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TD Securities' Global Strategy Team notes that recent geopolitical tensions and a weaker-than-expected 3-year Treasury auction have driven US interest rates higher. Market participants are now shifting focus to the upcoming February Consumer Price Index (CPI) data, which will provide critical insights into inflation trends and guide Federal Reserve policy decisions. The 3-year auction's underperformance highlighted demand for safe-haven assets amid global uncertainties, while rising rates have added pressure on bond markets. The February CPI report is pivotal for traders as it will influence expectations about the Fed's rate trajectory. A hotter-than-anticipated CPI could accelerate tightening, strengthening the USD and impacting global capital flows. Conversely, a softer reading might delay rate hikes, easing pressure on equities and commodities. Traders should monitor how markets react to CPI data and subsequent Fed statements for directional clues. For the broader market, the interplay between inflation data and central bank policy will shape risk appetite. Gulf investors should watch how USD strength affects emerging market debt and oil prices, which are sensitive to dollar movements. Key watchpoints include the February CPI release date (March 10) and the Fed's next policy meeting in March.
