The week of March 24–28 brings key economic events. In the U.S., inflation and consumer spending data will be in focus, alongside GDP revisions and durable goods orders. The UK’s budget and CPI report will test sterling’s recent rally, while the euro’s momentum hinges on flash PMIs and Germany’s business sentiment. In Asia, inflation data from Tokyo and Australia could influence monetary policy expectations. With major economic releases ahead, markets brace for potential volatility.
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Key Points to Watch Out For:
- U.S. CPI inflation rises next, but will consumption data matter more
- The UK budget and CPI in focus after the Bank of England’s hawkish decision.
- The euro heads for the flash PMIs as the rebound loses momentum
- Tokyo and Australian inflation figures are also on this week’s schedule.
The Dollar Shrugs Off Powell’s Dovish Tone
Following the March FOMC meeting, the U.S. dollar has gained value, while Jerome Powell’s preemptive comments on the economy and inflation are not a concern for the Federal Reserve chairman. Downplaying the idea of recession, he expressed concern about inflation. Although stock prices rose, Treasury yields were lower, which is more positive than the Federal Reserve expected.
The rebound in the value of the dollar could be due to its previous underperformance compared to yield results, suggesting that the increase is a recovery rather than a rebound. Be that as it may, Powell’s approach could remain bearish, and most suggest that it is. He reassured market participants, stating that inflation caused by tariffs may only be temporary, but there was a lack of optimism that the Federal Reserve would reach its 2% inflation target.
The Federal Reserve is outlining a policy to deal with inflation, as its prediction for this year is only two cuts of 25 basis points. However, these markets with lower-than-expected inflation continue to buy into the idea of a third surprise cut after its estimates, as the Federal Reserve could act later than expected.
Consumer Spending in the Spotlight
In the coming weeks, investors could increasingly focus on growth indicators, while inflation readings take a back seat. This Friday, March 28, the personal income and expenditure report, which includes key personal consumption expenditure (PCE) inflation data, will be closely watched.
The Cleveland Fed Nowcast suggests that the headline PCE index slowed slightly to 2.4% year-on-year in February, while the core rate probably remained stable at 2.6%. These figures may have little impact on the markets, leaving the personal spending component in the spotlight. After a fall of 0.2% in January, analysts expect a rise of 0.6% in February. Any downside surprise could rekindle fears of a slowdown, which would weigh on the dollar.
Recession Fears Could Resurface
Due to the upcoming publication of some important data, concerns about the recession could increase sooner than expected. The preliminary value of the S&P Global PMI for March, for example, will be released on Monday, March 24. Meanwhile, the consumer confidence index, along with new home sales, will be released on Tuesday, March 25. Finally, durable goods orders and pending home sales are due on Wednesday, March 26, and Thursday, March 27, and will conclude with the final revision of fourth-quarter GDP.
If these figures disappoint, especially amid tariff-related headlines ahead of Trump’s April 2 deadline for reciprocal tariffs, risk appetite could deteriorate, dragging the dollar lower.
Pound Rally Faces Test of Stagflation
In March, the pound sterling climbed roughly 3% against the dollar, which can be attributed in part to the dollar’s weak performance, as well as strong UK economic data and inflation revival.
The Bank of England faces pressures from increasing inflation and possible unemployment, which makes policy formulation challenging. Although fears of stagflation could limit a further rise in the pound, the UK’s exemption from U.S. trade tariffs is a supporting factor.
Investors will be watching the March PMI on Monday, March 24, for signs of business sentiment and hiring intentions amid global uncertainty. However, the February CPI report on Wednesday, March 26, is likely to grab the spotlight. Considering January CPI’s projection of 3.0%, which sits equidistant from the lower and upper end of the Bank’s tolerance, another survey reading may cause markets to analyze core and services inflation trends much more closely.
Reeves Under Pressure
Positive economic surprises could overshadow Chancellor Rachel Reeves’ upcoming spring statement, in which she is expected to announce significant spending cuts, particularly in social welfare. While these measures could please the markets by signaling fiscal restraint and disinflationary intent — which could give the Bank of England leeway to cut rates later — they may not be as popular with voters.
As for sterling, any government measures to stimulate growth could provide a short-term boost. The week will end with retail sales and a final update on fourth-quarter GDP on Friday, March 28.
Euro Bulls Expect PMI Data to Lose Momentum
The strong recovery of the euro, which was supported by increased spending in Germany and EU debt reforms, seems to have stalled. Although the euro is the best-performing currency against the dollar this year, it would need additional support to prolong the upward trend.
Flash PMI data on Monday, March 24, could provide that spark, although confidence has been dented by trade tensions between the U.S. and the EU. February’s composite PMI was flat, as a strengthening manufacturing sector was offset by a weak services sector. Nonetheless, services could perform even better than expected as they are indirectly impacted by tariffs.
On Tuesday, March 25, Germany will release an Ifo business climate index that will help determine if Berlin’s spending initiatives are improving industrial sentiment.
Conclusion
In Australia and Japan, inflation will be the main driver this week. Australia’s February CPI, due on Wednesday, March 26, is expected to remain at 2.5% year-on-year for the third consecutive month. A stronger-than-expected figure could push up the Australian dollar, as it could lead markets to reduce expectations of RBA rate cuts.
Australia’s economic prospects remain uncertain due to the slowdown in trade with China, which is hampering the Australian dollar’s ability to recover substantially against the U.S. dollar. In Japan, low inflation and the Bank of Japan’s cautious approach have kept the yen stable. However, upcoming reports, including services producer prices due on Wednesday, March 26, and Tokyo CPI estimates due on Friday, March 28, could alter this situation.
More importantly, investors will be watching out for the minutes of the Bank of Japan’s March meeting, which will be published on Friday, March 28. If these minutes indicate a stronger trend towards monetary policy tightening than recent statements by Governor Ueda suggest, they could raise expectations of an imminent interest rate hike, which would give the yen a further boost.
