Weekly Market Outlook: Inflation data To Dominate Week Ahead

The economic docket for the week ahead will see a somewhat slower schedule with most of the major markets closed on Friday due to Good Friday. Still, there is plenty of economic reports that will be coming out over the week.

Inflation will remain the major common theme this week. The UK, Canada, New Zealand, and the eurozone will all be releasing their respective inflation reports. For the most part, consumer prices are forecast to stay subdued.

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Among the economic reports, New Zealand’s inflation will be a report to watch as it could potentially influence the forward guidance from the RBNZ. The central bank was seen taking a dovish stance as it noted that there was room for a rate cut.

Following last week’s Brexit extension, investors will be able to focus on the fundamentals from the UK. This week, UK inflation and retail sales reports are due. With Brexit extended until October 2019, the focus will shift back to the Bank of England and the rate hike prospects.

Global investors will be closely watching the numbers from China this week. The world’s second-largest economy will be releasing its GDP figures on Tuesday. The forecasts point to a modest decline to 6.3% on the quarter.

Here’s a quick recap of what’s to come in the currency markets this week.

New Zealand Consumer Prices Expected to Slow

Statistics New Zealand will be releasing the quarterly inflation report this week on Wednesday. Preliminary estimates show that consumer prices in New Zealand will slow to a quarterly pace of 0.2% for the three months ending March 2019.

This would pull down the annual inflation rate from 1.9% in the fourth quarter of 2018 to 1.6% for the March quarter. A weaker pace of inflation growth could no doubt influence the Reserve Bank of New Zealand which will be meeting later in the month.

The RBNZ had previously opened the doors towards being flexible on interest rates. The central bank noted that interest rates could be cut down the line amid slowing growth and weak inflation.

The slowdown in inflation is largely due to a pullback in fuel prices. But, core inflation is forecast to hold steady just below the 2% threshold set by the RBNZ. A weaker inflation reading below 2% would fall in line with the RBNZ’s view which noted that inflation would remain below 2% for the remainder of the year.

At the same time, if inflation manages to beat estimates, we could expect to see the RBNZ standing pat on policy.

Australia Unemployment Rate Forecast to Rise

The Australian Bureau of Statistics (ABS) will be releasing the monthly job numbers this week. Economists forecast that the economy would add 15.2k jobs during the month of March. This marks a strong rebound when comparing to 4.6k jobs that were added the month before.

Economists expect the unemployment rate to rise to 5.0%. This follows February’s decline to 4.9%. Australia’s unemployment rate has been averaging around 5.0% over the past four months already.

The increase in the unemployment rate is, however, unlikely to dent the sentiment much. However, a surprise decline in the job figures could potentially impact sentiment as it could push the RBA to take a dovish stance.

UK Economic Data to Take Front Seat Once Again

Following weeks of uncertainty in regard to the Brexit talks, the recent announcement to the Brexit extension will see investors turning their attention to the economic data once again.

This week, the UK’s Office for National Statistics (ONS) will be releasing the inflation figures for March. Economists forecast that inflation increased on both the headline and core readings of the CPI. Headline CPI is forecast to rise 2.0% on the year ending March while core CPI is forecast to pick up to 1.9% on the year ending March.

Bank of England governor Mark Carney will be speaking later during the week. The focus will turn to the interest rate paths for the UK.