European financial markets are poised for a stable opening this week, with expectations that the European Central Bank (ECB) will maintain current interest rates. However, there is anticipation for any indications of when rate reductions might commence. Additionally, the upcoming U.S. inflation report will be closely analyzed by investors.
This week also presents an opportunity for market participants to evaluate the U.S. Producer Price Index (PPI) data and review the minutes from the Federal Reserve's March meeting. Furthermore, UK GDP figures are expected at the week's close, and several Federal Reserve officials, including John Williams, Mary Daly, and Raphael Bostic, are scheduled to speak.
While investors are not anticipating a rate cut in the ECB meeting on April 11, there is a consensus for a rate decrease in June, with potential for additional cuts throughout the year. The focus will be on the comments and tone from ECB officials during this period.
European stock futures suggest a calm start, particularly for the STOXX 600 index, which recently hit a two-week low. Before the ECB's decision, the market's attention will turn to the U.S. Consumer Price Index (CPI) report due on April 10, expected to reveal a slight decrease in core inflation for March.
The upcoming inflation data is crucial for understanding the potential timing of the Federal Reserve's rate-cutting cycle, a topic of significant speculation among traders following a strong U.S. employment report.
Moreover, the robust U.S. economy has begun to be seen in a more positive light by investors, despite the impact of higher U.S. Treasury yields on the dollar and stock market. The sustainability of this risk appetite, in light of the persistent narrative of prolonged higher U.S. rates, is yet to be determined.
Additionally, a recent report suggests progress in negotiations for a ceasefire in the Gaza conflict, which could also influence investor sentiment towards riskier assets.
Monday's market movements could be influenced by several economic events, including Germany's trade balance and industrial output figures for February.
