Today, all eyes are on the release of the US Consumer Price Index (CPI) for March, which is expected to be a significant event. Market consensus forecasts suggest a year-on-year increase of +3.4% (compared to the previous +3.2%), with the core CPI expected to rise by +3.7% (compared to the previous +3.8%).
The reaction of the dollar market is likely to be sensitive to any deviation between these expectations and the actual results, alongside movements in US bond yields. If inflation remains in the 3% range without a significant decline, it may lead to a resurgence in the argument for postponing interest rate cuts for the remainder of the year. Conversely, if there is an unexpected drop below the 3% range, speculation about a rate cut starting in June could resurface. Subsequently, attention will turn to how the stock market reacts and the movements of the yen.
USD/JPY is anticipated to be around the 151 yen level at the time of the index release, but significant volatility is expected afterwards. If the pair breaches the 152 yen level, there may be increased vigilance regarding potential intervention by the Japanese government and the Bank of Japan in the forex market. However, depending on the distribution of positions in the USD/JPY market, immediate intervention may be postponed, making predictions difficult. It’s important to exercise caution to avoid being swayed by the rapid fluctuations. It might be prudent to refrain from trading until a clearer direction emerges.
Other economic indicators to be released include the US MBA Mortgage Applications (03/30 – 04/05), US Wholesale Inventories (final) for February, Canada Building Permits for February, and the Bank of Canada’s Interest Rate Decision for April, with the market consensus expecting the rate to remain at 0.50%.
Regarding speeches and events, there will be remarks from Bowman, a member of the Federal Reserve Board, after the release of the US CPI, as well as participation from Goolsbee, President of the Chicago Federal Reserve, and Barkin, President of the Richmond Federal Reserve, in a panel discussion. Additionally, there will be a $39 billion auction of US 10-year Treasury notes and the release of the minutes from the Federal Open Market Committee (FOMC) meeting held on March 19-20. There’s also a scheduled meeting between Prime Minister Kishida and President Biden.
Today, attention will be on the movement of the US dollar following the release of the Consumer Price Index (CPI). Depending on the clarity of the results, I plan to follow the subsequent market movements.
