By Areena FxToday’s data calendar is relatively light, with market attention focused on public remarks from Fed and ECB speakers. In Denmark, the release of CPI inflation data for January is anticipated. The expectation is for a rise in inflation to 1.0% from 0.7% in December. However, it’s worth noting that January inflation figures can be volatile due to new year adjustments in prices and significant impacts from clothing sales.
In the US, the highlight of the week is the CPI inflation release scheduled for tomorrow. The January CPI data will be closely watched to gauge whether recent positive surprises in US economic data translate into higher inflation. Upbeat data has led to a reduction in rate cut expectations for 2024, as markets anticipate potential upside surprises in inflation figures.
Recent Developments
Overnight, Israeli special forces conducted an operation in Rafah, freeing two Israeli hostages but resulting in numerous casualties. In the US, annual revisions to CPI seasonal adjustment factors showed mixed results, with December CPI lower and November and October data revised slightly upward. Dallas Fed’s Logan emphasized the need for more benign data before considering rate cuts, contributing to positive market sentiment, with the S&P 500 ending Friday above the record-breaking 5,000 level.
On the political front, Donald Trump’s comments regarding NATO and Russia received criticism, while in Europe, Banca d’Italias’s Panetta highlighted concerns about falling inflation in the euro area. Finland elected a new president, and in Norway, January core inflation was in line with consensus, although slightly lower than projections by Norges Bank.
Chinese credit growth hit a record high in January, indicating ongoing stimulus efforts. Global equities rose on Friday, led by a rally in US, cyclical, and growth stocks, while European curves flattened as easing expectations for central banks were scaled back. FX markets were relatively calm, with positive performance in cyclical currencies like NZD, NOK, SEK, and AUD, despite higher global yields.