Week ahead: the US CPI.

As investors try to keep up with the daily change in the tariff policies of President Trump, the February CPI report outside the United States on Wednesday will probably be a very necessary distraction. Specifically, inflation data can mean the beginning of a new route down for the measure of the CPI, following the steps of January PCE figures.

The Fed struggle against high inflation has not been easy. The recent increase in price pressures must have been frustrating so that political leaders say the least. But the inflation of the United States seems to be turning a corner now and is expected to go lower in the coming months.

There is a problem: rates. Trump’s decision to continue with levies of up to 25% against Canada and Mexico and raise them at 20% for China, not forget the sector and reciprocal rates that have not yet been completed, could derail the battle of the Fed to direct inflation to 2.0%.

In January, the Rate of IPC holders rose to the highest since June 2024, reaching 3.0% A/A. The CPI Central also rose, increasing to 3.3% a/a. But February data will probably end the months of concern that inflation will raise its ugly head, since it is projected that the main IPC moderates to 2.9%, while the central CPI is expected to decrease to 3.1%. The forecasts from month to month for both are 0.3%.

On Thursday, the producer’s price index for the same month will shed more light on underlying price pressures in the economy of the United States, and on Friday, investors will focus their attention on the preliminary survey of feelings of consumption of the University of Michigan for March. Last month’s survey caused some concerns, since it showed that consumer inflation expectations became higher. In particular, five -year expectations increased to a maximum of 30 years.

Can the dollar recover some lost terrain?

A continuation of this upward trend would question the notion that the inflation perspective is improving, arguing continuous caution in the Fed.

However, when observing the expectations for reducing Fed rates, it seems that investors have already decided that inflation no longer represents a threat, and that the greatest danger is the economic growth that stops in the back of Trump’s protectionist commercial policies.

However, and having fallen by more than 3% during the past week, any rising surprise in incoming indicators could stimulate a rebound.

Boc speed cut can hang on balance

The Bank of Canada meets Wednesday to establish interest rates, maintaining attention in the country in the middle of the commercial dispute with the United States. Unlike his Mexican counterpart, Prime Minister Justin Trudeau has not contained in announcing retaliation tariffs in imports of the neighbor of Southern Canada and, with much, his largest commercial partner.

Therefore, it is expected that this climb not only delivers a severe blow to the economy of Canada, but it could also lead to higher prices in goods of C $ 125 billion imported from the USA.

But it may not reach that, since Trump has just signed new executive orders delaying 25% tariffs in almost 40% of the goods that enter from Canada to April 2. In response, Trudeau has put his last collection aware.

However, for the Bank of Canada, this still raises a great policy dilemma. After the Bank’s aggressive rates cuts last year, the Canadian economy is recovering, with an increase in employment, although consumer expense remains irregular. More important for policy formulators, there are signs that inflation is playing.

After having reduced rates in a total of 200 basic points, it makes sense that the Boc remains on the sidelines. But the downward risks for the growth of Trump’s tariffs will probably influence those responsible for formulating policies to reduce again in March.

Investors have assigned a 66% probability of a 25 BPS reduction in the target rate. Therefore, the Canadian dollar can see a strong reaction in any way. Although in the scenario of a rate cut, it could even be seen against the US dollar if the Boc points out that a pause is on the horizon.

It is possible, of course, that Trump can steal the thunder of the BOC if there are more tariff developments in the next few days, keeping Loonie merchants waiting.

Will the data of the United Kingdom spoil the bundle streak of La Libra?

The together with him have benefited more from the decline of the dollar. Sterling has set his sights on the handle of $ 1.30, abruptly recovering from its January minimums. However, it is not clear how sustainable this rally is, since the economy of the United Kingdom is dealing with its own problems even in the absence of a direct tariff threat.

On Friday, investors will monitor the latest monthly monthly production figures on industrial production, manufacturing and services, as well as aggregate GDP.

There was a surprise rebound in GDP growth in December, providing some postponement for the Labor Chancellor in Conflict, Rachel Reeves. But if the growth failed again in January, the pressure on REEves will increase before the statement of the spring budget of March 26 to obtain stronger measures to support the economy.

Yen is caught in Trump’s commercial storm

The Japanese, on the other hand, have been lagging behind the main couples of FX, despite the fact that the Bank of Japan maintains its aggressive rhetoric. The low performance could be related to Trump’s comments about Japan manipulating Yen to keep it weak, which raises speculation that Tokyo could be the next in the president’s success list.

Meanwhile, there is a wave of releases outside Japan in the first half of the week. Salary growth and domestic spending data for January on Mondays and Tuesday, respectively, will be important to measure if Japanese inflation is on a sustainable path of sticking near the 2% Boj target. Reviews for the growth of the GDP of the fourth quarter should also be defeated on Tuesday, while on Wednesday, the prices of corporate goods for February will be observed.