30 January 2026: Reeves says Labour can ‘absolutely’ protect the UK Steel Industry

Volatility.

This has seen a significant increase over the first month of the New Year, as traders and investors have divested themselves of dollar holdings and moved into more tangible “stores of value” as the U.S. appears to be withdrawing from globalism.

While gold has reached an all-time high and the Euro has reached levels not seen in five years, commodity prices have also risen and are expected to remain high until Donald Trump is either replaced or sees the error of his ways.

The elevated prices of commodities like grains, livestock, coffee and cocoa will soon feed through into inflation in the major economies as nations like the UK who still import the majority of its good struggle with elevated inflation, causing the Bank of England to leave rates on hold for an extended period which will see the economy suffer mediocre levels of growth until things settle down.

All over Britain, there are boarded-up shops. Banks and department stores have been replaced by vape shops, barbers and bookmakers. Shoplifting is at a record high, local services are being cut, and public frustration is mounting.

Politically, the high street decline is perfect campaign fodder for Nigel Farage to exploit.

Historically, these are the grains that lead to significant political change, as seen in the 1970s/1980s, when they contributed to the rise of Margaret Thatcher.

The potential change is even more marked this time around, with the end of two-party politics almost certain.

The current malaise has been inadvertently stoked by the policies Rachel Reeves has introduced, which, in many cases, have had the opposite effect from what was intended.

Even the most die-hard Reform UK supporter realises that Reeves' destruction of, for example, the hospitality sector has not been deliberate. She is totally out of her depth and constantly swimming against the tide, making empty promises that life will improve in the coming weeks, months, or years.

How quickly things have changed since the 2024 election, which Labour would likely have won, even though the “anyone but the Conservatives” voters turned a victory into a rout, leading to the demise of the Party that dominated the second half of the twentieth century. Now labour’s confidence is crumbling from the outside as well as from within.

Andy Burnham, the Mayor of Manchester, ’s bid to stand in a coming by-election was quashed by a Prime Minister who fears for his political life. It seems that all he has done is delay the inevitable.

Rachel Reeves has insisted the Government can “absolutely” protect the British steel industry despite closer economic cooperation with China.

China’s steel prices typically undercut those of UK producers, and it has recently been reported that Chinese steel will be used in a major carbon capture project in Teesside, leading to calls from Unite for new rules “to ensure all UK infrastructure projects buy our steel”.

While Starmer was meeting the President of China, Reeves had a slightly less glamorous “gig” in South Yorkshire, the battlefield in the “war” which saw the demise of the coal industry.

During her visit, hours after it had been announced that Prime Minister Keir Starmer and Chinese leader Xi Jinping had agreed to develop a “long-term, stable and comprehensive strategic partnership” between their two nations, reporters asked the Chancellor whether it would be possible to protect British steel despite closer links with the Chinese.

She said, “Absolutely, and we are determined to. That’s why, as a Government, we took over British Steel; it is also why we are working with the Mayor here and the local community to support Liberty Steel, and it is why we are putting investment in at Port Talbot as well.”

This remains to be seen, but the demise of yet another cornerstone of the British way of life would be an unwelcome epitaph for a Chancellor who is not even kindly considered well-meaning anymore.

Sterling’s upward path was briefly interrupted yesterday as the dollar staged a recovery. It fell to a low of 1.3742, but its correction spurred further buying interest, and it recovered to close barely changed at 1.3805.

The Federal Reserve kept borrowing costs on hold after it met this week, but rates might be the only thing steady at the Central Bank.

After months of speculation on who will run the Central Bank for the next four years, the nomination for the new Fed chair is moving closer.

It’s not yet clear who that will be, and expectations for the exact timing of an announcement have continued to slip. Last week, President Donald Trump told reporters (again) that he has a pick in mind.

I’d say we’re down to three, but we’re down to two. And I probably can tell you we’re down to maybe one in my mind,” Trump said then. The nomination for Chairman is only one part of the story.

President Trump said he plans to announce his choice for Chairman of the Federal Reserve later this morning, a long-awaited decision that could set up a showdown over whether the U.S. Central Bank preserves its independence from the White House and electoral politics.

For the past year, the President has aggressively attacked Chairman Jerome Powell, whose term as the head of the U.S. central bank ends in May.

Trump maintains that Powell should cut the Fed’s benchmark interest rates more drastically to fuel faster economic growth, while the Fed has taken a far more judicious approach in the wake of Trump’s tariffs because inflation is already elevated.

Subplots include an unprecedented Department of Justice investigation into allegations of overspending on the Fed’s headquarters renovation in Washington. How that plays out will influence whether Jerome Powell exercises his right to stay on the Fed’s board until January 2028, even though his term as Chairman will end in May.

Powell was tight-lipped on that question during his news conference on Wednesday, indicating to reporters he has no plans to announce his intentions just yet.

Trump has been relatively quiet, so far, about the Fed decision to leave rates unchanged, but found the time to warn Keir Starmer against “cosying up” to Beijing.

Trump has warned Sir Keir Starmer that it is “hazardous” to build closer business ties with China, after the UK Prime Minister hailed “strong” relations with Beijing on his trip to the country. The intervention from Trump came a day after Starmer held what he said were “very warm and constructive” talks with Chinese President Xi Jinping. The two sides also signed deals to halve Chinese tariffs on whisky from 10% to 5% and introduce visa-free travel for British citizens.

Starmer said those deals were the first fruits of a new, “sophisticated” relationship with China. He will travel from Beijing to Shanghai on Friday to try to drum up more business for British companies. But the mission's diplomatic delicacy was reinforced when Trump attacked Starmer’s trip.

The dollar appears close to bottoming out, but the current market suggests that any further protectionist comments from President Trump could reignite selling. The index fell to a low of 96.02 and closed at 96.16.

When the euro rises, imports become cheaper in local terms, and that can take some heat out of inflation, giving the ECB more room to lower rates.

Markets ran with that idea after the currency hit 1.20 for the first time since mid-2021, even though it later slipped back toward 1.19. Investors pushed up government bond prices, sending Germany’s benchmark yields lower, and an ECB policymaker told the Financial Times that more euro strength could force earlier cuts.

But the disinflation story isn’t just about FX: Brent crude is up roughly 16% this month, and pricier energy can keep transport and services costs sticky even if imported goods get cheaper.

However, the nature of a free market is that the Euro’s rise could be capped at any moment, leading it to return to lower levels.

For this reason, it is unlikely that the ECB will cut rates based on currency strength.

Energy prices were the leading cause of inflation rising across G7 economies. While the Euro’s newfound strength will cause inflation to fall, rising energy prices will have the opposite effect.

Eurozone economic confidence improved to the highest level in three years in January, a monthly survey conducted by the European Commission showed.

The economic confidence index advanced to 99.4 in January from 97.2 in the previous month. This was the highest score since January 2023 and well above economists' forecast of 97.0.

The marked upturn in the ESI index was driven by higher confidence in almost all sectors. The industrial confidence index rose to -6.8, the highest since May 2023, from -8.5 in December.

At 7.2, the services confidence index reached its highest level since January 2024, up from 5.8 in December.

The consumer confidence index improved to -12.4 from -13.2 in the prior month. Retailers' confidence also strengthened in January, with the index rising to -5.7 from -6.6 in December.

Meanwhile, construction confidence remained unchanged in January. The corresponding index came in at -0.9.

Economic confidence improved noticeably in all six larger EU economies: France, Germany, Spain, Italy, Poland, and the Netherlands.

The employment expectations indicator also improved in January to 98.2, marking the highest levels in twelve months.

Sales price expectations remained broadly stable in industry, services and construction, while dropping in retail trade. Meanwhile, consumers' price expectations for the next twelve months and their perceptions of past price developments fell markedly.

Last May, ECB President Christine Lagarde delivered a motivational speech aimed at unleashing pro-European sentiment and support for deeper integration, calling for a ‘global euro moment’. With the recent weakening of the US dollar and the corresponding strengthening of the euro, next week’s ECB meeting could be more interesting than imagined just a few days ago.

When it comes to the basics of monetary policy, given everything currently going on in the world, the ECB has almost become a beacon of continuity, boredom, only recently matched by the Fed.

The ECB simply calls it a ‘good place’, i.e., a eurozone economy that looks set to grow at around potential and for inflation to settle around the target. Data releases since the December meeting have only confirmed that view. That is the Fed's aim, which could be achieved if Trump simply “butted out”.

Traders and investors appear unsure whether to push the Euro further into uncharted territory as the single currency pauses for breath while the decision is made. Yesterday, the single currency retraced its steps from Wednesday’s session, rising to a high of 1.1996 and closing at 1.1964.

Have a great day!