A sense of calm fell across markets on Friday after a volatile week dominated by tariff headlines. The absence of any fresh tariff announcements from Trump was taken as “no news is good news” by markets.
Risk sentiment also got a boost from Germany, where Chancellor-in-waiting Friedrich Merz secured support from the Greens to revise the country's debt brake and unleash the biggest fiscal package since 1990, totalling some 1 trillion euro.
Elsewhere, GBP dipped after GDP data for January revealed the economy unexpectedly declined, prompting Chancellor Reeves to comment that the country was "feeling the consequences" of a changing world.
The USD experienced a temporary decline following the release of the latest Michigan Consumer Sentiment report, which revealed a drop to its lowest point since November 2022, coupled with a sharp increase in inflation expectations.
Reacting to the recent steep falls in US equities, US Treasury Secretary Bessent spoke in a TV interview over the weekend stating that he welcomed falling stock prices, calling it a healthy correction, he also wouldn’t rule out the possibility of a recession. Trump also spoke over the weekend, reiterating reciprocal tariffs are due to kick in 2nd April. All eyes are on today’s US Retails Sales data where markets are forecasting a bounce back from last month’s numbers.
*Daily move - against G10 rates at 7:30am, 17.03.25
** Indicative rates - interbank rates at 7:30am, 17.03.25
Macro-economics take centre stage this week, with interest rate decisions due from the US and UK, where rates are expected to be left unchanged.
The Fed will also release the latest dot plot projections and forecasts for GDP, Inflation and Unemployment. The last dot plot projections indicated two rate cuts in 2025. Markets anticipate the possibility of rate cuts commencing in the second half ofd this year.
This week also sees the latest UK Employment report where the focus will be on wage data.
Read more about the Fed and BoE's interest rate decisions here:
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