Thursday's Core PCE Price Index announcement is the main focus of the forex market this week, alongside other important economic data from the majors.

Market players are preparing for important economic data releases this week. Major pairs had limited fluctuations, while the US Dollar Index (DXY) was flat at around 103.95 in the Asian trading session on Monday (26/February).

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Thursday's Core PCE Price Index announcement is the main market focus this week, alongside other important economic data from the United States. The Federal Reserve usually uses this data as the main inflation reference in its policy decisions. Unfortunately, the effect of the data release is likely to be modest because expectations of the Fed's interest rate cut were already firmly established in May.

"If anything, the (data) may be stronger than markets currently expect, and that will likely give a modest boost to the dollar," said Carol Kong, Currency Strategist at Commonwealth Bank of Australia, "But at the same time, any gains in the dollar will likely be pretty modest. I don't think markets will really expect another rate hike from the FOMC."

Market players also highlighted the schedule for releasing inflation data for the Eurozone, Japan, and Australia. In addition, the Reserve Bank of New Zealand's (RBNZ) interest rate announcement on Wednesday morning can trigger turmoil as a handful of analysts speculate that New Zealand's central bank will raise interest rates twice more.

Prashant Newhana, Senior Asia-Pacific Strategist at TD Securities, wrote in a research note released last week, "We now expect the Bank to hike 25bps at next week's meeting. And given that 1yr inflation expectations remain stuck at 5% and 5yr inflation expectations jumped, there is no reason for the RBNZ to hike just once, but signal it intends to deliver a follow-up hike."

However, most analysts believe the RBNZ will keep interest rates at 5.50%. According to them, the current high market hawkish expectations risk triggering a decline in NZD/USD after the RBNZ announcement the day after tomorrow.

"I think the RBNZ will keep the OCR (official cash rate) unchanged and that will likely cause the kiwi to fall if markets unwind pricing for a near-term rate hike," said Kong. "But any falls in the kiwi will likely be pretty small because we expect the RBNZ to remain pretty hawkish."