australia will continue discussions for an exemption. China did not respond directly to the new tariffs but stated the US “owed a big thank you” as Beijing had successfully controlled the fentanyl trade.

Global markets rebound

US stock markets rebounded despite the recent escalation in the global trade war following cooler-than-expected inflation data released on Wednesday.

The S&P 500 rose about 0.5% after falling to near-correction territory this year, led by major technology stocks. The US dollar weakened against most currencies in the G-10 group on expectations that the Federal Reserve may cut interest rates sooner due to economic concerns.

However, analysts warned that the market bounce could be short-lived due to ongoing uncertainties. Michael Brown, a senior research analyst at Pepperstone, wrote in a note that he would continue selling into the equity rally, expecting gold to reach a new high due to the risk-off sentiment.

Nonetheless, the European stock markets continued to outperform global peers, driven by expectations of easing fiscal rules for defence spending.

Ukrainian President Volodymyr Zelenskyy said that Ukraine had accepted a 30-day ceasefire deal with Russia, adding to the optimism regarding the bloc’s outlook. The euro fell slightly against the US dollar but remained at a four-month high of just under 1.09.

Asian markets were mixed in the early trading on Thursday, with Japan’s Nikkei 225 and South Korea’s Kospi rising, while Australia's ASX 200 and China’s Hang Seng Index continued to decline.

Source: Euronews

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Risk Warnings and Disclaimers

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Warren Takunda

Economic

Wall Street's mild bounce on the back of a tame CPI reading did not provide much impetus for Asian markets, leaving European investors with little cause for optimism.

One problem is that the inflation data, while offering some relief from the run of discouraging indicators lately, won't translate directly into a lower PCE price index - the Fed's preferred gauge of price pressures - because the cooling came mostly in services.

Another concern is that February's data doesn't fully capture the impact of President Donald Trump's wave of tariffs.

And ultimately, the primary worry for markets is not inflation, but growth.

On the subject of tariffs, Europe finds itself directly in Trump's sights after the EU's threat of counter-measures was met by a warning of reciprocal duties from the United States.

It remains to be seen whether Trump's approach to Europe mirrors the ramp-up-and-reprieve strategy used for Canada and Mexico, or the tax-and-then-tax-again model applied to China.

The good news is that, according to Germany's Kiel Institute, only a "small fraction" of targeted products from the EU are exported to the United States.

The scatter plot shows the total U.S. exports on the horizontal axis against the share of U.S. exports to the EU on the vertical axis between 2000 and 2024 with average lines on both axes. The top-right quadrant has been highlighted. Morning Bid: Tariff Worries Weigh as CPI Cheer Fades_1

Morning Bid: Tariff Worries Weigh as CPI Cheer Fades_1

Meanwhile, Britain continues to keep a relatively low profile, refraining from immediate tariff retaliation but keeping all options open.

That may be why sterling continues its steady climb while the euro is slipping back, albeit after a steeper ascent.

A majority of Americans believe Trump's economic policy has been too erratic, and an even greater number expect higher prices as a result.

Warnings from corporate America are also surfacing, with airline Delta and retail giant Walmart indicating that the unusually high level of economic uncertainty will impact their profits.

A potential de-escalation in Trump's trade war could be sown at home rather than due to tit-for-tat tariffs from major trading partners. However, a more than 10% slide in the S&P 500 in just three weeks doesn't seem to be prompting a reconsideration of U.S. policy.

Key developments that could influence markets on Thursday:

- UK RICS housing survey (Feb)

- Sweden CPI (Feb)

- Euro area industrial production (Jan)

- US PPI (Feb), weekly jobless claims