This report reviews macroeconomic and market developments in January and February 2026. In the US, job growth surprised to the upside with 130,000 new jobs in January, while unemployment fell to 4.3%. Inflation eased to 2.4%, boosting expectations for a June Fed rate cut. The Fed held rates steady at 3.5%–3.75%, signaling patience. Political tensions intensified after the US Supreme Court struck down a large part of President Trump’s tariff framework, only for the administration to quickly introduce a new 15% global tariff.
In Europe, inflation declined to 1.7% in January. The ECB kept rates unchanged and maintained a data-dependent stance, while monitoring euro strength and trade uncertainty. The euro has appreciated significantly over the past year, raising some concerns about downside inflation risks.
Oil prices rose around 10% amid escalating US-Iran tensions and supply concerns. Gold rebounded strongly and remains near record highs, supported by geopolitical volatility and central bank demand. In contrast, Bitcoin fell nearly 30% over the period, reflecting a sharp deterioration in risk appetite.
US equities were largely flat, with the S&P 500 up just 0.2% after briefly surpassing 7,000. AI-related disruption fears weighed heavily on technology and software stocks, while IBM fell sharply following developments in AI-driven legacy system modernization. European markets outperformed, with France’s CAC and the STOXX Europe 600 reaching record highs.
Bond yields declined in both the US and Europe, reflecting softer inflation data and expectations of a more dovish Fed leadership transition later this year. In Cyprus, inflation jumped to 1.7%, while 10-year yields edged slightly lower.
European banks reported strong Q4 earnings, with BNP Paribas posting record results and ING delivering solid profits.
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