Week Ahead: Quiet calendar amid historic price action

Markets will be in thrall to the quite incredible moves we saw last week, which were primarily driven by the new European security and fiscal order. European assets, be they equities or the euro, continued to massively outperform the US, as bond yields in Europe soared. The world’s most traded currency pair, EUR/USD, rose over 4.4% last week, even outpacing the move seen in late 2022. The current theme, that centres around the huge shift in long-term fiscal policy, has trumped (pardon the pun) the US exceptionalism narrative.

Tariff fall-out and the impact of DOGE’s effective austerity measures might continue to weigh on the dollar. The US President did give Mexico and Canada another delay on the 25% tariffs until April 2. But steel and aluminium tariffs are due this week, with reciprocal tariffs on track for early April. Of course, we’ll be on the look out for any Trump headlines, with the noise adding to intraday volatility. The S&P 500 and the Nasdaq are both trading around their 200-day SMAs so at key support/resistance points.

Price action in the greenback appears to be mimicking the early stages of Trump’s first stint in the White House around late 2016/2017. We note USD fell roughly 10% in 2017. Of course, history tells us things rarely pan out the way we expect. Indeed, ECB President Lagarde spelt this out last week when cutting rates, as she used the word “uncertainty” no less than 17 times during her post-statement press conference.

It’s a much quieter week on the calendar, with very little top tier apart from the latest US inflation figures. This release probably won’t move markets too much, unless the high prior print is seen again which could spark fears of stagflation. Stagflation in the US is not something we thought we’d write about any time soon. Nor that we see there are parliamentary elections this Saturday in Greenland, so expect more Trump reaction to that.  More seriously, money markets now see the Fed cutting rates three times this year, as it reacts to the softer US data and import-driven plunge in some predictors of first quarter GDP.

In Brief: major data releases of the week

Wednesday, 12 March 2025

– US Inflation: Expectations are for the headline and core to rise 0.3% m/m and 2.9% and 3.2% y/y respectively.  Elevated food prices and persistence in services inflation are forecast, as seen in some survey data. Front-running of tariffs could also mean prices remain sticky. 

– Bank of Canada Meeting: Another 25bps rate cut, with a neutral-hawkish bias, is expected, taking the overnight rate to 2.75%. Policy guidance will likely be guarded as the implications of a prolonged trade conflict loom large.    

Thursday, 13 March 2025

– US PPI: The core rate of producer prices is predicted to rise 0.3% m/m, matching the January figure. Both CPI and this reading will inform expectations for the FOMC’s preferred PCE inflation measure that is released at month-end. That is after the March 19 Fed policy decision.

Friday, 14 March 2025

– UK GDP: January growth is forecast to slow two-tenths to 0.2%. The December reading meant Q4 q/q growth printed at 0.1%, just above the prior flat quarter. Monthly GDP numbers can be notoriously volatile, but a retracement of the big December rise is likely.

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