The main event in the European session was the release of the
UK CPI report. The data missed expectations across the board and reinforced the expectations for a 25 bps cut at the upcoming BoE's meeting. The focus is on the US CPI report though as this release will likely set the trend for the next weeks.
13:30 GMT/08:30 ET - US December CPI
The US CPI Y/Y is expected at 2.8% vs. 2.7% prior, while the M/M measure is seen at 0.3% vs. 0.3% prior. The Core CPI Y/Y is expected at 3.3% vs. 3.3% prior, while the M/M reading is seen at 0.2% vs. 0.3% prior.
This is the most important release of the month, and another hot report will likely cause some trouble in the markets with the stock market looking as the most vulnerable right now. Following the strong NFP report, the expectations are now for just one rate cut this year, which is below the Fed’s projection of two cuts.
The repricing has been pretty aggressive in the last few months and the data definitely made the 50 bps cut look like a big mistake. Nonetheless, the Fed has paused the easing cycle and switched its focus back to inflation with several members citing inflation progress as a key factor for the next rate cut (they will want to see it closer to 2%).
The best outcome would be a soft report given the overstretched moves in the markets caused by the repricing in rate cuts expectations. That would likely reverse most of the recent trends and trigger a rally in bonds, risk assets like stocks and bitcoin and lead to a selloff in the US Dollar.
Central bank speakers:
- 08:00 GMT - ECB's de Guindos (dove - voter)
- 08:30 GMT - ECB's Villeroy (dove - voter)
- 08:35 GMT - ECB's Vujcic (neutral - voter)
- 13:00 GMT/08:00 ET - Fed's Barkin (neutral - non voter)
- 15:00 GMT/10:00 ET - Fed's Kashkari (hawk - non voter)
- 16:00 GMT/11:00 ET - Fed's Williams (neutral - voter)
- 16:30 GMT/11:30 ET - BoE's Taylor (neutral - voter)
- 17:00 GMT/12:00 ET - Fed's Goolsbee (dove - voter)
This article was written by Giuseppe Dellamotta at
www.forexlive.com.
