Bankers’ speeches, US inflation and UK economic growth in focus

In early trade on Monday, the euro fell just below a three-week peak as the dollar gained momentum from positive US jobs data and rising Treasury yields. Later this week, inflation figures will be expected to cement prospects for a Fed rate hike in March. One-in-three chances are currently being priced in for the Fed to raise rates in March, with a reasonable possibility that rates will reach 1.5% by 2022.

Seemingly market participants continued to digest the latest hawkish move by the European Central Bank (ECB) on Monday. However, the further short-term gains for the euro are less likely as the US Federal Reserve’s imminent interest rate decision supported the dollar. Unexpectedly strong US jobs report was a sign of continued strength in the economy, while oil prices surged to 7-year highs and cryptocurrencies are showing indications of recovery as inflation hedge trades are reinvigorated. US two-year yields started the week higher and near a two-year high at 1.33%, while benchmark 10-year yields were around 1.907%.

Bankers’ speeches

Investors will closely watch Lagarde’s speech on Monday, following last week’s hawkish turn from the European Central Bank. ECB hawkish turn is expected to increase the likelihood of eurozone rate hikes in the near term and send bond yields sharply higher.

Additionally, the markets will pay attention to upcoming speeches by other policymakers at the Fed, the UK, Australian, and Canadian central banks to see what hints they will provide about future rate policy.

US inflation data

CPI and Core CPI reports will be released Thursday pre-market. January CPI is expected to come in at a 0.5% increase month over month and 7.3% year over year, along with the core CPI (excluding food and energy prices) coming in at a 0.5% rise month over month and 5.9% YoY. This report will have actual weight on the dollar with whispers that the Fed may not only hike four times this year but also jump straight to a 50 basis points hike in March.

UK economic growth

UK GDP figures will come on Friday, with annual economic growth expected to fall to 6.5% from the previous reading of 6.8%, while the Q4 GDP growth forecast remains unchanged at 1.1%.