In focus today
Today, focus continues to be on tensions in the Middle East and its impact on energy markets. Trump stated on Friday that the US will be hitting Iran “very hard over the next week”, which likely will continue to disrupt already volatile energy markets.
Norway will release its February trade balance. The data will largely be driven by energy exports, although the recent surges in oil prices will not be reflected in the numbers.
In Canada, February inflation data is released this afternoon, ahead of this week’s monetary policy meeting, with headline inflation expected at 1.9% y/y (Jan: 2.3%). That would place inflation right around the Bank of Canada’s 2% target, marking a 6-month low if realized.
Also in the afternoon, US industrial production data will be released for February.
Overnight, Australia kicks off a busy week of monetary policy meetings. The Reserve bank of Australia is expected to hike the interest rate by 25bp to 4.10% from 3.85%, which would mark the second consecutive hike in a row. Markets have priced in an 80% probability for the hike.
For the rest of the week, we have interest rate decisions by Canada and the Fed on Wednesday followed up with decisions from Japan, Sweden, Switzerland, England, and the ECB on Thursday.
Economic and market news
What happened overnight
China released the monthly batch of data today covering both January and February (the two months released together due to Chinese New Year). The data were overall a bit better than expected with retail sales for the two months rising 2.8% y/y (cons: 2.5%, prev.: 0.9%). Housing data were also moderately positive as home prices declined less than in previous months. New home prices declined 0.43% m/m in February vs 0.54% m/m in January, the smallest decline since April last year. This is the most positive part of the report as a stabilisation in the housing market is key for lifting consumption as well. Industrial production for January and February increased 6.3% y/y (cons: 5.3%, prev.: 5.2%). As usual China comes stronger out of the gates in a new year, which may ease some growth concerns. However, we have tended to see growth decline again later in the year. Overall, the data is still in line with our scenario of continued muddling through and in line with the government’s growth target of 4½-5%.
In geopolitics and Nato, Trump warned Nato late on Sunday, stating it faces a “very bad” outlook if US allies in Europe fail to assist in opening the Strait of Hormuz. He emphasised that European nations, which rely heavily on Gulf oil, have a responsibility to ensure the security of the crucial waterway.
What happened over the weekend
The US-Israeli conflict with Iran has now entered its third week with tensions continuing. On Saturday, US forces struck Kharg Island, which handles ~90% of Iran’s oil exports, destroying key military infrastructure. President Trump warned that Iran’s energy infrastructure on the island could also be targeted if Tehran continues to interfere with shipping in the Strait of Hormuz, a move that would likely intensify the conflict and tighten global oil supplies further. The potential for a ceasefire, however, remains slim as positions appear to have hardened as the conflict has dragged on. Gulf states are reportedly pushing both sides to return to negotiations, but so far without success. While some Iranian political figures (most recently FM Araghchi) have signalled openness to talks, the ultimate decisions rest with the supreme leadership and the IRGC, so these signals should be treated cautiously. The new supreme leader was wounded earlier last week according to US secretary of war Pete Hegseth, but his current condition remains unclear.
The oil price is on the rise again. It opened close to USD107/bbl after another weekend of escalation in the war in Iran. The oil market is likely concerned about the US attacks on Kharg Island and Iran’s attacks on Fujairah in the United Arab Emirates – both important key points for the oil market. If oil installations are hit, it risks affecting oil supplies from the region, keeping prices high even after a reopening of the Strait of Hormuz.
In the US, the Fed’s preferred measure of inflation, the PCE, landed at 0.4% m/m for January (cons: 0.4%) and was close to expectations in both headline and core terms. However, Q4 GDP was revised quite notably lower to 0.7% q/q AR from the already below-expectations flash print of 1.4%. The revision comes particularly from weaker services consumption, and slightly weaker investments into structures and software intangibles. Contribution from net exports was also revised from mildly positive to negative, as the trade deficit re-widened towards the end of last year.
The University of Michigan’s consumer sentiment preliminary March survey showed that the 1-year inflation outlook was 3.4%, unchanged from the final February reading. This is the first consumer inflation expectation measure partially overlapping with the Iran war period. However, the survey period included only the first week of the war, and US gasoline prices had not yet picked up.
The delayed U.S. JOLTs report for January revealed 6.946m job openings, surpassing expectations of 6.700m (Dec: 6.55m). The solid labour market performance provides the Fed with room to monitor developments in the ongoing Iran conflict without immediate pressure to adjust policy rates.
Trade delegations from US and China met for a new round of trade talks yesterday with talks continuing today, preparing for some kind of deal at the Xi-Trump summit in Beijing at the end of this month. With the US focused on the ongoing conflict with Iran, Trump suggested on Sunday he might delay this month’s Beijing summit if China does not help unblock the Strait of Hormuz, leaving little prospect for a breakthrough.
In Norway the Technical Calculation Committee revised its price forecast for 2026 to 3.2% (prev: 3.0%), an important assumption ahead of this year’s central wage negotiations (starting 23 March) as it could affect nominal wage claims. In Norges Bank’s latest expectation survey, labour unions on average expected real wage growth at 1.2% in 2026. If so, nominal wage growth will end at 4.4%.
In the UK, January GDP growth was below expectations and stalled at 0.0% m/m (cons: 0.2% m/m, Dec: 0.1% m/m). While services growth was flat at 0.0% m/m (Dec: 0.2%), production declined 0.1% m/m (Dec: -0.9%). On a year-on-year basis, GDP expanded by 0.8% y/y, slightly higher than December figures of 0.7% y/y.
In Sweden, unemployment came in as expected at 8.4% after the big drop to 8.0% in January according to the Labour Force Survey. The increase in the unemployment rate was due to higher activity rate. Employment increased by 0.3% m/m, better than expected and encouraging given the weaker January GDP.
In China, credit and money data for February was released stronger than expected with Aggregate Financing YTD at CNY 9600bn (cons: 9245bn). M1 growth was up 5.9% y/y (prev: 4.9%), while M2 growth was flat at 9.0% y/y. It points to a moderate rebound after credit growth has been slowing during 2025.
Equities: Global equities traded on a weak footing towards the back end of the week. While the oil price surge on Monday took all the headlines, the theme towards the end of the week was more concerning of ‘stagflationary’ish’ dynamics. The sell-off has now resulted in a general decline across equity sectors, with only the energy sector posting positive return since the Iran war started. On Friday the S&P500 was -0.6%, Nasdaq -0.9%, Russell2000 -0.4% and Stoxx600 -0.5%. US futures are up this morning by about 0.4%, while Asian indices are somewhat down.
FI and FX: The war in the Middle East continues to impact markets, with rising yields and heightened inflation expectations. This week is packed with central bank meetings, (in order: the RBA, BoC, FOMC, BoJ, Riksbank, SNB, BoE and ECB), where markets will focus on how the central banks assess the impact of higher oil prices. In general, we expect a “wait and see” mode while signalling readiness to address inflation risks. Oil prices opened at close to USD107/bbl after another weekend of escalation in the war in Iran. The oil market is likely concerned about the US attacks on Kharg Island and Iran’s attacks on Fujairah in Iran – both key points for the oil market. Energy supply uncertainty could well prolong even further, and as long as it lasts, we see risks skewed towards EUR/USD declining even lower.
