Some relief for markets following softer inflation data

A bear steepening , that had been in full swing earlier this week, reversed partly on the back of weaker-than expected inflation data in the US and the UK, reassuring financial markets. Despite the benign inflation print, the strong job market report made us still change our Fed-Funds call from four to three rate cuts this year, starting in May. For the BoE, we expect in total four rate cuts this year, even though next week’s labour market data are likely to show a slight reacceleration in pay growth. Also, next week the January preliminary PMIs in the euro area, the US, and the UK will be important to watch to better assess the growth momentum at the start of the year. While in Asia, the BoJ will hike by 25bp next week amid emerging confidence about spring wage negotiation s.