EUROPEAN SESSION
In the European session, we have the Swiss CPI and the Eurozone Q4 GDP. The Swiss CPI Y/Y is expected at 0.1% vs 0.1% prior. The data is unlikely to change anything for the SNB though as policymakers have repeatedly said that the bar for negative rates remains very high and that even a few months of negative inflation wouldn’t be a problem.
The Eurozone Q4 GDP is expected at 0.3% for the Q/Q measure and 1.3% for the Y/Y. This is the second estimate and won’t change anything for the ECB as the central bank remains mostly focused on inflation.
AMERICAN SESSION
In the American session, all eyes will be on the US CPI report. The CPI Y/Y is expected at 2.5% 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 2.5% vs 2.6% prior, while the M/M figure is seen at 0.3% vs 0.2% prior. The Fed doesn’t see the labour market contributing to inflationary pressures given the lower wage growth and higher productivity, so it could still cut rates solely based on more inflation easing (barring a quick deterioration in the labour market).
If we get an in-line or soft CPI, there shouldn’t be much change in terms of market pricing as the two rate cuts expected by the market are already above the Fed’s projection. Nonetheless, we could see a dovish reaction in the market, especially on stocks which should be supported.
On the other hand, a hot report will likely trigger a stronger hawkish reaction following the hot NFP report on Wednesday. In this case, the US Dollar would likely rally across the board and precious metals would drop to new lows. The stock market could also come under pressure in the short-term.
CENTRAL BANK SPEAKERS
- 12:00 GMT/07:00 ET – BoE’s Pill (hawkish – voter)
This article was written by Giuseppe Dellamotta at investinglive.com.
