The moment we've been waiting for

Stock markets got the week off to a strong start and that optimism is carrying through to the inflation report release, it would appear.

European indices are trading around half a percentage point higher early in the day and US futures indicate a slightly positive open as well. Of course, all of that will probably change between now and the opening bell, with the inflation data being released an hour before.

As was the case yesterday, I'm quite surprised at the level of optimism we're seeing in the run-up to the report. The inflation data has a lot of heavy lifting to do in order to alleviate clear concerns over the tightness of the labour market. The January report has heaped more pressure on the CPI to deliver and forecasts are not that hopeful. Time will tell whether investors have been a little bit complacent on this one.

A concerning wage number for the BoE

UK watchers may be feeling a little less optimistic this morning after labour market figures showed wages excluding bonuses rising once more in December. They were expected to stay flat at 6.5% but instead jumped to 6.7%, a level still far below headline inflation and not consistent with it falling back to target any time soon.

Including bonuses, the number was a slightly more modest 5.9% which is still too high but at least a deceleration from the month before. Following the release, UK yields were given a nudge higher, lifting the pound in the process alongside expectations on the terminal rate which is now seen hitting 4.5% and probably not falling this year.

All hangs on CPI

Bitcoin has also consolidated in the run-up to today's inflation number. This ultimately becomes a case of whether markets go into risk-on or risk-off mode following the release. It has entered into a corrective move but that's unlikely to continue if today's inflation print falls short of expectations again.

For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/