Morning Bid Europe

A look at the day ahead in European and global markets

By Wayne Cole, Chief Correspondent, Treasury

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It’s been a slow start to what will be a holiday-shortened week for many centres, though that won’t stop the U.S. from releasing the Federal Reserve’s favoured inflation measure on Friday even as markets there are shut.

The U.S. core personal consumption expenditures (PCE) price index is seen rising 0.3% in February, which would keep the annual pace at 2.8%. The headline index is seen up 0.4% for the month and 2.4% for the year.

Today’s Market News

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The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, March 20, 2024. REUTERS/Staff

Inflation tests

Anything higher would be taken as a setback to hopes for a Fed rate cut in June, which was put back on the menu last week when Fed chair Jerome Powell sounded relaxed on the inflation outlook.

Futures have a June easing implied at 75%, from 55% a week earlier, and have three to four cuts priced in for the year.

Powell will participate in a moderated discussion at a policy conference on Friday, while Fed governors Lisa Cook and Christopher Waller are also appearing this week.

Following the surprise move by the Swiss National Bank (SNB) last week, markets are almost fully priced for a first rate cut from the ECB in June and have 91 basis points of easing pencilled in for 2024.

Europe has its own inflation tests this week with consumer price data out from France, Italy, Belgium and Spain, ahead of the overall EU CPI report on April 3.

ECB President Lagarde is speaking later on Monday and may offer more guidance on whether the market has it right.

Graphics are produced by Reuters.

Protest

One of the more hawkish Bank of England members is also talking later Monday and may have something to say about the market’s 76% probability for a June cut.

Sweden’s central bank meets on Wednesday and is generally expected to keep rates at 4.0%, though the sudden shift by the SNB suggests a surprise cannot be ruled out.

The People’s Bank of China (PBOC) sprang a surprise of its own last week by seemingly letting the yuan fall past 7.2 per dollar to a four-month low, though it set a firmer fix on Monday likely as a protest against too sharp a fall.

That was enough to pull the dollar back to 7.2000 yuan, from 7.2290. It also eased a touch on the yen, in part as Japan’s top currency official was out cautioning against extreme moves ahead of the 152.00 barrier where they intervened in the past.

Key developments that could influence markets on Monday:

Participation by ECB President Christine Lagarde at EIB Group Climate and Environment Advisory Council
Bank of England Monetary Policy Committee member Catherine Mann gives a speech
UK CBI Distributive Trades for March
Fed Board Governor Lisa Cook gives lecture
Fed Bank of Chicago President Austan Goolsbee is interviewed on Yahoo Finance
Fed Bank of Atlanta President Raphael Bostic participates in moderated conversation
Data on U.S. February new home sales, Chicago Fed activity index, Dallas Fed index

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.