The week ahead and key inflation pressure

The US dollar lost ground this past week, but the tide could turn back in its favour in the coming days, especially if Wednesday's US inflation report surprises to the upside and triggers a hawkish repricing of interest rate expectations.

The week ahead presents many ‘high importance’ risk events ranging from US CPI data to central bank decisions in Canada, New Zealand, and the European Union. The FOMC minutes of the March meeting will also provide more insight on Fed thinking, although, the trend of hotter US data may diminish the impact of what was discussed during the March meeting.

The ECB and whether they hold firm on interest rates

The ECB is scheduled to decide on monetary policy on Thursday where it is almost certain there will be no change in the interest rates. Prominent governing council members have been vocalizing their preference for June as the appropriate meeting to start a managed rate cutting cycle.

Pressure is mounting on the ECB to cut elevated interest rates as economic growth remains anaemic and, unlike the US, inflation continues to decline towards target. The ECB’s staff projections had inflation only returning to target in the second half of 2025. Therefore, it may become increasingly difficult to avoid cuts given the bank’s price mandate.

Look out for more urgency in the statement. If 2022 is anything to go by, keep an eye out for any potential pre-commitment to June in the statement. Back in June of 2022, the ECB announced that it ‘intends to hike rates by 25 bps’ at the next meeting. However, considering markets have already priced in a cut in June, the actual market response may prove to be contained.

Lack of UK data likely to soften The pound

The British pound heads into a new trading week under pressure against the United States dollar as once-reliable monetary policy support continues to ebb. Markets are betting that the Bank of England could cut borrowing costs as soon as June given signs that inflation is coming to heel. That is the same month investors now consider most likely for a first move by the US Federal Reserve

Todays Major Economic Releases

CHF - 1515 -?SNB's Chairman Jordan speech?

USD - 23:00 -?Fed's Kashkari speech?

Interbank Exchange Rates

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