Markets are in a holding pattern as traders wait to see how sticky US inflation was in February. Japan’s recession was revised away. The Bank of Japan is expected to end negative rates next Monday or in April. India’s inflation rate is expected to be steady.
In our bonus deep dive interview, ANZ Economist Dhiraj Nim explains how the Reserve Bank of India may have over-delivered on its inflation target, and how it might be loosening monetary conditions through the repo markets before cutting from August.
5 things to know:
The S&P 500 was down 0.2% and the US 2 year Treasury yield up 4 bps at 4.52% by 5 am Sydney/Melbourne time. ANZ Head of G3 economics Brian Martin says traders are trimming positions ahead of the US CPI read tonight.
Japan skipped recession in the December quarter. A final data revision turned a 0.4% contraction into a 0.4% expansion due to more robust business spending, says ANZ’s Head of FX Strategy Mahjabeen Zaman.
There is increasing speculation that the Bank of Japan could finally end its experiment with negative interest rates, possibly as soon as this Monday, Mahjabeen says, although she still sees an April hike to 0% as more likely.
India publishes CPI data for February tonight. Dhiraj sees a steady headline annual rate of 5.1% and subdued core inflation.
The market consensus for US CPI inflation in February is for 0.4% headline inflation for the month and 0.3% core inflation. Brian says the focus will be on how sticky services inflation is.
Cheers
Bernard
PS: Catch you on tomorrow with reaction to that US CPI data.
