Market movers ahead
In the US , the most important release is the jobs report for February, with most focus on average hourly earnings (AHE), where another strong monthly print would be likely to add to the reflation story.
In the euro area, we await ‘Super EU politics Sunday’, with the Italian Parliamentary election being held and the results of the German SPD’s member vote on the coalition with CDU/CSU due to be released on Sunday.
The other big event is the March ECB meeting, which is scheduled for Thursday, when we expect the ECB to change its forward guidance, removing its easing bias.
In the UK , focus remains on Brexit, as we approach the important EU summit on 22-23 March, where the ambition is to reach an agreement on transition.
In Japan , the main event next week is the Bank of Japan’s monetary policy meeting ending on Friday, where we expect it to keep its ‘QQE with yield curve control’ policy unchanged.
Global macro and market themes
Inflation has been a key market driver this year and the balance of risks to our inflation forecasts is on the upside given the US fiscal stimulus and closing global output gaps.
Jerome Powell said the outlook for the US economy has strengthened – we still expect three Fed hikes this year but see the possibility of the Fed raising its ‘dots’ to three hikes for 2019 at its next meeting.
The ECB is set to remove some of its QE bias next week.
We remain positive on equities but see the US inflation outperformance as negative for the USD.
