What a week ahead! Our best assessment is that the Fed holds the biggest potential to surprise on the hawkish side of expectations, while the ECB is 100% fair priced with limited upside. Bank of Japan is as per usual a dark horse, but Ueda has not been a man of surprises (yet).

The Fed decision on whether to skip or hike depends 100% on the inflation number on Tuesday. We see downside to the 4.1% YoY projection and find that it will be enough for the Fed to ultimately decide on a skip.

Market pricing is still very benign for the Fed and monthly rates of inflation around 0.1-0.15% are needed to convince them of a prolonged pause. Doable, but not a certainty. Hawkish bias will remain intact from Powell – also since Core PCE has printed above projections.

Find out about EUR and JPY pricing below.

Chart 1: USD rates pricing