Weekly Economic & Financial Commentary: The Calm Before the Storm

This week brought glimpses of market stabilization after weeks of turmoil. Although consumers seem unfazed by the uproar, tighter credit conditions coming down the pipeline will likely weigh on growth. Meanwhile, inflation continues to advance at a stubbornly high pace, adding to the case for a 25 bps hike in May.

EUR/USD – Euro Slides On Soft German Manufacturing PMIs

After an impressive rally, the euro is falling for a second straight day. In the European session, EUR/USD is trading at 1.0739, down 0.86%.

GBP/USD – Pound Slips as PMIs Dip, BoE Hikes Again

The British pound is down considerably on Friday after mostly soft numbers out of the UK. In the European session, GBP/USD is trading at 122.13, down 0.60%.

USD/JPY – Surging Yen Breaks Below 130 as Rally Continues

The Japanese yen broke below the symbolic 130 line earlier in the day, for the first time since February 3rd. In the North American session, USD/JPY is trading at 130.17, down 0.55% on the day. The yen is enjoying a splendid month of March, climbing 4.6% against the US dollar.

Weekly Focus

After ECB remained in tightening mode last week, also the Federal Reserve chose to hold a steady course this week and hiked policy rates by 25bp. That said, both the statement and Fed chair Powell's comments were tilted to the dovish side, highlighting that the 'recent (banking sector) developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation'.

Eurozone Data Takes Centre Stage, But the Market is On the Lookout for Banking Headlines

With the market remaining on its toes regarding the ongoing banking sector issues, next week brings significant data in the euroland in the form of business surveys and inflation data. The ECB is clearly interested in these economic releases, particularly following last meeting’s change of strategy. However, there is a lingering fear about further negative banking news that could possibly derail the ECB’s tightening effort and put a stop to the euro’s rally.

Can Gold Move Above $2,000/oz?

Gold got a boost following the Fed's rate decision and managed to poke above $2,000/oz briefly on Thursday. But resistance seems to have been sufficiently strong to keep price action below that level. Given the latest turmoil in the markets and the change in the Fed's position, is there a fundamentals reason for gold to break through? Or can we expect resistance to hold out?

Weekly Economic & Financial Commentary: Fed Tightening

The FOMC's post-meeting statement and latest projections suggest that recent stress in the financial system has pulled forward the end of the Fed's tightening cycle. We look for one more 25 bps hike in May before the FOMC holds at 5.00%-5.25% through most of this year.

The Weekly Bottom Line: Canada Inflation Moving in the Right Direction

The easing in headline CPI was driven once again by a fall in energy prices (Chart 1 ). Total energy inflation has dropped in six of the last eight months, unwinding all the energy inflation witnessed after Russia invaded Ukraine.

Canada's Federal Budget Will Be Unveiled Amid Rising Economic Uncertainty

The Canadian economy has shown resilience so far this year. But there remain pockets of weakness, and headwinds from aggressive interest rate increases continue to build. It’s against this mixed economic backdrop that Finance Minister Chrystia Freeland will release the federal budget Tuesday.