Asia is Cautious Ahead of the ECB Meeting and the Release of US Inflation Statistics

A win for Le Pen would have the same effect as the United Kingdom's Brexit decision to quit the European Union (EU). The outcome was close enough to leave the euro somewhat stronger at $1.0888, after an earlier rise to $1.0950.

Equity markets remained cautious, with MSCI's broadest index of Asia-Pacific equities outside Japan down by 0.1 percent. Japan's Nikkei 225 index fell 0.6 percent, after a 2.6 percent decline the previous week.

S&P 500 and Nasdaq stock futures both fell 0.2 percent in early trading. JP Morgan, Wells Fargo (NYSE:WFC), Citi, Goldman Sachs (NYSE:GS), and Morgan Stanley (NYSE:MS) are all scheduled to report earnings this week.

Wall Street has done unexpectedly well so far in the face of a savage bond selloff that saw 10-year Treasury rates spike 31 basis points to 2.72 percent last week. [US/]

Markets have rushed to price in the possibility of ever-larger Federal Reserve rate hikes, with futures predicting 50 basis point increases at both the May and June meetings.

Ethan Harris, BofA's US economist, now anticipates half-point increases at each of the next three meetings and a cycle top of roughly 3.25-3.50 percent.

"If inflation seems to be headed below 3%, our present call should be sufficiently aggressive," Harris said in a note. "On the other hand, if inflation remains at 3%, the Fed will be forced to increase until growth approaches zero, causing a recession."

All of this highlights the critical nature of Tuesday's March consumer price data in the United States, where the consensus expectation is for a stratospheric increase of 1.2 percent, bringing annual inflation to an eye-watering 8.5 percent.

Inflation will also be a focal point of discussion at Thursday's European Central Bank meeting, with the danger of a hawkish tinge to the statement.

"Inflation has accelerated well above the ECB's expectations only one month ago," analysts at TD Securities remarked. "We anticipate a major change in policy from the ECB, with the declaration of an early end to quantitative easing in May and laying the basis for, but not committing to, a June raise."

Continuing the trend of tightening, the central banks of Canada and New Zealand are expected to hike rates by 50 basis points this week at their policy meetings. 

The dollar index has surpassed 100 for the first time since May 2020, standing at 99.785 at the time of writing.

The yen has been the primary loser, as the Bank of Japan has remained committed to maintaining ultra-loose monetary policy and near-zero bond rates. The dollar was trading at 124.37 yen, up 1.5 percent from last week's close of 125.10.

Thermal coal was the standout performer on commodities markets last week, rising over 13% after the EU's embargo on Russian coal imports.

Gold gained 1.1 percent on a weekly basis but has been weighed down by the massive spike in bond rates and was last flat at $1,944 an ounce. [GOL/]

Oil prices remained under pressure as international customers announced intentions to release petroleum from strategic reserves and Chinese lockdowns remained in place. [O/R]

Brent oil was down $1.51 to $101.27 early Monday, while US crude dropped $1.48 cents to $96.78.