Most US inflation data came in as expected yesterday, but Core CPI was a fraction lower than expected, boosting the chances of a further rate cut at the Fed’s March policy meeting.

1. Yesterday saw the release of highly important US CPI (inflation) data, which contained a surprise: Core CPI was slightly lower than expected, suggesting more progress is being made bringing inflation down than was thought. This sent stock markets higher, especially in the USA, and the US Dollar lower almost everywhere. The benchmark S&P 500 Index ended the day up by almost 2%. The chance of a March rate cut by the Fed has now risen to 28% according to the CME FedWatch tool.
2. Bloomberg reported some hours ago that the Bank of Japan is almost certain to hike its interest rate at its policy meeting next week. Governor Ueda had already publicly hinted strongly at that earlier this week, so the report has a credible ring to it. The Yen rose firmly during the Tokyo session in response, with the USD/JPY currency pair trading close to the ¥155 handle. This throws the long-term bullish trend in this currency pair in doubt.
3. The Forex market is in focus due to the US inflation data yesterday. Trend traders will remain interested in being short of the EUR/USD currency pair and long of the USD/JPY currency pair, although the latter trade is in serious doubt as the Bank of Japan begins to signal a rate hike. Since the Tokyo open, the strongest currency has been the Japanese Yen while the weakest has been the British Pound.
4. UK CPI (inflation) data released earlier today came in markedly lower than expected, showing an annualized rate of 2.5% when 2.7% was widely expected. Surprisingly, this news caused little movement in the British Pound, but it might be expected to be bearish for the Pound as it will increase pressure for rate cuts on the Bank of England.
5. Natural Gas futures closed at a new multi-month high yesterday and will attract interest from trend traders on the long side. Some CFD brokers offer this to traders, and micro futures are available on the Henry Hub.
6. UK GDP data released earlier this morning was a bit disappointing, showing a month-on-month growth in the economy of only 0.1% while an increase of 0.2% was expected. This is helping to weaken the British Pound right now.
7. Australian Unemployment data released earlier was as expected.

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