The Fed’s path of policy rates remains a key focus for risk markets this week. The FOMC minutes did not contain any surprises and all eyes will remain on incoming US labour and inflation data. Midweek, the RBNZ took a more hawkish stance than some analysts expected despite the natural disaster impacting economic activity. This sent the AUDNZD sharply lower. The GBP also saw some rare good news as services and manufacturing PMIs surprised to the upside. This sent the EURGBP sharply lower and could mark the start of a pullback for the EURGBP pair medium term. The path of Fed hikes remains the key focus of the market right now as re-pricing is still underway for a more hawkish Fed.

Other key events from the past week

  • GBP: PMI surprise, Feb 21: The GBP was lifted on Tuesday of this week as PMIs showed a surprise surge higher coming in above market expectations for all prints. Is the worst now behind for the GBP?
  • NZD: RBNZ keeps the hawkish tone, Feb 22: The RBNZ retained a hawkish stance this week despite the recent fallout from Cyclone Gabrielle. It hiked by 50bps, considered 75bps, and maintain a peak rate projection of 5.5%.
  • FOMC minutes: more hikes needed, Feb 22: The FOMC minutes did not contain any surprises, but some participants favoured a 50bps hike and all saw the need for more rate hikes ahead. Inflation data at the end of this week in the form of the Core PCE print will be the next clue as to the Fed’s pace of hikes.

Key events for the coming week

  • China return?: PMI release, March 1: PMI prints for February are out on Wednesday and Friday of next week. The big question is whether this data will start to show signs of optimism regarding a China bounce? Watch the China 50.
  • Microsoft move? Check out Microsoft’s strong seasonals on its AI move. 
  • EUR: Inflation focus, March 2: The headline flash inflation for February is expected to fall to 8.2% next week from 8.5% in January, but a big surprise higher will likely increase expectations of a more hawkish ECB. Expect EUR volatility.

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