What are the main events for today?

In the European session we don’t have anything on the agenda other than a couple of low tier releases. The focus today will be on the US CPI report as it will influence interest rate expectations and therefore impact all asset classes.

13:30 GMT/08:30 ET – US January CPI

The US CPI Y/Y is
expected at 2.9% vs. 2.9% prior, while the M/M figure is seen at 0.3% vs. 0.4%
prior. The Core CPI Y/Y is expected at 3.1% vs. 3.2% prior, while the M/M
reading is seen at 0.3% vs. 0.2% prior. The Fed is focused mainly on
inflation progress at the moment and these readings wouldn’t be bad, although
lower than expected figures will be much more welcomed.

The
projection for two rate cuts by the end of the year still holds (in my opinion) even though the
market leant on a more hawkish side on Friday following the NFP report and especially the inflation expectations data in the
University of Michigan consumer sentiment survey.

The NFP report was
good and the increase in average hourly earnings isn’t worrying yet given
the drop in weekly hours worked. The jump in inflation expectations, on the
other hand, has been entirely due to the tariffs news, so those will likely
ease going forward if we avoid trade wars.

Also, be careful of the January-effect as explained here and here by Adam.

Central bank speakers:

• 10:00 GMT – ECB’s Elderson (neutral – voter)
• 15:00 GMT/10:00 ET – BoE’s Greene (neutral – voter)
• 15:00 GMT/10:00 ET – Fed Chair Powell (neutral – voter)
• 17:00 GMT/12:00 ET – ECB’s Nagel (hawk – voter)
• 17:00 GMT/12:00 ET – Fed’s Bostic (neutral – non voter)
• 22:05 GMT/17:05 ET – Fed’s Waller (neutral – voter)

This article was written by Giuseppe Dellamotta at www.forexlive.com.