In this episode:
- Global Macro Data Preview: Diverging fiscal paths set the tone for markets.
- UK Macro Outlook: Back in focus, but still on hold.
- US Macro and Fed Outlook: Fed steady, projections speak volumes.
Global Macro Data Preview: Diverging fiscal paths set the tone for markets.
- Fiscal divergence remains central, with the US leaning toward consolidation and Europe considering stimulus—implying different monetary trajectories and FX impacts.
- China’s February data suite (including house prices, retail sales, and industrial production) will be closely watched for signs of demand stabilization.
- Central bank meetings in Sweden (Riksbank), Switzerland (SNB), and Japan (BoJ) will offer monetary policy signals amid persistent inflation differentials
UK Macro Outlook: Back in focus, but still on hold.
- BoE unlikely to act next week, despite prior dissent for rate cuts—recent wage data and commentary have moderated expectations.
- Employment and housing data could influence sentiment but are unlikely to alter immediate monetary policy direction.
- Trade and fiscal speculation continues, particularly around UK–US relations and the upcoming fiscal event, though these remain background factors for now.
US Macro and Fed Outlook: Fed steady, projections speak volumes.
- No rate change expected at the March FOMC, but attention will focus on growth and inflation projections and the dot plot.
- Equity market correction and tariff uncertainty add layers of complexity to the Fed’s policy path and communication.
- February retail sales will serve as a key barometer for consumer momentum, after January’s disappointment.
Transcript (AI Generated)
Matt Jones
Welcome to "The Long & Short of the Week Ahead", a production of Eurizon SLJ Capital that takes a look at the macro-economic themes of the week ahead and has been recorded for professional investors.
My name is Matt, Head of Distribution for Eurizon SLJ Capital, and I'm joined by Neil Staines, Senior Portfolio Manager.
Welcome back, Neil. It's great to have you here with us again.
Neil Staines
Thank you very much Matt. It's great to be here.
Matt Jones
Tariff rhetoric and fiscal plans have dominated both price, action and sentiment this week, adding to another very complex week for financial markets, but leaving that to one side at the moment, what are we looking for in global data next week?
Neil Staines
Yeah, great question, Matt. It's very complex indeed tariff and trade and fiscal policy, at least on a relative basis. And what we see as convergence of fiscal policy have definitely been very dominant in terms of the fx flows we've seen. We still see fiscal contraction or conservatism as more likely than consensus expansion expectations in the US, in the order of 3% US deficit, not the 7% that market expectations still center around. And that has material FX implications on relative fiscal and by extension through relative monetary differentials, there most notably in the FX space as we say. So the market is very focused on Germany's plans for a fiscal stimulus. But we think also the US' plans for fiscal consolidation are equally as important. Now, taking a step aside from the uncertainties of tariff and fiscal policies at the moment next week's global data will be watched very closely in the hope that we get more clarity. Now, on Monday, we get China's suite of data for February. That's house prices, industrial production, retail sales, fixed asset investment, and unemployment. And we'll be and markets will be very clearly hoping to see some signs of stabilization in demand. It's been very important emphasis on the global economic recovery.
On Tuesday we get the German ZEW and after the massive stimulus announcements, although we do still need to see those passing through the Bundestag and Bundesrat by the 26th of March. But any jump in sentiment in this ZEW in forward expectations component will be well noted.
On Thursday we get the Ricks Bank. And they're expected to leave rates unchanged at two and a quarter, having come down from 4% with inflation marginally rebounding in February but still well below target. We also get the Swiss National Bank. They are expected to cut 25 basis points to 0.25.
With headlines CPI is still at just 0.3. The risks of negative rates are most acute in Switzerland, and commentary around that will be very closely watched in that regard. And then finally in Japan, on Wednesday we get the Bank of Japan meeting. We're expecting unchanged but inflation on Friday, still well above target. Keeps the bias remaining to the top side. Market still focused on July and then January 26 for further rate hikes out of the Bank of Japan. So all in all, an interesting week for global markets.
Matt Jones
Now after a relatively quiet couple of weeks, the UK is back on the radar next week. So how are we thinking about the UK macro at the moment?
Neil Staines
Yeah, thanks Matt. It's been relatively quiet indeed. Certainly on the political front. We've had reports that Starmer is pushing for a UK US trade deal to avoid the risk of tariffs for the uk.
And of course there's much speculation about the potential announcements at the fiscal event in a couple of weeks time. Both worthy of note. But the focus next week comes back to the Bank of England. We had two dissents in favor of a 50 basis point cut at the February meeting, and that certainly raised some eyebrows.
But rhetoric from Sir Dave Ramsden that recent wage data has altered his view of the risks to prices has led to a more balanced narrative around expectations for the Bank of England In the near term. No press conference or updated projections means limited new information but the the statement will be forensically examined, for forward pointing clues nonetheless. Market pricing is almost zero probability of a cut at next week's meeting. But we do get the employment report on the morning of the meeting and public public sector borrowing data on Friday with housing data on Monday so they could shape the narrative going into the meeting.
Overall, the UK's back in focus but not likely back in action just yet. At least from a monetary perspective.
Matt Jones
In contrast, and never out of the action. The US has been at the heart of geopolitical and geostrategic developments, and next week the US also dominates the macro with the FOMC meeting. So how are we thinking about the Fed at the moment?
Neil Staines
Yeah, absolutely. Recent weeks have seen a very complex macro backdrop.
And heightened tariff and trade uncertainties. And they have seen or facilitated material equity correction. And we touch on that a bit further in this week's blog. Now, expectations for action at the next, at next week's FOMC meeting is very low with just one basis point priced. In fact a quarter point cut is still not priced in the curve until the June meeting. But what is likely to be the main focus is the updated economic projections for growth and inflation. And by extension the dots, essentially how the Fed are adjusting their expectations of the economic trajectory as a function of tariffs and the current geopolitical uncertainties and now also how they may be adjusting those in relation to the recent equity decline. The press conference and the statement will both be an hour earlier this week as the UK clocks are yet to be altered. But we'll be very keenly watched nonetheless. Retail sales on Monday for February will be another key barometer after the disappointment in January. So again another key gauge of the pace at which the US economy is slowing, but the FOMC and Powell will likely dominate macro sentiment next week.
Matt Jones
Fantastic. Thank you for joining us once again and outlining your thoughts on the week ahead. I look forward to catching up with you again next time.
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