In the European session we won’t have any notable data release that could influence future expectations. All the action will be in the American session when we’ll get the US CPI report and the BoC Policy Announcement.
12:30 GMT/08:30 ET – US February CPI
The US CPI Y/Y is expected at 2.9% vs. 3.0% prior, while the M/M figure is seen at 0.3% vs. 0.5% prior. The Core CPI Y/Y is expected at 3.2% vs. 3.3% prior, while the M/M measure is seen at 0.3% vs. 0.4% prior.
We are coming into this release with the market fully pricing in three rate cuts by the end of the year following the aggressive selloff in the US stock market. The catalyst for the entire selloff was in February 21st when we got the weaker US PMIs coupled with a new cycle high in long term inflation expectations in the UMich survey.
The market started to fear
that in case we get a slowdown, the Fed might not be fast enough in cutting
rates amid the inflation constraint and eventually worsen the economic pain.
Moreover, the uncertainty around Trump’s tariffs add to those expectations of a
slowdown in growth and potentially higher inflation in the short-term.
Therefore, we would likely need a soft report to trigger a relief rally in stocks in expectations of a more dovish Fed next week. A hot report could increase the bearish momentum and might even lead us to a bear market without Fed support.
13:45 GMT/09:45 ET – Bank of Canada Rate Decision
The BoC is expected to cut by 25 bps bringing the policy rate to 2.75%. The market wasn’t expecting a cut at this meeting a couple of weeks ago but conditions changed with the increase in trade tensions between the US and Canada. The market is now pricing a 94% probability of a rate cut today with a total of 78 bps of easing by year-end (two more rate cuts). The focus today will be on the US CPI report, so the BoC’s decision will take second place.
Central bank speakers:
- 08:00 GMT – ECB’s Simkus (neutral – voter)
- 08:45 GMT – ECB’s Lagarde (neutral – voter)
- 09:15 GMT – ECB’s Villeroy (dove – voter)
- 12:45 GMT/08:45 ET – ECB’s Centeno (dove – voter)
- 13:45 GMT/09:45 ET – ECB’s Nagel (hawk – voter)
- 14:30 GMT/10:30 ET – BoC’s Macklem Press Conference
- 15:15 GMT/11:15 ET – ECB’s Lane (dove – voter)
- 16:30 GMT/12:30 ET – ECB’s Panetta (dove – voter)
This article was written by Giuseppe Dellamotta at www.forexlive.com.
