All eyes on the inflation report

Investors remain in an upbeat mood going into tomorrow’s US inflation report, buoyed still by the December jobs report and the prospect of the economy being less squeezed by interest rates.

Fed Chair Jerome Powell may have refrained from commenting on the monetary policy outlook on Tuesday but the chances are he wouldn’t have said anything investors would have liked even if he had addressed it. It’s been clear from other commentaries that policymakers are sticking to the hawkish script.

Another good inflation number tomorrow could change that as the trend has already been very encouraging and the jobs data that appeared to throw a spanner in the works last month has since been revised out. From an investor perspective, it would take something pretty terrible tomorrow – the inverse of what we were treated to on Friday – to really rock the boat.

Building confidence

Bitcoin is missing out on today’s risk rally but traders will be relieved by how the last couple of days have gone. It’s back above $17,000 and suddenly the mid-December peak doesn’t look too far away. Friendly newsflow and a solid CPI number tomorrow could help it gain some momentum from here but I remain sceptical about how much upside can be achieved in an otherwise hostile environment.

For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/

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