stagnation on Wall Street, strengthening of the zloty

Monday's session on Wall Street was characterized by consolidation. All three main indices closed the day around their opening levels. It was a very quiet session after stocks rebounded on Friday following a strong NFP report. US bond yields rose slightly. The market is waiting for inflation readings (CPI and PPI) from the US, which will be released on Wednesday and Thursday. The zloty strengthened yesterday against the euro and USD rate of the main currency pair rose to around 1,0860.

No chance of quick recovery

Yields on 2- and 10-year U.S. Treasury bonds have returned to highest level since November 2023, given a string of good data from the US recently. Fed funds futures are trading at 52%. chance of a 25 bp cut by June and 89 percent. to July.

As for US data, the New York Fed's March annual inflation expectations held steady at 3%, unchanged from February. Today we will learn the NFIB small business optimism index for March and the change in fuel stocks according to API.

From Europe, we learned the results of German industrial production, which grew by 2,1% in February. which is the second consecutive increase. The rebound is visible in the automotive industry and construction. Production in energy-intensive sectors (e.g. chemicals) increased. It is clear that the negative impact of the strong increase in energy prices is gradually disappearing. An increase in production in February increased the chances that the German economy would not contract again in the first quarter. However, the continuing downward trend in incoming orders will limit a quick recovery and the next months will probably bring stagnation in this sector.

Is the ECB rate cut a done deal?

We can expect greater market volatility tomorrow and Thursday. Exciting inflation data from the US will be released on Wednesday and on Thursday, in addition to US producer prices, we will receive the ECB's decision on the matter interest rates. For the ECB, the first interest rate cut in June should be almost a foregone conclusion, and in the United States, inflation will likely remain too high to cut rates anytime soon, but not high enough to cause much concern.

Source: Łukasz Zembik, OANDA TMS Brokers