Investors will be paying attention to US nonfarm payrolls today

With inflation cooling down in major Eurozone countries, the lingering question pertains to the timing of a rate cut. Major central banks namely the ECB, BoE and Fed have stayed put on interest rates. In fact, France has reported a drop of 0.2% in prices on a monthly basis for January and CPI figures for Germany are also encouraging with headline HICP falling from 3.8% in December to 3.1% in January. So, the odds about a rate cut have increased and the market is expecting the first cut to happen in April this year. Easing monetary policy will also help the economy of the Bloc which is stagnating as indicated by latest GDP figures. However, the ECB remains committed to its data-dependent approach and if price levels continue to drop, it might move to cut rates. Today, the economic calendar features French government budget balance and industrial production, and Spanish unemployment rate. The fibre is currently trading at 1.0879.

The Bank of England voted to maintain its key interest rate steady at 5.25% yesterday. However, Governor Andrew Bailey hinted that the BoE would quite certainly pivot at the next Monetary Policy Committee and that it would possibly cut interest rates. Central bank policymakers Pill and Shortfall will be presenting the national briefing on the monetary policy report today. The cable is currently trading at 1.2749.

The market will be scrutinising non-farm payroll and monthly average hourly earnings today. A contraction in these figures would help in creating conducive conditions for inflation to slide further towards the 2% target. US manufacturing PMI appreciated yesterday, while first-time jobless claims surpassed expectations, coming out at 224K for the past week. Earlier this week, the Federal Reserve also kept the federal funds rate unchanged in the range between 5.25% to 5.50%. The FOMC noted that while there has been progress in the fight against inflation, price levels remain high. Chairman Powell stated that the situation is being constantly monitored and that unwinding policy tightening too soon or too much could reverse the progress achieved in fighting inflation. But also added that keeping high rates for too long or reducing them too little could hurt the US economy, hence the FOMC would consider data, the prevailing outlook and the balance of risks in formulating monetary policy. Other data due today include the labour force participation rate, unemployment rate and Michigan consumer sentiment index. The US dollar index was trading 103.01 ahead of non-farm payroll data.