Oil Prices Slip as Iran and Venezuela Supply Fears Ease

In a major policy reversal, JPMorgan Chase has abandoned its forecast for a Federal Reserve rate cut in 2026. The investment bank now predicts the Fed’s next move will be a 25 basis point rate hike in the third quarter of 2027, completely shelving its previous call for a cut in January 2026.

This pivot follows Friday's U.S. jobs report, which showed a labor market that isn't cooling fast enough to warrant monetary easing. While employment growth slowed more than anticipated, the unemployment rate fell to 4.4%, and wage growth remained solid.

However, JPMorgan noted that the door isn't completely closed on easing. "If the labor market weakens again in the coming months, or if inflation falls materially, the Fed could still ease later this year," the bank stated.

Wall Street Pushes Back Rate Cut Timelines

JPMorgan is not alone in reassessing the Fed's path forward. Other major banks are also delaying their expectations for rate cuts.

• Goldman Sachs: Has moved its rate cut forecast from March and June to June and September. The firm also lowered its 12-month probability of a U.S. recession from 30% to 20%, stating that the Federal Open Market Committee (FOMC) will likely shift from "risk management mode to normalization mode" if the labor market stabilizes.

• Barclays & Morgan Stanley: Both banks have adjusted their rate cut expectations to mid-2026. Morgan Stanley had previously anticipated cuts in January and April.

Traders Price In a Prolonged Rate Hold

Market sentiment has shifted decisively in response to the economic data. According to the CME FedWatch tool, traders now see a 95% probability that the Federal Reserve will hold interest rates steady at its January meeting. This is a significant jump from the 86% chance priced in before the jobs report was released.

Political Pressure and Upcoming Inflation Data

Adding another layer of complexity is the political environment surrounding the central bank. Fed Chair Jerome Powell revealed on Sunday that the Trump administration had threatened him with a criminal indictment, raising questions about the Fed's future independence.

With rate cut expectations fading, all eyes are now on Tuesday's Consumer Price Index (CPI) data, which will be the next major test for markets. Ahead of the report, Bitcoin is trading at $90,561, having lost its earlier gains and is down 2.48% over the past week.

Indian Prime Minister Narendra Modi and German Chancellor Friedrich Merz have signed a series of agreements in Gandhinagar, signaling a push to strengthen economic cooperation between India and Europe's largest economy. The new pacts focus on trade, energy, rare earth mining, and skills development.

Prime Minister Modi emphasized the goal of reinforcing India's relationship with Germany, its top trading partner within the European Union. He highlighted new joint initiatives in strategic sectors like clean energy and critical mineral mining.

New Pacts Cement India-Germany Partnership

During the bilateral talks, Chancellor Merz confirmed that both nations are actively working on a trade agreement designed to bolster their strategic and economic connections. He described India as a country with "tremendous economic potential" and noted ongoing collaboration in economic policy and defense.

The German ambassador-designate echoed this sentiment, calling India a "desired partner of choice." He stressed that finalizing a free trade deal is essential to unlocking the full economic potential between India and the EU.

As part of the discussions, the two countries also inked an agreement to facilitate the employment of Indian professionals in Germany's healthcare sector. Merz's visit precedes a key EU-India summit, where leaders hope to advance the long-stalled free trade pact. This trip marked his first to an Asian nation since assuming office last year.

Navigating a Complex Global Trade Landscape

India's outreach to Germany is part of a broader strategy to stabilize its economy by forging stronger ties with multiple global powers, particularly as U.S.-China tensions reshape international trade.

Mending Fences with the United States

Relations with the U.S. have seen recent challenges. Economic ties weakened after India increased its purchases of Russian crude oil following the 2022 invasion of Ukraine, making it the second-largest buyer after China. The Trump administration criticized the move, accusing India of financing Moscow's war effort.

In response, President Donald Trump issued an executive order last August imposing an additional 25% duty on India for its Russian oil purchases, bringing total U.S. tariffs to 50%.

However, efforts are underway to repair the relationship. Sergio Gor, the new U.S. ambassador-designate to New Delhi, stated that both countries are working toward a bilateral trade pact. On his first day in office, Gor remarked, "Real friends can disagree, but always resolve their differences in the end." He acknowledged the difficulty of finalizing a deal with the world's largest nation but affirmed a commitment to seeing it through.

Gor also announced that India will be formally invited next month to join Pax Silica, a U.S.-led strategic initiative, as part of a wider partnership.

Balancing Ties with China

Simultaneously, India is managing its complex relationship with China, its second-largest economic partner. Last year, Beijing's ambassador to India, Xu Feihong, announced that China planned to purchase more Indian goods to help balance the trade relationship. This came as the U.S. was preparing to impose tariffs on multiple countries, including China and India, for what President Trump termed "unfair trade practices."

Xu Feihong affirmed that the Chinese government was ready to enhance practical trade cooperation with India. In a related move, the Indian government has resumed issuing tourist visas to Chinese citizens after years of restrictions, recognizing China's role as a key supplier for its manufacturing sectors.

Expanding into South America

India's strategy extends beyond Asia and the West. Last July, Prime Minister Modi met with Brazilian President Luiz Inacio Lula da Silva to boost trade. Following up in an August call, the two leaders agreed to broaden India's existing trade agreement with Mercosur, the South American trade bloc that includes Brazil.

As the 10th anniversary of Brexit approaches this summer, recent polls suggest nearly 6 in 10 Britons want to rejoin the European Union. Prime Minister Keir Starmer has begun speaking vaguely about a "closer alignment" between the UK and the European single market. Both he and the EU can and should think more boldly.

Starmer's recent comments were spurred by chatter from his own Labour Party about rejoining the EU's customs union. That would eliminate costly "rules of origin" declarations and make tariff-free trade unconditional. But most post-Brexit trade costs stem from nontariff barriers — regulatory inspections, declarations, safety checks, excise duties and the like. As long as the UK remains outside the EU's single market, those stay. Britain would also have to modify a range of recent trade deals, including with the successor to the Trans-Pacific Partnership.

Few Britons want another constitutional brawl over sovereignty and immigration, and Labour has ruled out reversing Brexit or rejoining the single market. But settling for such half measures isn't the answer. What's needed is a broader trade agreement that encourages tighter UK-EU integration without requiring Britain to accept the free movement of people, which remains politically toxic.

The EU has recognized the need for flexibility in the past. Switzerland credits its own bespoke arrangement — over 100 bilateral accords including tariff-free trade, cooperation in electricity markets and Swiss participation in EU research programs — with boosting economic growth and competitiveness. While Switzerland doesn't get to vote on the EU laws it must comply with, it sets its own rules in areas such as monetary policy and trade policy that fall outside its EU partnership.

Getting there won't be easy. EU leaders would much prefer an off-the-shelf plan, and they don't want to seem to reward Britain for leaving the single market. Parochial interests are still influential: France recently blocked a British bid to join a Europe-wide defense financing program in order to protect domestic suppliers. Meanwhile, a loud pro-Brexit minority is already howling at the idea of accepting any EU regulatory constraints.

But such intransigence harms both sides. A recent National Bureau of Economic Research study estimated that, by 2025, Brexit had shrunk British GDP per capita by 6% to 8% while reducing investment by 12% to 18%; the country badly needs stronger growth and better access to the European market. Europe, meanwhile, faces an unreliable, if not actively bullying, ally in the US, a growing Russian threat, a weak defense industrial base and the rise of far-right parties. It can hardly afford to shun the region's second-largest economy, a military power that's already deeply embedded in European supply chains.

Rather than quibble further, both sides should acknowledge they need each other. The first step is to quickly finalize last year's "reset" deals, aimed at easing health checks on food, animals and plants, improving cooperation on defense, and providing greater mobility for young people.

Next, they should open talks on additional ways to ease border frictions, lowering compliance costs, and improving competitiveness for both British and European firms. The EU could accept shared product-safety testing, agree that architects, doctors and other professionals can have their qualifications recognized across Europe, and allow single sets of safety data or approvals for chemicals, cars and medicines; Britain would keep its rules closely aligned. UK defense companies should play a larger role in the continent's defense buildup.

If nothing else has over the last decade, the upheaval of the past year should make clear to European and British leaders that their nations' prosperity and security cannot be unlinked. Their task is to champion that future, not apologize for it.

Source: Bloomberg Europe

When the U.S. government releases its 2025 trade data, the numbers are unlikely to please President Donald Trump. Despite his focus on tariffs to shrink the trade deficit, the data shows the opposite trend. In the first 10 months of 2025, the U.S. goods deficit grew by $77 billion, an increase of nearly 8 percent year-over-year.

This widening gap will likely prompt a search for the main culprit, but for the first time in recent history, the answer isn’t China. Instead, the European Union has become the largest source of the U.S. trade deficit, reaching approximately $190 billion in the first three quarters of 2025. During the same period, the deficit with China shrank by 28 percent to $175 billion, while the EU’s surplus remained stable.

This shift could trigger a direct confrontation with the EU. Based on the administration’s recent actions, three potential strategies could emerge, creating major wild cards for trans-Atlantic relations in 2026: weakening the dollar, shifting defense costs to Europe, and cutting strategic deals with Russia.

Wild Card 1: Forcing a Weaker Dollar

A 2024 essay by U.S. Federal Reserve Board member Stephen Miran outlines the logic for a future trans-Atlantic trade battle. The core argument is that an overvalued dollar hurts the U.S. by making imports artificially cheap and exports too expensive. The solution, therefore, might be to deliberately weaken the dollar. Goldman Sachs has flagged this as a key scenario to watch in 2026.

One way to achieve this would be to compel foreign nations to sell their holdings of U.S. Treasury securities. The upcoming G-7 summit in Evian, France, in June presents a perfect opportunity. Collectively, EU countries own about one-fifth of all foreign-held U.S. Treasurys. At the summit, Trump will meet with the leaders of Britain, France, Germany, and Japan—the four largest global holders of this debt.

He could use the meeting to demand they sell their U.S. debt or face punitive measures. If the G-7 complies, his focus could then shift to other major holders like China at the G-20 summit in Florida later in the year.

For Europe, this demand would be a nightmare. European-held U.S. Treasurys are owned by a diverse mix of central banks and private funds, making a coordinated response nearly impossible. Furthermore, a sharp fall in the dollar would cause the euro to appreciate, devastating European exporters. With nearly one-third of EU exports invoiced in dollars, a weakening greenback is a greater fear than U.S. tariffs. In 2025 alone, the dollar lost about 12 percent of its value against the euro, and a further slide would be disastrous.

Wild Card 2: A New Burden-Sharing Network

The Trump administration's 2025 National Security Strategy contains another alarming element for Europe. The document proposes a new "burden-sharing network" where NATO allies would contribute more to military expenses.

This demand may surprise many European policymakers who believed the issue was settled. In June 2025, NATO members pledged to spend 5 percent of their GDP on defense by 2035, a commitment many EU capitals saw as final.

The strategy document clarifies how this network would function:

• U.S.-Led: The network would be entirely controlled by Washington.

• Pay-to-Play: Contributing to the network would unlock benefits, such as relief from U.S. tariffs and discounts on American military equipment.

The U.S.-hosted G-20 summit could be the moment these demands are officially made. Washington’s decision to invite Poland as the only non-G-20 member is strategic. In 2025, Poland spent nearly 4.5 percent of its GDP on defense, making it NATO's largest military spender by that measure. Trump could use Warsaw as a model to pressure other allies into joining his proposed network.

Wild Card 3: Strategic Deals with Russia

A final wild card involves negotiations with Russia and Ukraine. The National Security Strategy emphasizes a resource-centric foreign policy focused on securing critical minerals and expanding fossil fuel production. This opens the door for Trump to make deals with Moscow that benefit U.S. companies at the expense of their European rivals.

Squeezing Europe on Minerals and Energy

Russia is a dominant global supplier of several critical minerals, including:

• Palladium (42% of global supply)

• Antimony (23%)

• Vanadium (19%)

• Platinum (12%)

• Magnesite (11%)

A deal giving U.S. firms preferential access to Russian palladium and titanium would put European automotive and aerospace industries in a vulnerable position, as the EU relies on Russian supplies for these materials.

On fossil fuels, recent Russian decrees suggest a pathway for U.S. energy companies to return. In August 2025, Moscow authorized foreign firms to return to the Sakhalin-1 oil and gas project. U.S. giant ExxonMobil, which held a 30 percent share before its $4.6 billion investment was seized in 2022, stands to benefit. In December 2025, a decree from Russian President Vladimir Putin extended the deadline for ExxonMobil to sell its stake by a year, to 2027.

Washington knows that a complete lifting of sanctions on Russia is unlikely, as they are supported by the G-7, Britain, Canada, and Japan. However, this could work to the U.S.'s advantage. The administration could issue sanctions waivers to American companies like ExxonMobil, allowing them to invest in Russia while European competitors remain locked out. This approach mirrors the licenses Chevron has received to operate in Venezuela since 2019.

Preparing for an Unpredictable Year

As French scientist Louis Pasteur noted, "Luck only favors the prepared mind." Washington’s surprise seizure of Venezuelan leader Nicolás Maduro on January 3 is a stark reminder of its capacity for unpredictable action. As European leaders plan for 2026, preparing for these wild-card scenarios is essential. While it may be difficult to change Trump's course, proactive planning could help the bloc avoid being caught completely by surprise.

Nevertheless, GBP/NZD trades above its key moving averages, including the nine-day exponential moving average (EMA), which is still pointing up:

Source: Poundsterlinglive

The era of employee leverage in Europe, defined by the "Great Resignation" and "Quiet Quitting" that followed the pandemic, is decisively over. A combination of industrial pressure, slowing wage growth, and the looming impact of artificial intelligence is rapidly shifting the balance of power back to employers, ushering in a new period of caution and uncertainty for the continent's workforce.

During and immediately after the COVID-19 pandemic, European workers held a rare advantage. Government support programs helped companies retain staff, while a global labor shortage increased demand for talent. In 2022, research from McKinsey revealed that a third of European workers were considering leaving their jobs within months. Angelika Reich, a leadership advisor at Spencer Stuart, described this as a "striking figure for a region with a traditionally low [staff] turnover."

That moment has passed. The European labor market has "cooled down," Reich noted, and a tougher economic climate is making employees more hesitant to switch jobs.

Eurozone Job Growth Is Slowing Down

While Europe's labor market has shown resilience, its momentum is fading. The European Central Bank (ECB) projects that employment growth in the 21-member eurozone will slow to 0.6% this year and 0.7% in 2025.

Though the annual change seems minor, each 0.1 percentage point represents approximately 163,000 fewer new jobs. This stands in stark contrast to just three years ago, when the eurozone was creating 2.76 million new jobs annually with a robust growth rate of 1.7%.

Migration, which previously helped ease worker shortages and fuel job growth, is now stabilizing or declining, adding another layer of complexity to the labor supply. The new mood has given rise to fresh terminology, such as the "Great Hesitation," where firms delay hiring and workers avoid quitting, and "Career Cushioning," where employees quietly prepare for potential layoffs.

A person stands before a directory at a German job center, illustrating the growing pressure on the country's labor market.

Germany's Industrial Woes Signal Broader Trend

Germany's economic struggles are setting the tone for much of the continent. According to the IW economic think tank in Cologne, more than one in three German companies plans to cut jobs this year.

This trend is reflected across other major European economies:

• France: The Bank of France expects unemployment to rise to 7.8%.

• United Kingdom: Two-thirds of economists surveyed by The Times believe unemployment could climb as high as 5.5% from its current 5.1%.

• Poland: Unemployment reached 5.6% in November, up from 5% a year earlier.

• Romania and the Czech Republic: Both nations are experiencing similar increases in joblessness.

Workers assemble a vehicle at a Volkswagen facility, a sector central to Germany's industrial base that has announced significant layoffs.

Manufacturing Sector Under Pressure

Germany's industrial base has been hit particularly hard, losing over 120,000 positions in sectors like automotive, machinery, metals, and textiles. The key drivers are high energy costs, weak export demand, and intense competition from China.

These pressures are not unique to Germany; manufacturers in France, Italy, and Poland face similar challenges. The eurozone's Manufacturing Purchasing Managers' Index (PMI) fell to 48.8 in December, its lowest point in nine months. A reading below 50.0 indicates a contraction in industrial activity. Julian Stahl, a labor market expert at XING, observed that "most firms are aiming to hold the line or shrink slightly rather than grow," though he added that hiring has not "stopped completely."

The negative headlines are also creating a reputational problem. Bettina Schaller Bossert, president of the World Employment Confederation, noted that many young graduates now believe there is "no future in the automotive sector," despite new opportunities emerging within it.

Some Economies Continue to Outperform

The picture is not uniformly bleak. Several European countries are bucking the trend, with Spain leading the way thanks to a post-COVID tourism boom. According to the European Centre for the Development of Vocational Training, an EU agency, strong job growth is also expected in:

• Luxembourg

• Ireland

• Croatia

• Portugal

• Greece

Even in weaker economies, demand remains high in specific fields. "What felt like a widespread scarcity of workers during the Great Resignation has become more sector-specific," Stahl explained. "There are still serious shortages in retail, health care, logistics, engineering and other highly specialized roles."

The Shadow of AI: Reshaping the Workforce

While Europe has adopted AI more slowly than the United States and China, anxiety about automation replacing human jobs is widespread. A July study by consulting firm EY found that a quarter of European workers fear AI could put their jobs at risk, and 74% believe companies will need a smaller headcount as a result of the technology.

Projections for an AI-Driven Future

In November, Germany’s Institute for Employment Research (IAB) projected that 1.6 million jobs in the country could be reshaped or eliminated by AI by 2040. While high-skilled positions are expected to be disproportionately affected, the tech sector could generate around 110,000 new roles.

Enzo Webe, head of the IAB's forecasting department, anticipates a "transformation" of the labor market but "not less work." Other forecasts vary widely, from the rise of an "AI precariat"—a class of people left jobless and without purpose—to more optimistic scenarios where AI redistributes tedious tasks rather than eliminating professions.

"A lot of drudge tasks can be pushed to AI to free up human labor," said John Springford of the Centre for European Reform. "But there's a good reason to believe that professional, knowledge work won't shrink."

For many workers, the rapid advance of AI may become the kind of "jolt" described by University College London professor Anthony Klotz, who coined the term "Great Resignation." He argues that such jolts—sudden moments of clarity—are what prompt people to quit. AI could be the catalyst that encourages European workers to make their next career move before automation makes it for them.