Key inflation data is the focus in the week ahead and Wednesday’s US CPI report is the highlight. US inflation as measured by the Consumer Price Index (CPI), rose to 3.5% in the year to March, the third hot reading in a row, forcing traders to slash bets on Federal Reserve interest rate cuts. Core US inflation also rose more than expected, rising to 2.8% year-on-year. The data for April will be crucial to how markets see the Fed progressing. Goods inflation is expected to decline a bit, but core services inflation will likely remain a little too hot for the Fed’s liking. Despite the resilience of US inflation, the message from the Fed remains one of easing to come – cuts are in the mail.

Meanwhile on Friday the final CPI inflation data for the Eurozone is expected to show disinflation easing, but it’s unlikely to be anything significant enough to prevent European Central Bank from cutting rates in June.

Ahead of this, the market opens for the week with Saturday’s Chinese inflation data likely to be the main driver for trading in Asia. China has been grappling with deflation that has betrayed a somewhat soft domestic demand picture. CPI inflation edged higher in March but at just +0.1% year-on-year missed expectations, whilst producer prices declined by 2.8%.

Check the video below for more.