February inflation numbers are expected to show a flattening in headline inflation at 3.1% year-on-year and, most importantly, a deceleration in the core rate from 0.4% to 0.3% month-on-month and from 3.9% to 3.7% YoY.

Our economists agree that we’ll see a consensus 0.3% MoM core print. Expect large downside volatility for the Dollar if we see a 0.2% MoM core print. Unlike US jobs data, that would endorse the optimism on disinflation showed by Fed Chair Jerome Powell last week and push markets to add 5 bps to fully price in a June cut as well as add bets of a move in May.

If we are right with our 0.3% call, we may not see a big market impact already today, but it could definitely set the tone for a more defensive stance on FX – i.e., a gradual rotation back to the Dollar – ahead of next week’s FOMC meeting.

We were expecting this to be the week for a stabilisation or moderate recovery in the Dollar, and we continue to see an upward-tilted balance of risks for the USD in the coming days, with a possibility for a return to the 103.00/103.50 area in DXY.