Market expectations are clear, but the Bank of Japan's narrative is chaotic at best

Tuesday's session on international financial markets is focused on American CPI data for February. The importance of this report for the Fed's monetary policy and overall investor sentiment is so high that it is highly probable at 13:30 p.m. Polish time we can expect a significant spike in volatility.

A chance to 'soften' the FED

Today's CPI reading in the US is the last important report before the March meeting Fed. According to analyzes of leading investment banks and analytical units, the dynamics of core inflation on a y/y basis will amount to 3,7% compared to 3,8% in January, and on a m/m basis the data will indicate an increase in the general level of prices and services in the US economy by 0,3 % compared to 0,4% in January.

The market is hoping for a good report that will increase the chance of cutting interest rates in May. He may be behind this decrease in price pressure both on the real estate marketas well as cars. In this respect, a lower-than-expected report could constitute a foundation for the continuation of bullish tendencies on Wall Street and on the stock exchanges of the Old Continent, and thus soften the Fed in the context of interest rates, which could strengthen the USD sell-off on the Forex market.

The Bank of Japan is waiting to achieve its target

The publication itself may have a particular impact on the position of the Japanese yen, which has recently gained rapidly on the wave of higher expectations (currently 66% chance according to the swap market) regarding the BoJ's final exit from negative interest rates and the yield curve control program. As long as market expectations are clear, yes the narrative led by the Japanese establishment is chaotic, to say the least.

BOJ President Ueda stated today that Bank of Japan will modify its policy only when achieving inflation of 2% is visible in a stable and sustainable manner. These comments have the opposite tone than those that raised the bullish wave around JPY just a few days ago, which is why it seems that the result of the BoJ's March decision may not be so certain.

Especially on the broad market The Swiss franc is doing well at the moment. The above-mentioned yen is experiencing greater declines. The Polish zloty is marginally strengthening against other currencies. We will currently pay PLN 3,9184 for the dollar, PLN 4,2805 for the euro, PLN 4,4702 for the franc, and PLN 5,0106 for the pound.

Source: Mateusz Czyżkowski, XTB