U.S. Inflation, Spending Data Will Help Set Fed Rate Cut Expectations

U.S. inflation numbers will be in the spotlight on Tuesday as U.S. Federal Reserve officials consider when it might be appropriate to begin lowering interest rates.

Weekly Economic & Financial Commentary: G10 Central Banks Sitting Tight

This week, both the Bank of Canada and European Central Bank held policy rates steady. Inflation concerns in Canada and the Eurozone will, in our view, see the respective central banks waiting until June to initiate rate cuts. Japan also made headlines this week, but despite buzz growing around the idea of a March rate hike, we maintain our forecast for an April BoJ move.

The Weekly Bottom Line: A Busy Week in Washington

With the first quarter entering its final weeks, we received a host of important economic data this week that will help form expectations for the year ahead. This included a labor market pulse check in addition to Federal Reserve Chair Powell’s semi-annual testimony before Congress. Equity markets continued to notch record highs, with the S&P 500 rising 0.8% on the week, while Treasury yields fell by roughly 10 basis-points as of the time of writing.

Forex and Cryptocurrencies Forecast

The past week was dominated by the European Central Bank (ECB)'s meeting on Thursday, 7 March. As anticipated, the pan-European regulator decided to maintain its current monetary policy, leaving the interest rate unchanged at 4.50%. This move reaffirmed its commitment to steering inflation into the desired range. The ECB aims to be absolutely certain that inflation is consistently moving towards its 2.0% target, which currently stands at 2.6%.

Gold Hits Record as Net Long Positions Jump

Released last Friday, the CFTC data showed that money managers boosted their long gold positions in the week through March 5th and the net long positions jumped 35% from a week earlier as they were looking to hedge against a potential post-jobs data market selloff.

More Whispers on BoJ Considering Scrapping Yield Curve Control

This morning, there are more BoJ whispers that the central bank is also considering scrapping its yield curve control policy altogether and replacing it by announcing it advance an indication on the amount of bonds it plans to purchase. Japan’s largest union federation on Friday announces results of its annual wage negotiations (shunto) in what is expected to make or break the BoJ’s normalization plans.

Bitcoin's New Highs and BNB's Revival

Bitcoin’s record highs support the accelerated recovery of the crypto market. Its capitalisation reached $2.69 trillion (+1.6% in 24 hours), 10% below the record high of $2.97 trillion in November 2021. Extreme greed remains the driver of the crypto market, but major coins are getting the main influx of money.

Japanese Yen Rally Continues as GDP Ticks Higher

The Japanese yen continues to make inroads against the US dollar. In Monday’s European session, USD/JPY is trading at 146.54, down 0.35%. The yen notched its fourth straight winning day on Friday and surged 2% last week.

GBP/USD Edges Lower, UK Employment Next

The British pound has started the trading week in negative territory. In the North American session, GBP/USD is trading at 1.2807, down 0.39%. The pound has posted six straight winning days and climbed 1.56% last week against the US dollar.

US CPI in the Limelight

The most important release of the day will be the US February CPI. We look for both headline and core CPI to come out at +0.3% m/m SA, slightly below consensus forecast. Markets will focus on non-housing services inflation, which surprised to the upside in January, cooling expectations of rapid rate cuts.