Global financial markets remain stable as investors await the release of the January inflation report later today. On Monday, stock markets worldwide managed to brush off lingering concerns over potential tariff impacts. This comes as 25% levies on imports of steel and aluminum were implemented late Monday night. Despite this, the S&P 500 and Eurostoxx 50 indices are predicted to open lower today, reflecting cautious sentiment among investors.
In currency markets, the EUR/USD pair is trading within a narrow channel above 1.0350 as of Wednesday. Market participants are closely monitoring inflation data and Federal Reserve cues for any signs of policy shifts. Monthly core Consumer Price Index (CPI) figures are anticipated to show an increase to 0.3% from the previous 0.2%, while the Consumer Price Index is expected to reveal an annual rise of 2.9% in January. Notably, the core rate, excluding food and energy, is projected to slightly dip to 3.1% year-on-year from 3.2%.
Federal Reserve Chair Jerome Powell has reiterated that the Fed "does not need to be in a hurry" to adjust its monetary policy. This stance aligns with market expectations, as indicated by the CME’s FedWatch tool, which shows a 95% probability of a rate hold at the upcoming March meeting. Powell also deflected questions concerning President Trump's tariffs and their implications for U.S. trade policy, emphasizing the current robust performance of the U.S. economy and the minimal pressure on the Fed to lower rates at this time.
Looking ahead, New Zealand is set to release its inflation expectations early Thursday. Investors will be particularly attentive to these figures as they anticipate the Reserve Bank of New Zealand's meeting next week. The money markets have fully priced in a rate cut from the RBNZ, adding another layer of interest to New Zealand's economic outlook.
The forecast for the first quarter stands at 1.8% quarter-on-quarter, compared to a stronger 2.1% growth in the fourth quarter of 2024. These projections underscore a deceleration in economic activity, which may influence central bank decisions in the coming months.