Monday February 25th, 2024

The USD, equities, oil and treasury yields are trading lower to start the week. The USD is holding its ground ahead of a macro-packed week that could shed more light on the global rate outlook, with a U.S. inflation reading taking centre stage. The core personal consumption expenditures (PCE) price index - the Fed preferred measure of inflation - is due on Thursday. ?Inflation figures in the euro zone, Japan and Australia also land this week, alongside a rate decision from the Reserve Bank of New Zealand (RBNZ) and China PMI surveys.

In other news. Negotiators meeting in Paris have agreed on the basics of a deal under which the Palestinian militant group Hamas would release remaining Israeli hostages in exchange for a cease-fire. Palestinian Prime Minister said he was resigning to allow for the formation of a broad consensus among Palestinians about political arrangements following Israel's war against the Islamist group Hamas in Gaza. Israel’s defense minister vowed to step up attacks on Lebanon’s Hezbollah militant group even if a cease-fire is reached with Hamas in the Gaza Strip.

In currency news Japan’s Nikkei reached a record high at the start of the week. The Japanese Yen remains confined in a range just below a multi-month low touched last week. The CNY starts the week flat against the USD. The MYR remains under pressure at the start of the week. The THB and TWD have both gains against the USD 0.3%. The AUD and NZD have sold off to start the week down 0.23% and 0.34% respectively. The trading currencies are mixed with the ZAR down 0.12% and the MXN up 0.1%.

In commodity markets. Oil prices fell on Monday, extending losses from the previous session after the dollar rose on market views that higher-than-expected inflation could delay cuts to high U.S. interest rates that have been capping global fuel demand growth. Oil is off 0.47%, Nat gas is up 4.7% while metals trade lower (Gold -0.22%, Silver -0.96% and Copper -0.40%.) Agricultural commodities are hedging higher with Soybean up 0.7% and Wheat up 0.5%.

The USD/CAD is seen building on last week's rebound from the 1.3440 area and gaining some positive traction for the second successive day. The cooler-than-expected Canadian inflation numbers might convince the Bank of Canada to cut rates sooner than expected while Fed’s Waller suggests that they should delay rate cuts to see more evidence of inflation data.

The EUR/CAD continues to rebound from early February’s low – the results of a sooner than expected rate cut in Canada and the ECB official’s pushing back on expectation of rate cuts,

The EUR/USD trades on a softer note amid a modest rebound of the USD Monday. The US January PCE inflation data will be in the spotlight this week. This data could trigger volatility in the market.

GBP/EUR’s winning streak comes to an end on the back of ECB's Stournaras ruling out the possibility of rate cuts in March.

The GBP/USD struggles for direction as uncertainty over the timing of rate cuts by the BoE and the Fed continues to persist.