- This afternoon’s US inflation report will likely set the tone for the coming days as markets continue to reflect on fewer cuts from the Federal Reserve in 2024. Fed Chairman Jerome Powell highlighted earlier this month that the disinflation road will be bumpy, and markets expect the March CPI print to illustrate that point. We have had to contend with two ‘hot’ inflation reports this year and expect rising energy prices to keep headline CPI elevated even as core inflation slowly moderates. Headline inflation is expected to hover around 3% throughout the year, which should be low enough for the Fed to begin cutting rates – although the timing and number remains unclear. Three cuts of 25 basis points, commencing in June appears to be the safe bet currently – but it is worth remembering that at the start of the year markets were pricing in seven cuts in 2024. Minutes of the March FOMC meeting are released this afternoon, and markets will be looking for an explanation as to why the dot plot shifted to fewer interest rate cuts this year.
- USDJPY remains elevated, trading ever closer to the psychological 152 area trading as high as 151.92 overnight. The single currency continues to consolidate with EURUSD trading between 1.08 to 1.09 as we await Thursday’s ECB policy meeting. Cable holds steady capped below the 100-day MA which comes in at 1.2670. With little UK data on the docket until Friday’s GDP release, the pound will likely be influenced by the greenback and the upcoming US inflation report.
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