Various European nations declare inflation and as that’s the issue on most market players minds it will be important. The ECB is regarded as being late to the rate rising party but is trying to catch up and overall the ECB is now the most hawkish so another higher reading in inflation will build pressure for higher rates.
In contrast the FED reacted first to raise rates and although the size of the rises has moderated they show little sign of actually halting the rises and the market now expects rates to rise to 5.5% (leaving 0.75% to increase). The minutes from their recent meeting showed near unanimity for a rise and said that inflation will shape policy which means that until they see signs of inflation coming down they will keep their foot firmly on the accelerator pedal, especially since their favoured metric: PCE came in at 4.7% instead of the expected 4.3%.
We have FED governors speaking this week and their commentary will be watched to gauge how much rates are going up and how many more times.
All of the above took its toll on stocks (down 3% on week) and on metals with copper / silver seeing the biggest drop of roughly 4% on the week.
The move down in copper doesn’t make much sense as supply disruption continues to be an issue but perceptions of global recession don’t go away and presently trump the supply problems. Should the rate rising cycle and thereby the recession fears subside then I suspect copper will rally strongly.
Japanese inflation was higher than expected, almost inevitable, since they import commodities and thus inflation, the pressure on the BOJ to move to a more “normal” rate environment (ie higher) is becoming intense. That said the BOJ governor said that the ultra low policy remains and indeed the fact that the yen depreciated says the market doesn’t believe the Japanese will change their stance.
Commodities took fright from the likelihood of higher for longer rates with oil particularly under pressure as fears of world recession dented its appeal. Taking a step back, it really has been rangebound with 76.40 as the pivot point and 71.71 as the base – erosion through this level opens up 65 as a possibility and OPEC+ interest.
Date | Country | Figures | Expected | Previous |
February 27 | USA | Durable Goods | -4% | 5.6% |
February 28 | France | Inflation Rate | 6.2% | 6% |
| Spain | Inflation Rate | 5.6% | 5.9% |
March 01 | Germany | Inflation Rate | 8.7% | 8.7% |
| USA | ISM Manu PMI | 48 | 47.4 |
March 02 | EUR | Unemployment Rate | 6.6% | 6.6% |
| EUR | Inflation Rate | 8.2% | 8.6% |
March 03 | USA | ISM Non Manu PMI | 54.5 | 55.5 |
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