This essentially buys the Fed a few more months potentially to get a grip on inflation developments and that may qualm fears about yields rising too quickly, thus some breathing room for equities to keep running higher.
But eventually the data and more bullish economic prospects will bring about the same debate again and it’ll be interesting to see if Powell & co. can stick with this same script, especially when the market is very much eager to get on with it.
The BOJ report earlier has tempered with the market mood a little but I don’t quite see that staying the course, though dollar losses may remain more shallow as the market contemplates potentially higher yields still post-Fed.
0700 GMT – Switzerland February trade balance data
Prior release can be found here. Trade conditions – much like everywhere else – are still gradually catching back up to pre-virus levels so expect more of the same in the trend this year as well.
0730 GMT – Switzerland February producer and import prices
Prior release can be found here. A general indication of price pressures in the Swiss economy. A minor data point.
1000 GMT – Eurozone January trade balance data
Prior release can be found here. The recent improvement in trade conditions in the euro area suggests that things are still gradually working its way back to pre-virus levels, but it will take time and that should be the story for 2021 as well.
1200 GMT – BOE announces March monetary policy decision
The prior decision can be found here. I don’t think there is much that hasn’t already been said going into the BOE meeting today. Bailey’s remarks earlier in the week reflected some degree of optimism and that might be reflected again today, keeping the potential for a more “hawkish” surprise if anything else. There are only a few things the BOE needs to address and that being how does it view the economic outlook after Sunak’s budget and how comfortable it is with the latest developments in the bond market. I would argue that they may want to keep things more vague on the former, while communicating some optimism as Bailey pointed out. However, expect more reiteration on the potential need for negative rates if things do go awry. Other than that, this remark by Bailey on Monday stands out when it comes to how the BOE feels about the bond market: “Rise in rates in the market is consistent with change in economic outlook”. As such, with the vaccine rollout still progressing smoothly, now isn’t quite the time for the BOE to change anything up. So, this could very well end up being more of a non-event, all things considered.
That’s all for the session ahead. I wish you all the best of days to come and good luck with your trading! Stay safe out there.