EUR

The latest CPI Inflation figures from the European Union came in as expected this morning, with Final CPI at 2.6% and Final Core CPI at 3.1%. These figures also marked no change from last month's reading.

Later this week, we'll see President Lagarde speak at 8:45am Wednesday following commentary from two other European Central Bank members indicating that a June cut could be likely. Markets will be watching closely to see if Lagarde echoes this after previously stating the ECB will likely cut rates in the summer.

French, German and Eurozone Manufacturing and Services PMIs are out Thursday morning. Markets expect rising figures across the board, with French Manufacturing and Services readings expected to climb from 47.1 to 47.3 and 48.4 to 48.8, respectively. German Manufacturing is also expected to rise from 43.1 to 48.8 and Services from 48.3 to 48.8. These readings are expected to contribute to an overall increase across the Eurozone, with its Manufacturing data expected to rise from 46.5 to 47.0 and Services from 50.2 to 50.5.

We also have the Euro Summit on Thursday and Friday in Brussels, which sees heads of state or governments of the euro area countries, the Euro Summit President and the President of the European Commission meet to give guidance on the region's economic policy.

USD

The Federal Reserve is due to meet at 6pm GMT on Wednesday. The outlook is similar to that of the Bank of England, with a very low probability of a rate cut.  

With the US unemployment rate still relatively low at 3.9% and wage growth still too high to cut rates, markets will be particularly interested in the Fed's Dot Plot. The forecasts in December showed three rate cuts for the remainder of 2024, but given the continued strength of the labour market and the surprise uptick in inflation, the Fed could indicate fewer rate cuts this time round. This could take markets by surprise, given comments from Fed Chair Powell two weeks ago, where he said policymakers were “not far” from the confidence they needed to cut rates.

This could cause the Dollar to regain some lost ground and increase the likelihood that the ECB will be the first of the three major central banks to cut.

This week, the latest US unemployment claims will be released on Thursday at 12:30pm. They are forecasted to rise slightly from last month's reading of 209K to 214K.

The latest US PMIs follow at 1:45pm. Both Manufacturing and services are expected to drop from 52.2 to 51.8 and 52.3 to 52.0, respectively. We'll also hear from the Fed's Chair, Jay Powell, again on Friday when he delivers the opening remarks at a Fed Listens event in Washington, DC, at 1pm.