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The Bank of Japan (BoJ) scrapped its negative rate policy, raised the rates from -0.10% to 0%, ditched its YCC policy and ended the purchases of ETF and Japanese real estate investment trusts. However, the bank said that it will continue to purchase sovereign bonds with ‘broadly the same amount’ and that the policy will remain accommodative for now. The latter caught traders attention more than the rest. The yields fell and the yen weakened.

Elsewhere, the Reserve Bank of Australia (RBA) maintained rates unchanged at today’s policy meeting, as expected, and the AUDUSD fell sharply below the 200-DMA. The dollar index, on the other hand, extended gains above the 50-DMA and jumped above the downtrending channel top of February and March. The hawkish Federal Reserve (Fed) expectations sent the US 2-year yield to 4.75% in the run up to this week’s Fed meeting.

While the yields and the dollar were rising, the S&P500 was also rising, led by technology stocks.

Elsewhere, US crude rallied past the $82pb on Monday on news that Ukraine continued its attacks on Russian refineries.

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A week packed with central bank decisions starts on a mixed note after hotter-than-expected US inflation sent the US 2-year yield around 25bp higher over the week and the 10-year yield spiked past the 4.30% mark. Stocks resisted to higher yields for the major part of the week, but the mood was not brilliant on Friday. The S&P500 fell from an ATH, as equity bulls also started feeling the heat of hawkish fears before this week’s FOMC meeting and stocks in Europe were also sold off before the weekly closing bell.

The Bank of Japan (BoJ), the Reserve Bank of Australia (RBA), the Federal Reserve (Fed), the Bank of England (BoE) and the Swiss National Bank (Bank) will announce their latest policy decisions this week. The BoJ is suspected to exit the negative rates or hint that it will soon do so, the Fed could readjust its dot plot for a more hawkish tilt, the BoE and the SNB will likely cut but are not in a hurry while some hawks expect the RBA to stay pat until the end of the year.

In summary, we have a lot of central bank decisions to digest this week, along with a Reddit IPO. So it will likely be a week full of twists and turns, surprises and disappointments, and a good dose of volatility.

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Yesterday’s mix of economic data – which pointed at higher-than-expected inflation and lower-than-expected spending in the US – finally broke the Federal Reserve (Fed) doves’ and the equity bulls’ back for at least a day. US yields and the USD jumped, equities fell.

All eyes are on next week’s FOMC meeting. The Fed will update its dot plot having seen a two-month jump in inflation, robust jobs data, a relatively strong GDP print and healthy earnings. There is a chance that we see the median forecast show no more than two rate cuts penciled in by the Fed members for the year – instead of three plotted at December’s dot plot. The EURUSD fell as the European Central Bank (ECB) members continued to voice support for rate cuts in the euro area, the USDJPY rebounded despite wages negotiations looking favourable for Bank of Japan (BoJ) hike.

Elsewhere, US crude advanced to $81pb level after Ukraine damaged 12% of Russia’s refining capacity with drone attacks and IEA’s new forecast of supply deficit this year.

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Direction was mixed yesterday, as Tuesday’s hotter-than-expected US CPI print gave cold feet to investors regarding the Federal Reserve’s (Fed) ability to cut interest rates as soon as in June. The S&P500 and Nasdaq consolidated near record, energy stocks helped tempering losses in the S&P500 as technology stocks traded down. European stocks hit fresh record. The dollar index rebounded as the selloff in Treasuries accelerated despite a strong 30-year bond auction, the EURUSD consolidated below 1.10.

Today, focus is on the US retail sales and producer price inflation data.

In energy, the positive pressure is building after the EIA data confirmed a 1.5 mio barrel fall in US oil inventories last week, and after Ukraine attacked major Russian oil refineries with drones and damaged around 12% of the country’s oil-processing capacity.

Elsewhere, tensions between the US and China are on the rise again, as US House passed a bill to ban Tiktok unless the Chinese ByteDance sells the platform to a third party that would comply with the US data security demands.

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Inflation in the US accelerated, not only in terms of monthly headline figure but everywhere, both core and headline, and both yearly and monthly figures came in hotter-than-expected. US yields and dollar rose, gold fell, but the S&P500 gained!

Elsewhere, sterling fell against the dollar as softer-than-expected jobs data in the UK reassured the Bank of England (BoE) doves and boosted the expectation of rate cuts this year to almost three following the data.

In Japan, all eyes are on wages negotiations as many Japanese unions disclose their pay deals with employers this week. Yen traders are closely watching the news as any pickup in wages should boost inflation expectations and get the Bank of Japan (BoJ) to exit the negative rates sooner rather than later. So far, it seems that big corporations meet wage demands.

In energy, US crude tested the 200-DMA to the upside as the API data printed a 5.5-mio barrel fall in US oil inventories last week. OPEC raised its economic outlook for the year but a delay in Fed cuts could further reinforce offers above $80pb level.

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The week started with limited appetite in US stock and a fresh record for Bitcoin. Major US indices were flat on Monday’s trading session ahead of today’s US CPI data.

Investors are not feeling fully comfortable into today’s US inflation print, as there are several factors warning of a second blip in US disinflation that could eventually lead to a further softening in dovish Federal Reserve (Fed) expectations.

Volatility will certainly be on the menu of the day, as the Fed’s data-dependent approach results in an increased focus on inflation data. Bloomberg data shows that over the past six months, the S&P500 moved 0.8% up or down on average after the release of CPI data. And this number will likely go up in the run up to the first Fed rate cut.

In the meantime, Germany will release its own inflation numbers, which should print a softer yearly, and a higher monthly figure. The EURUSD retreated from post-NFP peak at yesterday’s session on expectation that the European Central Bank (ECB) will cut more than the Fed this year due to a softer economic outlook and fading pressure on wages, while yen traders are busy gathering evidence to justify a rate hike in Japan.

Elsewhere, Bitcoin hit a fresh record yesterday and gold is consolidating gains near record high into the US CPI data.

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The US economy added 275K new nonfarm jobs last month, significantly more than around 200K new job additions penciled in by analysts. But happily, the unemployment rate unexpectedly rose to 3.9% and wages grew slower than expected on a yearly basis and were almost flat on a monthly basis. The fact that another strong NFP read didn’t translate into higher wages gave a peace of mind to investors. US yields fell and the US dollar index tumbled in the immediate aftermath of the US jobs data, the EURUSD spiked to 1.0980.

While I found that the dollar selloff was a bit exaggerated – given that the US economy still added 275K new nonfarm jobs and wages grew 4.3% on yearly basis, more than twice the Fed’s inflation target - Friday’s reaction to the jobs data revealed an important information: investors don’t care about the strength of the US economy and the labour market, they only care about inflation.

This week, attention shifts to the US CPI print, due tomorrow. The headline inflation is expected to steady near 3.1% on a yearly basis, core inflation is expected to have eased from 3.9% to 3.7%. But the monthly figures could print another strong month. If that’s the case, we shall see a softening in dovish Fed expectations. Remember, Fed Chair Powell said last week that the Fed ‘can and will’ start cutting the rates this year, but he also said that they are in no rush.

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Yesterday’s European Central Bank (ECB) meeting and Lagarde’s press conference went according to the plan. The ECB left its rates unchanged for the fourth straight meeting, lowered its inflation forecasts, predicted that inflation will reach the 2% target by next year and suppressed its growth forecast for this year. Still, Lagarde said that they aren’t ‘sufficiently confident’ in inflation to lower rates but that they ‘will know a little bit more in April and that they will know a lot more in June’. It was heard as ‘we will start cutting the rates in June if inflation continues to ease as predicted’. The dovish message was well received from the market: the Eurozone bond yields fell, the Stoxx 600 hit a fresh record, but the EURUSD extended gains above the 1.0955 as the US dollar fell more than the euro did as the Federal Reserve (Fed) Chair Jerome Powell reiterated that rate reduction in the US ‘can and will begin’ this year.

Due today, the US jobs data will either keep the doves in charge the market or temper enthusiasm. Attention will shift to the US CPI next week.

Elsewhere, Japanese stocks fell below 40’000 level as the USDJPY tumbled below the 148 level on rising speculation that the Bank of Japan (BoJ) could be closer to exiting the negative rates than many think and rebound in Chinese stocks began losing steam.

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Federal Reserve (Fed) Chair Jerome Powell’s testimony before the Congress went smoothly yesterday. He said that the Fed will certainly cut the interest rates this year and that he’s not necessarily looking for inflation to hit the 2% target to start cutting rates. US yields and dollar fell, equities rebounded, and gold rose to a fresh all-time high.

Elsewhere, the Bank of Canada (BoC) left its rate unchanged at 5% at yesterday’ decision and the European Central Bank (ECB) will announce its latest policy verdict today. The European policymakers will leave rates unchanged but will revise inflation forecast down. The broad-based dollar depreciation sent the EURUSD above the 1.09 yesterday. A hint of a June rate cut from the ECB could quickly cast shadow on the euro bulls’ excitement to push this rally to 1.10 level.

Finally, the USDJPY falls steeply this morning as the Japanese wage growth accelerated at the fastest pace since June and the latter fueled speculation that the Bank of Japan (BoJ) could hike its rates already at this month’s meeting.

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