Eurozone headline CPI eased slightly from 2.3% yoy to 2.2% yoy in March, in line with expectations. CPI Core (excluding energy, food, alcohol & tobacco) dropped from 2.6% yoy to 2.4% yoy, undershooting forecasts of 2.5% yoy.
Looking at the composition, services remained the main driver despite moderating to 3.4% from 3.7%. Food, alcohol, and tobacco edged up to 2.9% from 2.7%. Non-energy industrial goods stayed stable at 0.6%, while energy slipped further into deflationary territory at -0.7%.
UK PMI Manufacturing index was finalized at 44.9 in March, down from 46.8 in February, its lowest level in 17 months. The data showed broad-based weakness, with steep declines in output, new orders, and export business. Business optimism also tumbled to its lowest point since November 2022.
Rob Dobson of S&P Global Market Intelligence noted that new business inflows suffered one of the sharpest drops since the pandemic lockdowns of 2020.
Manufacturers are being “hit on several fronts”: weakening domestic demand, rising costs linked to minimum wage and national insurance changes, and a deteriorating global trade backdrop due to mounting geopolitical risks and tariff uncertainties.
Eurozone manufacturing showed encouraging signs of recovery in March, with the final PMI Manufacturing reading rising to 48.6, its highest level in 26 months. Output index broke above the 50 mark to 50.5, the first time in growth territory since March 2023. Though still technically in contraction, the steady three-month climb in headline PMI suggests that the worst may be behind for the sector.
Regional breakdowns reveal uneven performance, with Greece leading the bloc at 55.0, while Italy and Austria remain below 47. Germany and France—the two largest Eurozone economies—improved notably, to 48.3 (31-month high) and 48.5 (26-month high) respectively.
Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, believed some of the recent gains stem from US companies frontloading orders ahead of the looming tariff war, which could mean that part of the improvement may unwind in the coming months.
Still, there are signs of structural tailwinds forming. Speculation is growing that Germany’s ramped-up fiscal spending—particularly on defense and infrastructure—may eventually trickle down into broader Eurozone growth. While those benefits are unlikely to be felt until 2026 or beyond, they offer a potential path to sustained recovery.
RBA kept the cash rate target unchanged at 4.10% today, in line with broad market expectations. While the central bank welcomed the continued decline in underlying inflation, it emphasized a “cautious” stance due “risks on both sides”.
Recent data suggests inflation is easing in line with forecasts, but RBA reiterated that it needs greater confidence that this trend will continue sustainably toward the midpoint of the 2–3% target band.
RBA highlighted “notable uncertainties” around domestic consumption and labor market dynamics. Internationally, there are concerns over the escalating US tariff policy, noting that such developments are already affecting global confidence.
The risk of further tariff expansion or retaliatory measures from other countries could amplify the drag on global activity. Inflation could move in “either direction” depending on how households and firms react to the shifting macroeconomic environment.
China’s Caixin PMI Manufacturing rose to 51.2 in March, up from 50.8 and marking a four-month high.
According to Wang Zhe of Caixin Insight Group, the upbeat print points to a steady start to the year, suggesting broader signs of recovery in the industrial sector.
Still, challenges remain beneath the surface. The labor market “remained relatively sluggish”. In addition, “deflationary pressures persisted”, driven by weak domestic demand and cautious sentiment among market participants.
Japan’s manufacturing sector contracted further in March, with final PMI reading falling to 48.4 from February’s 49.0, marking the lowest level in a year.
According to S&P Global, both output and new orders declined more sharply, reflecting “weaker demand from both domestic and international clients”. Employment offered a rare bright spot, as firms increased hiring at the fastest rate in three months.
However, confidence remained muted and below the long-run average. Cost pressures also persisted, with strong increases in both input costs and selling prices, suggesting that “inflationary pressure across the sector remains acute”.
Japan’s Q1 Tankan survey revealed a mixed outlook for the economy, with sentiment among large manufacturers slipping for the first time in a year. The index fell from 14 to 12, in line with expectations, as steel and machinery producers grew more cautious amid weak global demand, rising input costs, and uncertainty surrounding US tariff policy.
However, manufacturing outlook ticked down just slightly to 12, beating expectations of a sharper decline to 9, indicating that businesses remain cautiously optimistic.
In contrast, Japan’s services sector showed remarkable resilience. The large non-manufacturing index rose from 33 to 35—marking the highest level since 1991. Still, the outlook component was flat at 28, slightly missing forecasts of 29.
Capital expenditure plans were also encouraging, with large firms expecting a 3.1% increase for fiscal 2025, ahead of consensus of 2.9%.
Richmond Fed President Thomas Barkin highlighted growing concerns over the economic impact of the Trump administration’s upcoming tariffs. He told CNBC that the tariffs could both stoke inflation and weigh on the labor market.
“Call me nervous on both,” Barkin said, signaling that the path forward for monetary policy remains highly data-dependent.
Barkin emphasized “there’s a lot of uncertainty right now, and I think that makes the case for wait and see how this plays out.”
New York Fed President John Williams cautioned that the inflationary effects of new US tariffs could be “more prolonged” than initially anticipated.
In an interview with Yahoo Finance, Williams emphasized that while the immediate price increases are expected, the true impact of tariffs “might not be fully felt for a couple of years.”
He stressed the importance of monitoring not just the direct price changes, but also the “indirect effects” that ripple through the broader economy over time.
“It is still early days to be able to come to a concrete conclusion around this,” Williams said, noting that Fed will need to remain open-minded about “how long these last in terms of their effects on inflation and the economy.”
Italian ECB Governing Council member Fabio Panetta warned that the battle against inflation “cannot yet be said to be over.” and urged caution in the timing of interest rate cuts.
In a speech today, Panetta pointed to the heightened uncertainty stemming from “contradictory” announcements on US trade policy, suggesting that such unpredictability complicates the ECB’s path forward. As a result, the central bank must continue to monitor “all the factors that could hinder the return to the 2% target”
Panetta emphasized the balancing act the ECB now faces. On one hand, subdued consumption and investment, driven by geopolitical tensions and weak Eurozone growth, are helping to ease inflationary pressures.
But on the other hand, the resurgence of uncertainty—particularly around US tariffs—means the ECB must remain vigilant and not rush into policy loosening.
ECB President Christine Lagarde emphasized the need for Europe to assert more control over its economic future in light of looming US tariffs, set to begin on April 2.
In a France Inter radio interview, Lagarde reframed the narrative around “Liberation Day,” saying that while the US sees it as a move toward sovereignty, Europe must seize it as an inflection point—“a march toward independence.”
Lagarde reiterated her previous estimates that tariffs from the US could shave around 0.3% off Eurozone growth in the first year. Should Europe retaliate with reciprocal measures, the negative impact could deepen to as much as 0.5%.
On inflation, Lagarde noted that keeping it in check remains a “constant battle.” She stressed that while some progress has been made, inflation needs to fall in a sustainable way. That, she said, requires a carefully calibrated interest rate policy.
China’s official PMI data for March offered modest optimism, with the manufacturing index rising from 50.2 to 50.5, matching expectations and marking its highest level in a year.
Sub-indices for production and new orders both improved to 52.6 and 51.8, respectively. However, employment index slipped to 48.2, highlighting persistent weakness in labor market conditions within the manufacturing sector.
Non-manufacturing activity also improved slightly, with the PMI climbing from 50.4 to 50.8, beating expectations of 50.5.
Still, employment in the non-manufacturing sector deteriorated, with the index falling to 45.8, as both the services and construction sectors shed workers.
New Zealand’s ANZ Business Confidence dipped slightly from 58.4 to 57.5 in March. Own Activity Outlook improved from 45.1 to 48.6.
However, the data also brought a clear warning on inflationary pressures. Cost expectations surged from 71.3 to 74.1, the highest level in a year. Pricing intentions climbed from 46.2 to 51.3, marking the strongest since May 2023.
Perhaps more importantly, one-year inflation expectations also ticked up from 2.53% to 2.63%, inching further above the RBNZ’s 2% midpoint target.
ANZ flagged the rising inflation signals as “a little disconcerting,” cautioning that these developments could influence how enthusiastic RBNZ will be about delivering further rate cuts.
A rate cut at the April meeting appears locked in, and a second in May is viewed as likely. However, ANZ noted that the odds of a third cut in July are now “more of a coin toss.”
Japan’s industrial production rose 2.5% mom in February, beating market expectations of 1.9% mom gain. The strong growth was driven by key tech-related sectors, with chipmaking machinery output jumping 8.2% and electronic parts and devices surging 10.1%.
A survey by Ministry of Economy, Trade and Industry projects continued, albeit modest, gains in output of 0.6% mom in March and 0.1% mom in April.
While the headline data is encouraging, the METI acknowledged that the outlook could quickly shift. Though no direct production impact from the proposed US tariffs has been reported yet, METI emphasized the need to monitor the situation more closely going forward.
On the consumer side, retail sales grew just 1.4% yoy, missing expectations of a 2.4% rise.
US PCE inflation data for February came in largely in with notable surprises. Headline PCE rose 0.3% mom and held steady at 2.5% yoy, both matched expectations. However, core PCE, excluding food and energy, rose by 0.4% mom, slightly hotter than expected 0.3% mom. That pushed , pushing the annual core PCE rate up to 2.8% from 2.7%, also above forecasts.
On the household side, personal income surged by 0.8% mom, significantly outpacing expectations of 0.4% mom, reflecting strong wage growth and robust labor market. But personal spending only rose 0.4% mom, slightly below forecasts of 0.5% mom, hinting at a more measured pace of consumption.
Canada’s GDP expanded by 0.4% mom in January, outpacing expectations of a 0.3% mom gain. Growth was broad-based, with 13 of 20 sectors contributing.
Goods-producing industries led the charge, rising 1.1% mom, the strongest monthly gain since October 2021, as all major components saw expansion. Services-producing industries posted a more modest 0.1% mom increase.
However, early estimates for February point to a flat reading, suggesting a pause in momentum. Strength in manufacturing and financial services was offset by pullbacks in real estate, oil and gas, and retail trade.
Switzerland’s KOF Economic Barometer rose to 103.9 in March, beating expectations of 102.6 and up from revised 102.6 in February. The index has remained above its medium-term average since the start of the year, reinforcing the view that the Swiss economy “remains robust”.
KOF noted that improvements were broad-based, with stronger signals coming from manufacturing, services, and construction. Private consumption indicators also showed improvement while foreign demand remains unchanged.
UK retail sales volumes jumped 1.0% mom in February, far surpassing market expectations for -0.3% mom decline.
The gain was driven by strong performances across all non-food store categories, including department stores, clothing, and household goods, suggesting consumers were more willing to spend on discretionary items. The only notable drag came from supermarkets, where sales volumes dipped slightly following a solid increase in January.
Looking at the broader trend, sales volumes rose 0.3% in the three months to February compared to the previous three-month period, and were up 2.0% from the same period a year earlier.
Germany’s GfK Consumer Sentiment for April ticked up slightly from -24.6 to -24.5, falling short of expectations at -22.2.
According to Rolf Bürkl of the NIM, the minor improvement may reflect “lessened pessimism” following recent elections and the hope for a stable new government. However, willingness to save continues to signal significant uncertainty among German households.
Bürkl emphasized that “fast formation of a government and the early adoption” could play a key role in boosting consumer confidence and spending ahead.
ActionForex.com was set up back in 2004 with the aim to provide insightful analysis to forex traders, serving the trading community for over a decade. Empowering the individual traders was, is, and will always be our motto going forward.
Contact us: contact@actionforex.com
© ActionForex.com © 2025 All rights reserved.
BoE’s Greene: Trade War likely disinflationary for UK
BoE Monetary Policy Committee member Megan Greene said today that a trade war involving retaliatory tariffs would likely be “disinflationary” for the UK overall. Though she cautioned against putting too much weight on early modelling at this stage.
Greene pointed out that exchange rates would be a key transmission channel for the effects of global trade tensions. She also noted the possibility that the US dollar’s role as the world’s reserve currency could be “undermined a little bit” by the rising uncertainty, adding more unpredictability to how exchange rates, including GBP/USD, could respond.
On domestic inflation expectations, Greene maintained that they “remain anchored” for now but acknowledged the upward drift over the past six months as a growing concern. While she clarified that this is not currently a crisis-level issue—“not flashing red lights”—the trend warrants attention.