Will BoJ Take Interest Rates Out of Negative Territory?

The yen staged a strong recovery last week following several reports suggesting that the Bank of Japan (BoJ) may abolish its ultra-loose monetary policy as early as its upcoming policy meeting, which is scheduled for next week.

March Flashlight for the FOMC Blackout Period

We do not expect the FOMC to change the federal funds rate or alter its current pace of balance sheet runoff at its upcoming meeting on March 19-20.

In Wage Growth the BoJ Hopes

The Bank of Japan and financial markets are eagerly awaiting the Shunto wage decision for Japan’s largest trade confederation RENGO, which is due in. In our view, the result will likely be more of a reflection of near-term cyclicality than structural strength in the economy. It is therefore unlikely to justify a material policy shift by the Bank of Japan (BoJ).

Focus on Swedish inflation and US Retail Sales

In the US, February retail sales and PPI are due for release today. Consensus expects a rebound in retail sales after the unusually weak January print, which might have been distorted by heavy seasonal adjustments at the start of the year. Markets will also follow if the sticky price pressures seen in the CPI earlier this week will be reflected in the PPI as well.

U.S. Retail Sales Rebound in February

Retail spending was back in positive territory in February, after a sizeable decline to start the year. Higher borrowing costs and elevated prices are challenging households but spending is still being fueled by a robust job market and rising wages. However, as the labor market cools and wage gains abate, spending should moderate. With two months of data in for the quarter, consumer spending is currently tracking 2.7% q/q (annualized) for Q1.

Sunset Market Commentary

The dollar, for the first time since long, finally starts profiting from favourable interest rate differentials and a weakish risk environment (stocks slightly down in the US). EUR/USD slips from an intraday high of 1.0955 to currently test the 1.09 big figure. DXY (trade-weighted) found support at the 50% retracement on the December-February rebound (102.8) before moving beyond 103.

Looking Beyond the Horizon

The macro outlook is unchanged from our view of recent months. Two years of slow growth could result in economic slack, with inflation ultimately undershooting the RBA’s target. What forces could emerge to offset this?

Fed Decision: Will the New 'Dot Plot' Boost Dollar?

Fed officials are almost certain to keep interest rates unchanged on Wednesday. As such, the market reaction will depend mostly on the updated economic forecasts, the new rate projections in the famous ‘dot plot’, and what Chairman Powell says during his press conference. 

Risks Significantly Tilting to First Fed Rate Cut in September at Earliest

US Treasuries sold off for a third straight session yesterday with eco data strengthening the case for a hawkish tone at next week’s FOMC meeting. Risks are significantly tilting to a first rate cut in September at the earliest. February US producer price inflation accelerated much more than forecast (0.6% M/M for headline & 0.3% M/M for core) with Y/Y-figures establishing a bottoming out pattern. Weekly jobless claims came in at another extremely low 209k.

USD/JPY Rises, All Eyes on BoJ After Wage Deal

The Japanese yen has extended its losses against the US dollar for a fourth straight day and is down 1.1% this week. In the European session, USD/JPY is trading at 148.70, up 0.28%.