The final full week of March opens with markets transitioning from pricing an energy shock to testing its real economic impact. With Persian Gulf exports largely halted, oil prices remains elevated and the inflation impulse is now firmly embedded. The focus shifts to whether this shock is beginning to translate into slower growth, setting up a stagflation backdrop.
Last week’s dominant theme—monetary policy divergence—remains intact, but the emphasis is now on validation. Markets have already repriced central banks toward a more hawkish stance in response to energy-driven inflation. The key question this week is whether incoming data will justify that shift or challenge it by revealing early signs of demand destruction.
The “High Stakes”: UK & AU CPI
UK February CPI stands out as one of the week’s most important releases. Headline inflation is expected to hold at 3.0% yoy, with core at 3.1%. Even though the data largely reflects pre-war conditions, it will be interpreted as a “floor” for where inflation is heading under the new energy regime.
An upside surprise in UK CPI would reinforce expectations that Bank of England would need to tighten sooner or more aggressively. That would likely support Sterling, particularly against Euro and Swiss Franc. A softer print, however, may have limited impact, as markets are likely to look through backward-looking data in light of rising energy costs.
Australia’s monthly CPI will play a similar role for the Australian Dollar. Inflation is expected to hold at 3.8% yoy in February. Even though RBA has already delivered consecutive hikes, markets are leaning toward another move in May, after getting Q1 CPI report.
An upside surprise could raise expectations that RBA’s tightening cycle is not yet complete even after May, boosting AUD, particularly against Dollar.
The “Silent Movers”: Flash PMIs from JPY, AU, EZ, UK, and US.
Flash March PMI releases from Japan, Australia, Eurozone, UK, and the US will be where the real stagflation test begins. Unlike CPI, which largely reflects pre-escalation conditions, PMIs offer the first timely read on how the Iran war and oil shock are feeding through to both activity and pricing dynamics. This makes them the most forward-looking indicators of whether the macro regime is shifting.
The key focus on the growth side will be new orders and business expectations. Deterioration in these components would signal that elevated energy costs and geopolitical uncertainty are already weighing on demand. If businesses start to scale back orders and turn more cautious on outlook, it would confirm that the shock is not just inflationary, but also growth-destructive.
At the same time, input price indexes will be critical in assessing the inflation channel. With supply disruptions and transport costs rising, firms are likely facing a sharp increase in production costs. If PMIs show accelerating input prices alongside weakening output, it would provide clear evidence that stagflation dynamics are taking hold.
Crucially, the data could also highlight divergence across regions. Economies more exposed to energy imports, particularly in Europe, may show a sharper deterioration in growth alongside stronger cost pressures. In contrast, more insulated economies could display greater resilience. This divergence would reinforce the current split in monetary policy expectations, with some central banks forced toward tightening while others retain room to wait, further shaping FX dynamics.
Here are some highlights for the week:
United States:
The US calendar is relatively light on top-tier data, but focus remains on growth momentum and consumer resilience amid rising energy costs.
- Flash S&P Global PMIs (Tuesday).
Eurozone:
The Eurozone is particularly sensitive to energy market disruptions, and this week’s data will highlight the extent of the economic “pinch.”
- Flash PMIs (Tuesday).
- German Ifo Business Climate & GfK Consumer Sentiment (Tuesday/Wednesday).
Japan:
The focus is on whether inflation is becoming sticky enough to warrant further BoJ normalization.
- National CPI (Tuesday).
- BoJ Monetary Policy Meeting Minutes (Wednesday).
- Flash PMIs (Tuesday).
United Kingdom:
The UK faces a high-impact week with a focus on whether the BoE will need to pivot to a more hawkish stance.
- Consumer Price Index (Wednesday).
- Flash PMIs (Tuesday).
- Retail Sales (Friday).
Australia:
Aussie is caught between hawkish RBA and global risk-off sentiment.
- AU Consumer Price Index (Wednesday).
- AU Flash PMIs (Monday).
