Week of March 10

Last week, the ECB implemented a hawkish rate cut, while China confirmed its growth targets for the year ahead of the crucial NFP figures.

In the upcoming week, investors are likely to focus on the latest US inflation data, the BOC rate decision, and the UK's monthly GDP figures.

Week in Review

The main theme last week, which has become increasingly prevalent, was tariffs, their application, and exemptions. Despite a relatively heavy economic calendar, this took centre stage.

As widely anticipated, the ECB cut rates by a quarter of a point. However, President Christine Lagarde's press conference provided a strong impression of a more hawkish tilt, casting substantial doubts on a rate cut at the April meeting. She stated that inflation would return to target next year, contrary to her previous assertion that it would occur this year. The policy statement also highlighted that rates had become meaningfully less restrictive, suggesting that the central bank does not view its rate policy as weighing heavily on the economy and, therefore, does not need to be reduced as much.

China's National People's Congress (which will continue into next week) announced a 5% growth target for the country this year, after both official and private measures of PMI exceeded expectations. Conversely, the US ISM manufacturing PMI disappointed at 50.3 instead of the expected 51.0, though it remained marginally in expansion.

In geopolitical developments, the White House followed through on its threat of applying tariffs to Mexico and Canada, along with raising duties on all Chinese imports, with the respective countries retaliating. However, the Trump administration allowed exceptions a couple of days later, such as for automobile imports from Mexico and Canada.

In an address to Congress, US President Donald Trump signalled a rapprochement with Ukrainian President Volodymyr Zelenskyy, with the prospect of renewing negotiations next week.

Meanwhile, European leaders held two emergency summits, pledging substantial increases in defence spending, including a suggestion from French President Emmanuel Macron to extend his country's nuclear umbrella to other nations of Europe.

Biggest Market Movers

• The US dollar index trended 3.5% lower throughout the week as investors rotated out of stocks and into bonds, pushing yields down.
• The Euro soared 4.50% despite the rate cut, as the ECB's more hawkish stance, combined with increased spending, pushed Euro yields higher through the week.
• Crude oil prices were under pressure for most of the week due to demand concerns after OPEC+ announced it would proceed with its production increase in April.
• The German benchmark stock index DAX hit two new all-time highs during the week on ECB easing and trade relief after Trump eased some of the tariffs, though performance was marred by profit-taking near the end of the week.

Top Events in the Week Ahead

Trade is likely to be a dominant factor for the markets in the upcoming week, with expectations that the White House will revise its tariff policy on Canada and Mexico once again.

US Inflation in Focus

As for scheduled events, the focus is likely to be on Wednesday's release of US inflation figures, which are expected to show that the headline CPI is starting to ease to 2.9% from 3% previously. Core inflation is forecast to show further improvement to 3.1% from 3.3% prior, which will be crucial for the market's view on when the Federal Reserve will cut rates next in light of the NFP figures. Poor figures could prompt a gold break outside its narrowing range near $2900 per ounce, exposing $2950 and $2830.

Efforts to Boost Economic Growth

There are two releases related to economic growth, which has become an increasing concern among investors. The first is the BOC's rate decision.

While inflation has been within the target range, the continued rate cuts from Canada's central bank are seen as an effort to support the faltering economy, which is facing additional turmoil from tariffs. Loonie, however, has benefited due to a weaker dollar. A break of the support at 1.43 might see a move towards the 200-day moving average of 1.42.

Then, on Friday, the UK will post its monthly GDP growth figures, with January economic expansion expected to slow to 0.1% from 0.4% previously. Near the 1.30 psychological level, Cable could extend to the resistance or slightly above it and pull back or fail to reach the resistance and revert towards 1.28.

Other Events, Earnings

Sunday will see the release of Chinese inflation figures. On Monday, Germany's trade balance is the highlight. Australia's Westpac and NAB confidence surveys will be released on Tuesday. Thursday includes Euro Area industrial production figures. Friday has Chinese new loans data as well as the University of Michigan consumer sentiment index.

Among companies updating investors throughout the week are Oracle, Ferguson, Persimmon, Adobe, Lennar, Williams-Sonoma, Wheaton, and WeRide.