Spotlight on Euro Area March Inflation Figures

In focus today

In the euro area, we receive the flash March inflation print. We expect HICP inflation will rise to 2.6% y/y (from 1.9%) while core inflation should fall slightly to 2.3% y/y (from 2.4%). The headline rise is driven by energy inflation, adding an estimated 0.9 p.p., with petrol prices up 15% m/m and diesel 28% m/m. Core inflation is expected to decline as the spike in Italian services inflation from the Winter Olympics reverses. The data is a key input for the ECB’s April meeting, but we note that it only captures part of the first-round effects of the war and no second-round effects. Hence, the April inflation print on April 30 will likely be more important for the ECB’s decision.

EU energy ministers will hold an informal video conference to coordinate their response to oil and gas market disruptions from the Iran war, amid heightened market uncertainty and national measures like Poland’s petrol price cap and Spain’s EUR5bn energy package.

In the central bank space, we have a string of ECB speeches as well as Federal Reserve speeches. There are four from ECB officials and three from Federal Reserve Officials. The market will as always be looking for comments on inflation, but also the negative impact on growth from the rise in oil prices.

In the US, the February JOLTS job openings report is due, offering the first labour market figure of the week. The stronger-than-expected January report reflected improved labour demand and fewer layoffs, supported by positive signals from online job postings.

In Sweden, Riksbank speeches are scheduled from Erik Thedéen at 8.00am and Per Jansson at 12.00pm, with the latter hosted by Danske Bank. Thedéen and Seim leaned hawkish at the last meeting, while Jansson, Hjelm, and Bunge remained dovish. Although it may be early for clear signals on the May meeting, with markets pricing a 50% chance of a May hike, we look forward to insights on their reaction function to supply shocks.

Overnight, China releases the private PMI manufacturing report from Rating Dog. Unlike the official NBS PMI, February’s Rating Dog PMI was strong at 52.1. The Yicai high-frequency indicator suggests further strength in March, though the Iran war adds uncertainty.

In Japan, the Q1 Tankan business survey, due overnight, will provide key insights for the Bank of Japan ahead of its policy meeting. Rising energy prices and a weaker yen threaten to erode consumers’ purchasing power, jeopardising a recovery.

Economic and market news

What happened overnight

In Japan, Tokyo’s March core CPI rose to 1.7% y/y, below expected, as fuel subsidies offset rising costs. An index excl. fresh food and fuel rose 2.3% after a 2.5% gain in February. Analysts expect inflation to pick up due to surging oil prices and a weak yen, with markets pricing a 70% chance of an April rate hike. BOJ Governor Ueda hinted at potential action. Separate February data, including a 2.1% m/m drop in factory output and a 0.2% y/y decline in retail sales, offers largely outdated insights

In China, the official March manufacturing PMI rose to 50.4, the highest in a year, up from February’s 49.0, signalling improved demand. Non-manufacturing PMI also increased to 50.1. While the stronger reading eases pressure on policymakers, analysts warn that surging energy prices from the Middle East war and global supply chain disruptions pose risks to sustained growth.

What happened yesterday

In the Middle East, Iran’s parliamentary Security Commission has approved a plan to impose tolls on ships passing through the critical Strait of Hormuz (SOH). The plan includes measures to enhance security, regulate maritime navigation, and charge rial-denominated tolls, with a prohibition on vessels from the US and Israel. This development adds to tensions in the ongoing conflict, which has already disrupted oil shipments and intensified global market volatility. Amid these rising tensions, President Trump warned that the US would obliterate Iran’s energy plants and oil wells if the SOH is not reopened to international shipping.

In the US, Fed Chair Powell signalled that higher energy prices resulting from the Iran war have not yet required immediate policy action, as the Fed can afford to wait and assess the war’s economic and inflationary impacts. While inflation remains above the 2% target, longer-term inflation expectations remaining anchored. Markets reacted by removing rate hike bets for this year. Fed’s Williams echoed Powell, noting the current rate setting allows flexibility to monitor inflation pressures before acting.

In the euro area, the EU Commission’s business sentiment survey indicates a sharp rise in selling price expectations for the next months in the industry for March, while services remained unchanged. The increase in industry expectations mirrors trends from 2021-2022 but remains below peak levels. Services, which typically lag industry, offer some reassurance for the ECB. Overall, the data aligns with PMI price trends and does not strongly point toward an April rate hike.

German CPI inflation rose in March, as expected, to 2.7% from 1.9% in February. The HICP measure rose marginally less than expected to 2.8% y/y (cons: 2.9%). German inflation rose to the highest level since January 2024, driven entirely by a 7.6% m/m surge in energy prices due to the Iran war. This increase is half the size of the March 2022 spike during Russia’s invasion of Ukraine. Core inflation remained stable at 2.5% y/y, with no impact beyond energy.

In Sweden, retail sales declined by 0.6% m/m in February 2026 compared with January. On a year-on-year basis, the calendar-adjusted retail trade volume grew by 2.4% in February. Sales of durables fell by 0.9%, while sales of consumables (excluding Systembolaget, the state-owned liquor store chain) remained flat.

Equities: Global equities had a steady run in European hours with “everything” in green. Upon US hours that sentiment shifted, leaving the MSCI world down 0.4%. S&P500 declined 0.4%, Nasdaq 0.7%, Russell2000 -1.5%. Stoxx600 was up 0.9%. Overnight, Asian equities are down, amid higher US futures, which up about 0.9%.

FI and FX: With no imminent signs of deescalation in the Middle East, asset vols remain at or close to year highs. That said, we have seen a notable change in price action this week with yields – both nominal and real yields – coming lower. This marks an important difference to recent weeks amid markets increasingly becoming concerned about the negative impact on growth from the war and the rising likelihood of central banks hiking into slowing economies. In FX markets, it has been a relatively calm start to the week albeit SEK has been a prominent underperformer amid renewed USD strength which has returned EUR/USD down below the 1.15 support level.