Below are the most important global events likely to affect FX and bond markets in the week starting Monday, March 25.
After a week of multiple central-bank decisions around the globe, focus now turns to economic data as investors seek clues as to their next moves.
U.S. and eurozone economic data will be closely watched as uncertainty remains about when the Federal Reserve and European Central Bank are likely to start cutting interest rates.
Trade is likely to be muted heading into the Easter weekend, with Good Friday a public holiday in many countries, especially in Europe.
In Asia, a much calmer week awaits markets as the dust settles after the Bank of Japan finally lifted rates out of negative territory. More indicators from Japan will be watched for signs on how the BOJ policy story will unfold.
Taiwan also grabbed some of the spotlight with a surprise rate hike. Though most economists think the CBC's unexpected hike is a case of one and done, the bank's concerns about resurging inflation highlights that price pressures remain a source of worry. A string of CPI data this week will show the latest price developments in economies including Australia, Japan, Malaysia and Singapore.
U.S.
The U.S. Federal Reserve left interest rates on hold at its March meeting and stuck to its prediction that rates would be cut three times this year despite recent strong inflation data. "The Fed seems biased to cut rates even though the economy is doing quite well," ING's global head of markets Chris Turner said in a note.
Still, economic data will continue to be scrutinized as the Fed requires further evidence of slowing inflation before lowering rates.
Friday's PCE price index data--the Fed's preferred inflation measure--for February will be particularly closely watched. If it remains high it could push Treasury yields higher, ING analysts said in a note, though the immediate reaction could be muted due to it being Good Friday.
Surveys will be watched for indications of whether U.S. economic activity has remained strong in March, including the Conference Board Consumer Confidence index on Tuesday, the final March University of Michigan consumer survey on Thursday and Chicago PMI on Friday.
Also attracting attention will be U.S. durable goods orders data for February on Tuesday, followed by the final estimate of fourth-quarter GDP and weekly jobless claims data on Thursday.
Data on the health of the U.S. housing market include February new home sales on Monday; the Case-Shiller Home price index for January on Tuesday; and February pending home sales on Thursday.
EUROZONE
Provisional inflation figures for March from Spain on Wednesday, Belgium on Thursday, and France and Italy on Friday will be closely watched as investors gauge the extent to which price growth is slowing in the eurozone.
A sluggish eurozone economy has shown signs of recovery recently. Confidence surveys could indicate whether this recovery is gaining traction, including Germany's forward-looking GfK consumer climate survey for April on Tuesday, eurozone business and consumer surveys for March on Wednesday and French consumer confidence for March on Wednesday.
French consumer spending data for February are also due on Friday.
European government bond issuance will slow in the week heading into Easter. In the eurozone, the Netherlands will auction bonds on Tuesday, Italy on Wednesday, while Germany on Tuesday and Wednesday. Germany has two auctions, tapping 2025- and 2033-dated green bonds on Tuesday, and 2030-dated Bunds on Wednesday, offering altogether EUR5 billion.
U.K.
The coming week is a quiet one in the U.K., with just the second estimate of fourth-quarter GDP due on Thursday.
The Bank of England left interest rates unchanged at its March meeting but said conditions for lower rates were "moving in the right direction." Money markets are fully pricing in a rate cut in August, with a significant chance of an earlier reduction in June, and the timing of this will depend on whether or not data show the U.K. economy remains strong and the extent to which inflation comes down.
The Debt Management Office will auction gilts maturing in 2028 on Tuesday.
SWEDEN
Sweden's central bank, the Riksbank, announces its latest policy decision on Wednesday and is expected to leave its key interest rate unchanged at 4.0%, with focus on the likely timing of a rate cut. Recent data showed Swedish inflation in February fell more than forecast, potentially leaving the door open for rate cut in May or June, analysts say.
March consumer confidence is due on Tuesday, February foreign trade on Wednesday and retail sales data for February on Thursday.
Sweden has penciled in a bond auction for Wednesday.
JAPAN
On Good Friday*, a slew of activity data take the pulse of Japan's economy. The lineup features Tokyo CPI, jobs market data, retail sales figures and industrial production numbers. Traders will be looking for evidence that growth is rebounding, after revised fourth-quarter data showed that the economy narrowly avoided technical recession.
Setting the stage was a renewed jump in Japan's nationwide consumer inflation that could be viewed as smoothing the path for another Bank of Japan rate hike. But economists say it's too early to tell, with many expecting inflation to slow again.
"It is still premature for the BOJ to turn to a more hawkish stance given that domestic conditions currently do not warrant tightening," HSBC economists said in a note.
Underlying inflation continued to slow in February, weakening the case for tighter policy, Marcel Thieliant, head of APAC at Capital Economics, said.
Looking to the February industrial output figures due Friday*, Capital Economics thinks firms' forecasts of a strong recovery from January's plunge are too optimistic.
CE's forecast of a 1.5% on-month rise in output in February would leave industrial output down by around 5% on year, he said. "If we're right, GDP will almost certainly contract this quarter."
FX SPOTLIGHT: YEN
With the yen sliding after the Bank of Japan's decision to exit negative rates, focus will also be on the currency's next moves.
ING economists flag event risks, recommending investors keep a close eye on wage and consumption data.
"However, the broad-based view is that the gulf in interest rates between Japan and many other central banks in the G10 space mean that the yen will still be used as a funding currency in a low-volatility world," said Min Joo Kang, senior economist South Korea and Japan, and Chris Turner, global head of markets.
ING's baseline view is for USD/JPY at around 150-152, as long as short-term U.S. rates remain firm. When they turn lower the pair should head to the 145 area and likely close to 140 when the Federal Reserve's rate-cutting cycle is in full swing.
"On a recent trip to Tokyo, local accounts felt that the BoJ would not intervene to sell USD/JPY until the 155 area," they said.
CHINA
On deck this week is industrial profit data for February due Wednesday, and official PMI gauges for March slated for the weekend. The PMIs cover manufacturing and non-manufacturing, which includes services and construction sectors.
China watchers are seeing some potential green shoots in the economy, but are still concerned about structural issues and the continued slide of the property sector.
January-February activity data beat consensus views overall, but it's not wise to get complacent yet, Nomura research analysts said in a note.
"While we do see some resilience in exports and some types of consumption, we believe the economy has yet to bottom out," Ting Lu, Jing Wang and other analysts say. "The property sector faces even bigger challenges, the risk of another fiscal cliff this year is on the rise, activity data might slow over the next few months."
Goldman Sachs economists say the latest data, plus their own high-frequency trackers for early March, suggest that growth was solid in the first quarter. However, for China to reach its ambitious "around 5%" GDP growth target for this year, "more policy easing is still necessary, especially on the demand-side (e.g., fiscal, housing and consumption)," they wrote in a note.
AUSTRALIA
In what could be a quiet week in both Australia and New Zealand, the only data point of real note will be the release of Australia's monthly consumer price index indicator for February.
The data set provides only a partial read on price pressures across the economy, but it is still useful for assessing the direction of inflation.
The Reserve Bank of Australia will be keen to see a fall from the January on-year result of 3.4%.
However, RBA Gov. Michele Bullock recently pointed to the overseas experience saying the process of getting inflation back into the band will be "bumpy."
SINGAPORE
Singapore reports inflation data for February on Monday. Consumer-price trends have been choppy recently, with inflation slowing unexpectedly in the first month of the year after a surprising acceleration in the final month of 2023.
Economists polled by The Wall Street Journal expect headline inflation to come in at 3.3% on year in February, compared with 2.9% in January. They also forecast core inflation to be 3.35% on year in February, compared with 3.1% in January.
Singapore's core inflation is likely to rise in the first quarter of this year, partly due to the one-off impact of the government's one-percentage-point increase in the goods and services tax from January, the central bank said at its quarterly review in late January. Excluding this impact, however, core inflation is expected to ease gradually over 2024, the Monetary Authority of Singapore said.
At its January quarterly review, the MAS maintained its forecast for Singapore's core inflation to slow to an average of 2.5%-3.5% for 2024 as a whole, while lowering its headline inflation projection for the year to 2.5%-3.5% from 3.0%-4.0% previously.
On Tuesday, the city-state's February industrial production are due.
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03-22-24 0750ET
