Tightening up in tone
The week just gone saw no fewer than eight G10 central banks deliver rate decisions. And, to the surprise of absolutely no one, events in the Middle East were clearly top of mind. Policymakers across the board pointed to upside inflation risks, though only the RBA actually decided to tighten policy, with other central banks playing wait and see for now. Still, the direction of travel has clearly shifted in favour of tighter policy, with shifting expectations a key dynamic underpinning FX performance over the past week. That is, of course, in addition to the continued volatility in oil prices stemming from the ongoing Middle East developments.
The week ahead, in contrast, looks a little quieter, at least in terms of scheduled events. The Norges Bank is set to leave rates on hold, though, like counterparts the week prior, we also anticipate a degree of hawkishness in the accompanying rhetoric. The data calendar sees PMIs out of the UK and the eurozone, which should give an initial steer on how business confidence is holding up. CPI data, meanwhile, is likely to be seen as dated, with February reports due from Japan, Australia, and the UK. Rather, continued monetary policy fallout and Middle East headlines should continue to dictate market tone. That points to continued volatility across markets, with the dollar likely to track oil prices as month-end fast approaches.
You can read the Week Ahead in full here: