In the European session we don't have anything on the agenda other than a couple of low tier releases. The focus today will be on the US CPI report as it will influence interest rate expectations and therefore impact all asset classes.

13:30 GMT/08:30 ET - US January CPI

The US CPI Y/Y is expected at 2.9% vs. 2.9% prior, while the M/M figure is seen at 0.3% vs. 0.4% prior. The Core CPI Y/Y is expected at 3.1% vs. 3.2% prior, while the M/M reading is seen at 0.3% vs. 0.2% prior. The Fed is focused mainly on inflation progress at the moment and these readings wouldn’t be bad, although lower than expected figures will be much more welcomed.

The projection for two rate cuts by the end of the year still holds (in my opinion) even though the market leant on a more hawkish side on Friday following the NFP report and especially the inflation expectations data in the University of Michigan consumer sentiment survey.

The NFP report was good and the increase in average hourly earnings isn’t worrying yet given the drop in weekly hours worked. The jump in inflation expectations, on the other hand, has been entirely due to the tariffs news, so those will likely ease going forward if we avoid trade wars.

Also, be careful of the January-effect as explained here and here by Adam.

US Core CPI YoY
US Core CPI YoY

Central bank speakers:

  • 10:00 GMT - ECB's Elderson (neutral - voter)
  • 15:00 GMT/10:00 ET - BoE's Greene (neutral - voter)
  • 15:00 GMT/10:00 ET - Fed Chair Powell (neutral - voter)
  • 17:00 GMT/12:00 ET - ECB's Nagel (hawk - voter)
  • 17:00 GMT/12:00 ET - Fed's Bostic (neutral - non voter)
  • 22:05 GMT/17:05 ET - Fed's Waller (neutral - voter)
Source: Forex Live