After a massive week with seven central bank meetings we are in for a quieter week that will be dominated by inflation prints from the UK and Australia as well as preliminary March PMI data from the Eurozone, UK and Japan. All eyes will be on developments in the Middle East as any lowering of uncertainty will be welcomed by the markets and policymakers.
USD
US President Trump asked that Xi-Trump meeting that was scheduled for March 31 to April 2 in Beijing be postponed by a month as he has obligations to stay in the country due to US – Iran war. Price for natural gas is surging and is now higher by 30% after the attacks on Qatar’s Ras Laffan gas field. Brent has crossed $113 per barrel. Both Trump and Israeli Prime Minister Netanyahu stated that war could end much sooner than people think and that countries are cooperating on opening Straight of Hormuz for safe passage of vessels.
Fed has left Fed funds rate unchanged in range of 3.50-3.75% as was widely expected. The vote was 11-1 with Governor Miran dissenting in favor of a 25bp rate cut. According to available indicators economy is expanding at “solid pace” but now we are in period of heightened uncertainty due to US-Iran war. Inflation remains somewhat elevated. Summary of Economic Projections (SEP) shows upward revision to GDP for 2026 (2.4% vs 2.3% in December). Longer-run growth has also been lifted to 2% from 1.8% in December. PCE has also been revised higher and is now see at 2.7% for the end of 2026, up from 2.4% in December. Core PCE is also seen rising to 2.7% from 2.5%. Inflation is seen coming to 2% by the end of 2028 and staying there in the long run. The unemployment rate projection held steady at 4.4% for year-end 2026 and then dropping to long run target of 4.2% in 2028. Dot plot shows one cut for 2026 as projected rate for the end of the year is 3.4%. Participants see additional cut in 2027 bringing the Fed funds to 3.1% which is now seen as the long-run rate (it was 3% previously).
Fed Chairman Powell stated at the press conference that he intends to stay “pro-tem” as Chairman after his term expires until new Fed Chair is confirmed and does not plan to leave Fed until investigation is “well and truly over”. He has not decided yet whether he will stay in as Governor. Powell jokingly said that if there was any meeting where participants would skip publishing SEP it was this one as uncertainty is very high and it all depends on assumptions one makes about the effects of US-Iran war. He added that elevated inflation is largely reflected in goods prices which are further boosted by the tariffs. Powell is putting greater emphasis on inflation as he stated that they are not prepared to just look through energy issue lightly adding that if they do not see progress on inflation there will be no cuts. His remarks are hawkish and set the pace for Fed to dig in and move cuts further into the future, but all of that can change once new Fed Chair is appointed.
The yield on a 10y Treasury started the week at 4.28%, rose to 4.40% and finished the week at around 4.39%. The yield on 2y Treasury started the week at 3.73%, rose to 3.97% and finished the week at around 3.88%. Spread between 2y and 10y Treasuries started the week at 55bp and finished the week at 51bp as curve bear flattened. FedWatchTool sees the probability of a 25bp rate hike at May meeting at around 6% while probability of no change is at around 94%. WTI had another volatile week spending time between $92 and $101 per barrel and finished the week at around $99.
EUR
March ZEW index, a monthly survey of German financial experts and a good leading indicator for the future health of German economy, showed economic sentiment collapse to -0.5 from 58.3 in February. It has dropped much lower than expected 39 print. US – Iran war, higher oil prices leading to increased inflation pressures and widespread belief that there will be no quick resolution to the conflict all caused this enormous plunge that shows pessimism taking over among financial experts. Final February inflation print was unchanged at 1.9% y/y for headline and 2.4% y/y for core. Services inflation rose 3.4% y/y after printing 3.2% y/y in January. Energy shock caused by US – Iran war will spike inflation in the months to come.
ECB has left key interest rates unchanged as was widely expected with deposit rate sitting at 2%. US – Iran war and higher energy prices caused by it are the main uncertainty for the bank as it poses an upside risk to inflation and downside risk to economic growth. In the light of those concerns headline inflation has been revised up to 2.6% for 2026, 2% for 2027 and 2.1% for 2028 with core inflation also seen higher at 2.3% for 2026, 2.2% for 2027, and 2.1% for 2028. Growth for 2026 has been slashed down to 0.9% from 1.2% seen in December while it is seen at 1.3% for 2027 and 1.4% for 2028. ECB is closely monitoring the situation and continues with data-dependent approach, not pre-committing to any particular rate path.
The bank provided three scenarios. In this base case scenario, members see current oil price shock as a one-off and that would not call for a monetary policy reaction. In the adverse scenario, the impact on the economy would be temporary. This would lead to somewhat lower growth and higher inflation in 2026 but inflation would come down quickly. In the severe scenario, energy prices would have a stronger and longer-lasting effect. GDP growth would be reduced in both 2026 and 2027 and push economy into a technical recession in Q3 of 2026. Inflation in the coming years would also be much higher.
ECB President Lagarde sounded more hawkish at the press conference as she emphasized concern about upside risks to inflation. She stated that they are monitoring closely how the situation in Middle East is developing os they may better assess how energy prices will influence inflation. Later on, there was a story on Bloomberg that some members were already thinking about rate hikes in April.
This week we will have preliminary March PMI data expected to show improvements but be mindful that this will be impacted in the future by uncertainties caused by US-Iran war.
Important news for EUR:
Tuesday:
Manufacturing PMI (Eurozone, Germany, France)
Services PMI (Eurozone, Germany, France)
Composite PMI (Eurozone, Germany, France)
GBP
Payrolls change for February saw economy add 20k jobs after January reading was revised up to show a gain of 6k jobs. January ILO unemployment rate was unchanged at 5.2% while expectations were for it to tick up to 5.3%. Wages continued to come down with average weekly earnings printing 3.9% 3m/y growth while ex bonus category printed 3.8% 3m/y. ONS reiterated that there are issues with data but this report shows some positive signs that decline in the labor market is on pause.
BoE has left bank rate unchanged at 3.75% as was widely expected. The vote was 9-0 while markets were bracing for a 7-2 or 6-3 vote. US – Iran war and energy shock caused by it were put in the center and inflation is expected to come in higher in the coming months as a result of higher energy prices. MPC members will monitor situation in Middle East closely to assess its impact global energy supply and energy prices. The fact that decision was unanimous puts a hawkish spin on this meeting as markets are now pricing even two rate hikes by the end of the year.
This week we will have preliminary March PMI data expected to show deterioration and inflation data that is expected to show continuation of disinflation process, but be mindful that this will be impacted in the future by uncertainties caused by US-Iran war.
Important news for GBP:
Tuesday:
Wednesday:
CPI
AUD
RBA has delivered a widely expected 25bp rate hike thus lifting the cash rate to 4.10% thus making two consecutive rate hikes. The vote was a close call with 5-4 in favor of a rate hike. Inflation is the main concern as board members saw it rising faster than expected in the H2 of 2025. Members have warned that strong inflation pressures could keep inflation above 2-3% targeted zone for longer than previously expected. Additionally, the war in the Middle East will keep oil prices higher which will add to inflationary pressures and keep uncertainty elevated.
RBA Governor Bullock clarified at the press conference that vote split had more to do with the timing of the rate hike than with direction. The four members who voted for pause at this meeting were doing it so with intention of delaying rate hike until May when they would have a clearer picture. All members see inflation as too high and think that cash rate wss not high enough to fight inflation and bring it into the targeted range. Initial reaction of markets to 5-4 vote split was dovish but with governor’s clarification RBA’s bias remains hawkish as it indicates that they are prepared to deliver future rate hikes when situation calls for it.
February jobs report was mixed with economy adding 48.9k jobs vs 20k jobs as expected and adding to 17.8k jobs already created in January. On the other hand, the unemployment rate jumped to 4.3% from 4.1% but participation rate also jumped to 66.9% from 66.7% the previous month thus explaining rising unemployment rate with more people entering the labor force. Composition of jobs is worrisome as economy lost 30.5k full-time jobs and all of the jobs added, 79.4k, were part-time jobs. Labor market remains tight but some weaknesses start to appear.
Economic data for the first two months of 2026 saw industrial production growth improving to 6.3% y/y from 5.2% y/y in December and beating expectations of a 5.1% y/y increase led by strong growth in hi-tech manufacturing. Retail sales grew by respectable 2.8% y/y thus beating expectations of a 2.5% y/y growth and accelerating from 0.9% y/y growth seen in December. Sales of communication devices as well as gold and jewelry were the biggest contributors while cars, petroleum products and construction materials were the biggest drags. Fixed Asset Investments showed growth with a 1.8% y/y print after four months of negative readings. They have also stopped a streak of eleven consecutive declining months starting in March of 2025. Housing remains an issue as house prices fell 3.2% y/y in February following a 3.1% y/y decline in January. Property investments and construction starts continue to plunge. Officials characterized start of 2026 as “sound” but warned that weak demand still presents an issue which may warrant policy action in the future.
This week we will have February inflation print expected to come unchanged.
Important news for AUD:
Wednesday:
CPI
NZD
Q4 GDP saw economy weaken into the year end as it printed 0.2% q/q growth vs 0.4% q/q as expected and down from 0.9% q/q growth in Q3. The economy grew 1.3% y/y after 1.1% y/y in the previous quarter but weaker than 1.7% y/y as expected. Growth easing while inflation remaining stubbornly high makes things difficult for RBNZ. They decided to stay on pause till December at their last meeting so it is yet to be seen how this new information will influence their outlook.
CAD
February inflation report saw headline number drop to 1.8% y/y from 2.3% y/y in January while markets were bracing for a 1.9% y/y print. Base effects were the main reason for inflation coming down. All three core measures declined as well with median and trim printing 2.3% y/y while common declined to 2.4% y/y. Higher oil prices will inevitably lead to higher inflation in March.
BoC has left overnight rate unchanged at 2.25% as was widely expected. They have emphasized the severity of US – Iran war on energy prices and global financial markets adding that before war global GDP was on path to a 3% growth. Members have summarized risks as downward for growth and upward for inflation. Recent data suggests that near-term economic growth will be lower than predicted in January. Labor market has been characterized as soft. Outlook for growth and inflation will be closely monitored for future rate decisions and bank is prepared to respond to these developments as needed.
JPY
BoJ has held its short-term policy rate at 0.75% as was widely expected. The vote was 8-1 with one member, Takata, voting for a rate hike as he sees inflation risks skewed to the upside. The statement shows that economy continues to recover moderately. Inflation expectations have moved slightly to the upside and members reiterated their willingness to tighten monetary policy if economic outlook continues to develop as forecast.
BoJ Governor Ueda warned in the press conference that higher oil prices caused by US – Iran war will provide upward pressures to inflation and bank will closely monitor how higher oil rices influence prices in Japan. He expects wage growth to be even better than the previous year. This is a hawkish sign as BoJ always emphasized importance of wage growth.
CHF
SNB has left key policy rate unchanged at 0% as was widely expected. They have noted instability in Middle East as main source of uncertainty. Due to the US – Iran war bank’s willingness to intervene in FX markets has increased. They also see increasing uncertainty due to unclear trade policy outlook. Inflation for 2026 has been revised up to 0.5% from 0.3% previously but for 2027 it has been revised down to 0.5% from 0.6% seen previously. GDP projections saw no change as they stand at around 1% for 2026 and around 1.5% for 2027.
SNB Chairman Schlagel stated that stronger Swissy presents problem for price stability which is the main reason they have increased their willingness to intervene in FX markets. He clarified that they are still ready to use negative rates if need arises in order to achieve their targets. They are stating clear resolve to fight Swissy strength with all tools in their disposal. SNB total sight deposits for the week ending March 13 were almost unchanged as they came in at CHF454.4bn vs CHF454.1 the previous week.
