Week Ahead: Calm before the storm?

It will be a lighter data week in the US, aside from some inflation figures on Friday, as we brace for the tariffs “Liberation Day” on April 2. We’re not sure who coined that moniker but in short, markets will get to see the publication of the Trump administration’s varied investigations into unfair trade practices and deficits. After the tariff-on, tariff-off saga surrounding Canada and Mexico since inauguration day, reciprocal and long-lasting tariffs are set to be enforced, notably on Europe.

It’s likely that we will hear plans and hints at what is to come this week, though the recent quieter news on tariffs possibly suggests there is some uncertainty about how Trump wishes to unleash aggressive levies on his trade partners. Although US stocks snapped a four-week losing streak on Friday, and the dollar steadied, the broad secular theme around fading US exceptionalism should remain in the medium-term. That may limit major greenback upside (watch the death cross on the Dollar Index), while it is only natural that high-flying European stocks take a breather. That said, new catalysts do appear to be needed to further fuel EUR/USD and GBP/USD to 1.10 and beyond 1.30 respectively.

We note headline media stories around Europe’s “meme stock” mania as an indicator of where we are in the EZ investor cycle. Also instructive were some recent rather gloomy earnings from US bellwether companies like Fedex and Nike. The logistics group lowered its earnings forecasts, blaming persistent “weakness and uncertainty in the US industrial economy”. Nike warned it expected sales to decline, citing tariffs and falling consumer confidence. No wonder gold continues to make fresh record highs and is up over 15% year-to-date. We see there is a possible reversal pattern on the chart, and huge psychological levels like $3,000 can be tricky to break decisively, especially first time around.  

In Brief: major data releases of the week

Monday, 24 March 2025

– Global PMIs: Consensus expects manufacturing to remain in contractionary territory across the globe, except in the US. Any reactions to tariffs will be in focus. Services have been weakening recently, amid rising uncertainty.

Wednesday, 26 March 2025

– Australia CPI: Expectations are for the monthly Australian CPI release for February to stick at 2.5% y/y. Economists say the prior report saw monthly CPI dragged down by a fall in holiday travel and a slowdown in housing costs. The RBA recently said it is more confident inflation is moving towards the midpoint of the 2-3% target range, but upside risk remain.

– UK CPI: Analysts forecast the headline rate to cool one-tenth to 2.9%. The core is also seen off one-tenth at 3.6% but services is predicted to tick up to 5.1%, matching the MPC estimate. The next BoE rate cut isn’t seen until the summer, according to money markets.

– UK Spring Statement: Chancellor Reeves will likely need to find some savings due to a rise in debt interest costs. These shouldn’t affect markets hugely, but her choices later in the year may be more impactful.

Thursday, 27 March 2025

– Tokyo CPI: Prices are expected to ease one-tenth to 2.8% in March. Food prices are stabilising amid energy subsidies. The ex-food and energy figure is seen unchanged at 1.9%. This data is seen as a forerunner to nationwide figures.

Friday, 28 March 2025

– UK Retail Sales: Expectations are for February activity to print flat, down from the 1.7% in January. Other indicators have been mixed, as consumers hunker down ahead of April’s rise in utility bills.

– US Core PCE: The Fed’s favoured inflation gauge is seen steady at 0.3% m/m and 2.7% y/y. Headline PCE is forecast at 0.3% m/m and 2.5% y/y. The Fed upwardly revised its projection of the core metric to 2.8% from 2.5% at its March meeting.

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