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Week Ahead: Accelerated Tightening

Published 03/20/2022, 12:47 AM

Central banks playing catch-up

The global economy is facing an incredible amount of uncertainty at the moment which is continuing to drive the volatility we’re seeing in financial markets.

Whether it’s uncertainty around inflation, interest rates, commodity prices, COVID, or Ukraine, the growth outlook has become extremely unclear and is constantly subject to significant revisions.

That has been clearly evident in recent months as central banks have been forced to dramatically accelerate their tightening plans despite facing the prospect of slowing growth, even recession risks. As it stands, investors appear relatively calm about the situation, but the way things are evolving, it may not take much to tip them over the edge.


Now that the Fed has raised interest rates for the first time since 2018 and signaled they are ready to do a lot more, investors are looking for clues if some of the next hikes will be supersized. It could be a choppy period for US stocks as investors assess whether the current inflationary environment will ultimately lead to a much sooner economic slowdown.

The upcoming week will primarily focus on all developments in Ukraine, President Biden’s attendance at the NATO emergency summit in Brussels on Thursday, and both Fed Chair Powell’s speech at the NABE conference on Monday and participation at the BIS panel about "challenges for central bank governors in a digital world" on Wednesday. Powell has made it clear that he is very confident in the economy and in the path of rate hikes the committee has forecasted.

The week is filled with a lot of economic data that includes new home sales, durable goods orders, the flash PMI readings, and the final consumer sentiment readings for March. Widespread pricing pressures will likely weigh on consumer sentiment, manufacturing and service activity. The housing market still remains hot, but surging mortgage rates will shortly cool that economy.


Focus next week will naturally remain on Ukraine and the progress, if any, in talks with Russia. Both sides have talked up progress at times recently but there still seems to be a significant gulf. Russia is also continuing its assault on various cities, despite the talks, which may signal how serious it’s taking the negotiations. Markets are pricing in a lot of optimism at this stage, leaving them vulnerable to any disappointment. Complacency could prove costly.

Next week offers a selection of economic data, most notably flash PMIs as well as appearances from ECB policymakers including President Christine Lagarde.


Next week offers some key data releases from the UK, most notably CPI inflation on Wednesday. The BoE is ahead of the curve compared to most others, but it signaled that it may be preparing to ease off the accelerator after raising rates in March. Inflation is expected to continue to rise though and a faster rate could see it postpone potential plans to slow the hiking cycle. PMIs on Thursday and retail sales on Friday are also in focus.


Putin is showing no signs of easing Russia’s assault on Ukraine which means more sanctions will be coming its way soon enough. The crippling impact on the economy has been acknowledged during some fiery statements this week but he remains undeterred.

The CBR also acknowledged the economic impact when keeping rates on hold at 20% on Friday. New forecasts will be presented in April.

South Africa

Inflation rose to 5.8% in February, data is expected to show on Wednesday, which will likely push the SARB to raise rates a day later by another 25 basis points to 4.25%. This will be the third consecutive rate hike and the focus will be on how many more are signaled to follow. With inflation right at the upper end of the 3-6% target, further hikes will likely be warranted.


Only tier three data being released next week. The CBRT left interest rates unchanged on Thursday and is still conducting its monetary policy review. No sign of a change of course despite inflation surpassing 54% and likely to rise further.


Chinese equities staged a huge reversal this past week, rallying aggressively after the government announced a number of stock market support measures. The rally has faded and markets appear to be waiting for concrete action instead of talk now. The first opportunity will be Monday when China announces its 1 and 5-year Loan Prime Rates decisions. A cut of the 1-year LPR is more likely and will give the rally renewed vigor.

The Ukraine conflict and the threat of sanctions for supporting Russia militarily still loom over China markets. Negative developments on this front or the US-China meeting could negatively impact equities.

COVID restrictions have been eased in Shenzhen, but increased in Shanghai. Greater COVID restrictions announced over the weekend could be negative for China equities.


India has no significant data this week except bank loan growth on Friday. A low number could be a negative for equities. The rupee and local stocks continue to be buffeted by fast-money sentiment flows related to the evolution of the Ukraine situation.

Russia and India are exploring a ruble/rupee structure to circumvent international sanctions. The US and Europe have been quiet thus far, but if they decide that it may violate sanctions, and threaten direct sanctions, local equities could suffer.


Australian markets and equities have rebounded on better investor sentiment internationally, and very strong employment data in the week past. Markets are continuing to price a change in direction by the RBA because of this. RBA Governor Lowe speaks on Tuesday, and if he hints that a change is coming, that could boost the AUD, but be negative for equities.

New Zealand

The New Zealand dollar has also rebounded on improved international sentiment, but like the AUD, remains acutely vulnerable to negative shifts in it. With noises mounting over the cost of living domestically, the RBNZ has found itself in a very bad place of its own making. A poor balance of trade number on Monday will further narrow its monetary box canyon and be a potential headwind for the currency and local equities.


USD/JPY has jumped above 118.00 as markets price in Japan’s soaring imported energy bill and the widening US/Japan interest rate differential. With the BoJ remaining unchanged, a firming of US yields could be enough to send USD/JPY over 120.00.

Japan releases Tokyo CPI on Friday, but given the BoJ has remained ultra-dovish, its effect will be minimal.

Japanese equities continue to follow the swings in international investor sentiment surrounding the Ukrainian situation.


Singapore releases core and headline inflation on Wednesday. High prints could lock and load an expected MAS tightening in April and that could weigh heavily on local equities from the mid-week.

Economic Calendar

Sunday, March 20

No scheduled major events

Monday, March 21

Economic Data/Events

  • NABE conference with speeches from the Fed Chair Powell and Bostic
  • China loan prime rates
  • New Zealand trade, card spending
  • RBI Governor Das speak at an India Industry event

Tuesday, March 22

Economic Data/Events

  • Fed’s Daly to speak at Bloomberg Equality Summit
  • ECB President Lagarde to speak at BIS innovation summit
  • RBA Governor Lowe attends the Meet the Regulators ASIC Annual Forum 2022.
  • The ECB’s Fabio Panetta to speak at Fourth annual joint conference of Bundesbank, ECB and Federal Reserve Bank of Chicago
  • New Zealand consumer confidence
  • Australia consumer confidence

Wednesday, March 23

Economic Data/Events

  • Fed Chair Powell and BOE Gov Bailey to speak at BIS panel on challenges for central bankers in a digital world
  • UK Chancellor Sunak’s Spring Statement
  • US new home sales
  • UK CPI
  • South Africa CPI
  • Singapore CPI
  • Russia industrial production
  • Eurozone consumer confidence
  • Mexico international reserves
  • Thailand trade
  • Japan leading index, machine tool orders
  • EIA crude oil inventory report

Thursday, March 24

Economic Data/Events

  • President Biden attends NATO emergency summit in Brussels
  • US initial jobless claims, durable goods
  • European Flash PMI readings: Eurozone, France, Germany, UK
  • Mexico Rate Decision: Expected to raise rates 50bps to 6.50%
  • Norway central bank (Norges) rate decision: Expected to raise rates by 25bps to 0.75%
  • South Africa central bank (SARB) rate decision: Expected to raise rates by 25bps to 4.25%
  • Switzerland central bank (SNB) rate decision: No changes expected with policy rate
  • Eurozone Markit services PMI
  • Australia PMI
  • Japan PMI, department store sales
  • China SWIFT payments CNY

Friday, March 25

Economic Data/Events

  • US University of Michigan consumer sentiment
  • China BoP current account balance
  • Day 2 of Emergency NATO leaders Meeting
  • Spain GDP Spain
  • Germany IFO business climate
  • Japan Tokyo CPI, PPI services
  • Singapore industrial production
  • Thailand foreign reserves, manufacturing production index, capacity utilization

Sovereign Rating Updates

  • Netherlands (Fitch)
  • Germany (S&P)
  • Saudi Arabia (S&P)
  • Hungary (Moody’s)
  • Sweden (Moody’s)
  • European Union (DBRS)

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