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Well, madness for economics nerds anyway. Equity futures are setting up for a modestly-positive open, ten-year Treasury yields are holding steady near the 4.3 percent mark, and most major currency pairs are range-bound ahead of a week in which central banks in Australia, Brazil, Japan, Mexico, Sweden, Switzerland, the UK, and the United States will deliver rate decisions.

Tomorrow morning, the Bank of Japan could raise rates into positive territory for the first time since 2007. A significant share of market participants expect policymakers to lift the overnight and uncollateralized call rates by 10 basis points and end the yield curve control policy which currently caps long-term rates near the 1 percent mark. This would mark a meaningful shift in global liquidity dynamics that have remained intact for decades, but might be something of a damp squib in currency markets, which have been braced for such a move since last summer.

On Wednesday, updates in the Federal Reserve’s “dot plot” summary of economic projections are likely to garner more attention than the decision itself. Although not our base case, an upgrade in the inflation outlook and a lowering in the number of expected rate cuts this year – from December’s three to two – could pose upside risks for the dollar. In contrast, an unchanged plot, particularly if paired with a calmly dovish outlook from Chair Powell himself, might trigger a relief rally.

Thursday’s decision from the Bank of England shouldn’t be a major market mover, but dovish signalling could bring rate expectations into closer alignment with its global peers – a change that could sap some of the pound’s recent strength. The Banco de Mexico might deliver a rate cut, or clearly put one on the table for its next meeting, but rate differentials should remain broadly supportive for the peso. And the Swiss National Bank is likely to move closer to rate cuts, helping boost the franc’s role in funding carry trades.

The Chinese yuan rose briefly after the National Bureau of Statistics released a raft of data pointing to a modest strengthening in the economy through the early part of the year. Industrial output climbed 7 percent in the January-to-February time period from the same period last year, fixed asset investment rose 4.2 percent, and retail sales grew 5.5 percent. Real estate remained a clear drag, with sales values down 33 percent year over year.

More broadly, oil prices keep grinding higher, threatening the sense of calm that has fallen across the financial markets. Both Brent and West Texas Intermediate benchmarks are trading above the $80 mark on OPEC+ cuts, rising global demand expectations, and simmering geopolitical risk, and refined product prices are pushing higher earlier than is typical in the annual cycle. Terms-of-trade dynamics could reassert themselves, with the US gaining while big importers like China and India lose out, and rising consumer inflation expectations – closely correlated with gasoline costs – could upend forecasts for central bank cuts.


Still Ahead

MONDAY

The Reserve Bank of Australia has kept traders on their toes for months, but looks likely to deliver a fairly boring decision in March. After having raised the cash rate target by 425 basis points in this tightening cycle, policymakers look likely to maintain a hawkish bias even as they acknowledge signs of softness in labour markets and consumer spending, helping ratify market expectations for a third- or fourth-quarter pivot toward lower rates. (23:30 EDT)

TUESDAY

Markets are increasingly convinced the Bank of Japan will deliver its first hike in 17 years at the March meeting, with elevated wage growth seen overriding weak economic data in presenting a compelling reason to normalise rates. We’re unsure – while the timing is likely fairly optimal, it isn’t clear that the country is yet generating the sort of demand-driven inflation that typically necessitates a tightening in financial conditions. A revision in the Bank’s forward guidance that gives policymakers the option to exit negative rates in April seems more likely. (02:00 EDT)

Headline inflation likely snapped higher in Canada last month, with the Bank of Canada’s preferred core measures remaining stubbornly elevated. Beyond the still-overheated shelter categories, wage pressures continue to rise, services costs are holding firm, and disinflationary forces on the goods side of the equation are looking shaky as gasoline prices climb and trade disruptions reemerge. Speaking to the press just after the March meeting, Governor Macklem said “Looking ahead, we continue to expect inflation will be close to 3 percent through the middle of the year before easing in the second half”.(08:30 EDT)

WEDNESDAY

British inflation is on a clear downward trajectory, with markets expecting the increase in consumer prices to slow to 3.5 percent year-over-year in February, down from 4 percent in the prior month. Core price growth should remain somewhat more elevated, coming in at roughly 4.5 percent, down from 5.1 percent previously – not yet near the Bank of England’s comfort zone, but clearly headed toward it. (03:00 EDT)

A record of the Bank of Canada’s early-March meeting could deliver insight into the factors that led policymakers to rule out easing in April, and might provide some colour on the quantitative tightening debate playing out behind the scenes. In the post-meeting press conference, Governor Macklem said “Governing Council remains concerned about the persistence of underlying inflation, and we want to see a further deceleration in core inflation in the coming months” – language that clearly anchored rate cut expectations further out – and noted that overnight repo operations were reducing stress in funding markets, saying “Our view on our QT (quantitative easing) strategy hasn’t really changed significantly”. (13:30 EDT)

The Federal Open Market Committee will almost certainly leave the Fed Funds target in the 5.25-to-5.5 percent range for a fifth consecutive meeting and its forward guidance should remain basically unchanged, but the “dot plot” summary of economic projections could generate some drama. Most observers expect officials to pencil in a total of three rate cuts in the remainder of the year – the same as in December – but after a series of hotter-than-anticipated data releases, a significant minority think the number could be reduced to two. Markets could experience a relief rally if this fear goes unrealized. (14:00 EDT)

THURSDAY

The Bank of England is overwhelmingly likely to leave its policy rates and forward guidance unchanged for a fifth consecutive meeting, but officials could continue to edge in a more dovish direction. Monetary Policy Committee members are gradually moving toward Swati Dhingra’s position, with slower inflation and wage growth numbers helping to silence calls for still-higher rates. (08:00 EDT)

Officials at the Banco de Mexico could vote by a narrow margin to cut key interest rates for the first time in three years, but should stick with guidance that sets out an extremely gradual easing trajectory ahead. With inflation subsiding at a rapid clip, Mexican real interest rates are the highest in Latin America, imposing a speed limit on the economy, while also helping support the carry trade that has made the peso one of the world’s best-performing currencies in the last few years. (15:00 EDT)

FRIDAY

Markets think Canadian retail sales contracted by -0.4 percent in January, consistent with Statistics Canada’s preliminary estimate. Softness in gasoline prices probably played a role, but a pullback in vehicle purchases likely did much of the heavy lifting. (08:30 EDT)

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