By Dow Jones Newswires staff
Below are the most important global events likely to affect FX and bond markets in the week starting March 16.
Decisions by major central banks, including the U.S. Federal Reserve, will take center stage in the coming week as investors watch how policymakers react to the recent jump in oil and gas prices due to the ongoing war in the Middle East.
The European Central Bank, Bank of Japan, Bank of Canada, Reserve Bank of Australia and the Bank of England are among a list of central banks that are scheduled to make decisions on interest rates.
U.S.
The Federal Reserve announces a policy decision on Wednesday and is widely expected to leave the fed funds target rate unchanged at 3.50%-3.75% for a second consecutive meeting.
The key question for investors will be what signals the Fed sends on the prospects for interest-rate cuts in the months to come in light of the war in the Middle East and the consequent jump in energy prices, which will likely push inflation higher.
Investors have scaled back rate-cut expectations since the start of the conflict and now fully price in only one rate reduction by the end of the year.
HSBC economists expect that Fed Chair Jerome Powell will give a "nuanced assessment," stressing the two-sided risks of the Middle East conflict for inflation and the economy.
"We do not expect the statement to send a clear signal about the implications for policy rates. Instead, the statement may indicate that the conflict will boost inflation but also weigh on economic activity," they said.
The Fed will also release updated projections for the economy and its "dot-plot" forecasts for interest rates. HSBC expects the Fed to keep rates on hold through 2026.
U.S. economic data in the coming week include February industrial production on Monday, February producer prices on Wednesday, followed by weekly jobless claims and January new home sales data Thursday.
The Treasury will auction $13 billion in 20-year bonds on Tuesday and $19 billion in 10-year inflation-protected TIPs on Thursday.
Canada
The Bank of Canada announces an interest-rate decision on Wednesday, where it is widely expected to leave rates on hold at 2.25%.
As an energy exporter, Canada's economy is expected to be somewhat shielded from the recent spike in energy prices due to the Middle East war but even so policymakers will be wary of risks to inflation and will likely avoid reducing interest rates again for the time being.
"In our base case, stronger inflation is contained to higher energy prices and weaker demand and activity still has officials cutting rates again later this year," Citi analysts said in a note. If oil prices stay elevated for a prolonged period, however, "there is a clear risk that cuts are over."
Analysts at TD Securities, however, said markets are underpricing both the risk of rate cuts in 2026 and the magnitude of potential rate increases in 2027. "Ultimately we think that the outlook for domestic household and government spending will be the most important determinant for the Bank of Canada," they said in a note.
The central bank will need to digest recent much weaker-than-expected Canadian jobs data for February, as well as inflation data for February on Monday. Weak Canadian job numbers for February will likely raise alarm bells at the Bank of Canada but won't be enough to sway policymakers to cut rates next week, Oxford Economics said in a note.
Canadian retail sales data are also due Friday.
Latin America
Brazil's central bank announces a rate decision on Wednesday, where it is expected to lower its key interest rate from the current 15.0%.
Many analysts expect a 50 basis-point reduction. However, some say the jump in energy prices could mean a smaller 25 basis-point cut is possible as the central bank exercises caution.
Given that Brazil is a net energy exporter, rises in global oil prices are unlikely to deter the central bank from cutting interest rates this month, as it signaled it would do in January, said Kimberley Sperrfechter, emerging markets economist at Capital Economics in a note.
Eurozone
The European Central Bank's meeting will be the region's key event as the war in the Middle East could potentially divert the central bank from its pre-conflict wait-and-see stance.
"This meeting should provide important insight into the ECB's reaction function and what would be required to trigger a change in policy rates this year," said Niall Scanlon, fixed income portfolio manager at Mediolanum International Funds Limited in a note.
"This is likely to take the form of verbal vigilance rather than an explicit signal of an imminent rate move," he said.
Markets, nevertheless, expect the ECB to hike rates this year. Money markets fully price a rate increase by July, LSEG data showed.
Among economic data due in the coming week, Germany's ZEW economic sentiment indicator for March is due on Tuesday. Final Italian CPI inflation data for February are due Tuesday, while harmonized eurozone CPI for February is scheduled for Wednesday.
Slovakia will hold an auction on Monday; Finland on Tuesday; while Germany will offer August 2046- and August 2056-dated Bunds on Wednesday. Spain will hold an auction on Thursday while France will hold two bond sales on the same day, one for short- and medium-term nominal bonds and the other for inflation-linked bonds.
U.K.
The large spike in energy prices due to the Middle East war will give Bank of England policymakers plenty of worry ahead of an interest-rate announcement on Thursday.
With oil and gas prices surging, the central bank looks highly likely to keep interest rates on hold at 3.75%, especially as annual inflation is already high, standing at 3.0% in January and well above the Bank of England's 2.0% target.
Prior to the U.S.-Israeli strike on Iran, which sparked retaliatory attacks across the Gulf region, many analysts had anticipated that the BOE could cut interest rates this month in order to support a flagging economy as inflation was expected to drop sharply from April. Money markets had priced an 83% chance of this happening. Now this looks a distant memory, with U.K. money markets pricing the potential for a rate hike during 2026, LSEG data showed.
"Faced with an overwhelming number of unpredictable variables, nobody expects the Bank [of England] to do anything other than wait and see," said Danni Hewson, head of financial analysis at AJ Bell in a note. "But this decision will still be a difficult one, and close attention will be paid to any guidance about the path ahead."
Some analysts still expect that the BOE could cut interest rates in the coming months given the U.K.'s fragile economy, albeit as long as the disruption to energy markets caused by the Middle East war isn't too prolonged.
U.K. money markets priced around a 70% chance of the BOE raising interest rates by the end of the year, LSEG data showed.
Data on U.K. jobs and wages will be released Thursday, followed by February public sector finances figures on Friday.
The U.K. will sell government bonds maturing in March 2031 on Tuesday.
Scandinavia
Sweden's Riksbank will announce a decision Thursday, where it is expected to keep interest rates unchanged at 1.75%.
Nordea had seen monetary policy clearly skewed toward cuts ahead, but due to the Middle East developments it now thinks cuts are off the table. An important signal will be the Riksbank's high readiness to tighten policy should inflation accelerate rapidly, Nordea analyst Torbjorn Isaksson said in a note.
"We expect the policy rate to be left unchanged at 1.75%, and the rate path to remain intact from the December report, implying an unchanged policy rate throughout most of 2026."
Denmark and Norway will have auctions on Wednesday, while Sweden will offer inflation-linked bonds on Thursday.
Switzerland
The Swiss National Bank is expected to keep interest rates on hold at 0% in a decision on Thursday, particularly given higher energy prices amid the war in the Middle East.
Higher oil prices should reduce risks of deflation, at least in the near term, HSBC economists said. However, the central bank could signal a greater willingness to intervene in foreign exchange markets in order to address the strong Swiss franc, they said.
Japan
The Bank of Japan is expected to keep its policy rate at 0.75% at its two-day meeting ending Thursday as it monitors the Middle East conflict's impact on energy costs and supply chains.
Surging energy prices due to the U.S.-Israel war with Iran pose a heavy burden for Japan, which relies on imports for its power needs. BOJ Gov. Kazuo Ueda has said that the central bank will keep an eye on the situation, and continue to raise rates as needed.
Trade figures for February are due on Wednesday, and will likely show a slowdown after January's double-digit growth.
Middle East tensions pose challenges to Japan's trade balance, DBS's economics team said, given the country's significant dependence on the region for crude oil. That may help explain the yen's weakness over the past two weeks, which contrasts with its traditional role as a safe-haven currency.
Markets will be watching the yen closely after the currency weakened to its lowest levels against the dollar since July 2024, flirting with the 160-mark seen as a potential line in the sand for intervention.
Bond traders will look at the BOJ's outright purchases of four sectors of Japanese government bonds on Monday. That includes sovereign securities with tenors of more than 1 year and up to 3 years, tenors of more than 5 years and up to 10, and tenors of more than 25 years.
On Tuesday, the finance ministry is scheduled to auction about 800 billion yen of 20-year JGBs. The 20-year sovereign securities to be issued in March will be a reopening of the January 2026 issue. Investors could take a cautious stance toward the auction, which takes place the day before the BOJ's meeting starts.
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03-15-26 2014ET
