Today is Presidents’ Day in the U.S., so data and market activity are light. Combined with half-term in the UK, we are not expecting much market movement.
Overnight, risk sentiment has been cautious due to tensions between the U.S. and the European Union over tariffs and the war in Ukraine. Oil is on a four-day losing streak. The main event this week will be the Fed minutes on Wednesday. After the CPI data, the Fed needs to maintain a hawkish stance.
Fed Chairman Powell’s testimony stated that the U.S. employment market remains tight and inflation is still above the bank’s 2% target. The "final mile" is proving tough to achieve. Regarding monetary policy, the Fed seems in no hurry to cut rates—implying that tight financial conditions will persist in the U.S. economy for now. Interestingly, while Powell avoided commenting on Trump’s tariff plans and broader policies, he did acknowledge their potential inflationary impact. A 25-basis-point cut is currently priced in by year-end, but will this change?
Overnight, Bitcoin fell 0.8% to $96,414.31, Ether declined 0.2% to $2,682.85, and spot gold rose 0.3% to $2,890.19 an ounce. Cable opens at 1.2590, EUR/USD at 1.0490, and USD/JPY at 151.60.
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