Market remained on a roller-coaster ride last week. With a series of banking fallouts triggering a wave of panic before somewhat settling down towards the end of the week. This week a few central banks, particularly the US Federal Reserve (Fed). Policy rate decisions out of the Bank of England (BoE) and Swiss National Bank (SNB) will also be on watch. This will bring clutter for the entire market.
US Fed decision on Wednesday
The Federal Reserve’s meeting will be in the spotlight, with markets expecting a 25 basis point rate hike this time around.
However,Fed chair Powell had been widely signaling a 50bps hike in the lead-up to the March FOMC meeting. But worsening fears about the health of the financial sector in the past week paved the way for a more restrained view for monetary policy.
Thursday
The economic calendar also includes data on, initial jobless claims which could have a negative impact on the dollar. As all data forecasted slightly lower at 200k than previous reading of 192k.
Friday
Flash Manufacturing PMI will be important data for dollars. It’s foreseen unchanged from previous reading 47.3. That could have a neutral impact on dollar
Flash Services PMI may have a negative impact on the dollar. As data foreseen 50.3 slightly lower from previous reading of 50.6.
UK
On Wednesday, UK February inflation rate will be released a day before the meeting. Data is foreseen at 9.9%, previous was at 10.1%. Data could have a positive impact on the pound.
On Thursday, the Bank of England (BoE) will announce its decision on monetary policy. A 25 basis point rate hike to 4.25% is expected. The previous BoE meeting in February saw a 50 basis-point move but attention is on the softer tone for its forward guidance. Which suggested that the central bank’s hiking cycle could be nearing its end.
Dovish rate expectations were further reinforced in the aftermath of recent global banking worries. With interest rate futures pricing a 40% probability that we will have a rate pause from the BoE. This is a stark shift from the 25% at the start of the week and 10% last month.
Friday
Flash Manufacturing PMI data could have a positive impact on pound. As data foreseen slightly higher at 50.00 from previous reading 49.3. On the same day, Flash Services PMI could have a neutral impact as data foreseen slightly lower at 53.1 from previous reading of 53.5.
Switzerland
Another central bank meeting next week and in light of events this week, heavily centered around one of its own, Credit Suisse, it will be very interesting to see whether it sticks with plans for a 50 basis point hike. While it hasn’t hiked rates much so far, the SNB has a low tolerance for inflation so may remain determined to stick with the plan despite inflation being only 3.4% in March.
Japan
Japan’s inflation data will have a significant impact on Yen. The national CPI reading for February is expected to cool from 4.3% to 3.1% as utility bills softened over energy subsidies. Pricing pressures however should remain robust as the ex-fresh food and energy is expected to rise on an annual basis from 3.2% to 3.4%.
Eurozone
It goes without saying that the focus in Europe next week will be firmly on the banking sector.And whether recent turmoil has had any ripple effects on weaker institutions or highlighted any vulnerabilities.
The European Central Bank raised its key interest rates by 50 basis points last Thursday. Pressing on with its fight to tame inflation despite signs of stress in the financial system resulting from earlier rate hikes. Flash PMIs on Friday will also be of interest but against the backdrop of recent events. Data foreseen slightly lower at 52.4 compared to previous reading of 53.1.