Market Outlook for the Week of 25- 29 March

The upcoming week appears to be relatively quiet, with a few notable economic events and speeches from Federal Reserve officials. On Monday attention will be primarily focused on the United States, where data on new home sales will be released.

Moving to Tuesday, Australia will get the Westpac Consumer Sentiment figures, while Japan will release the BoJ core CPI y/y data. Meanwhile, in the U.S., investors will be monitoring core durable goods orders m/m, durable goods orders m/m, CB consumer confidence and the Richmond manufacturing index.

Wednesday sees Australia releasing inflation data, while Switzerland publishes its SNB quarterly bulletin.

Thursday brings the BoJ summary of opinions in Japan, will U.S. will get the GDP q/q, the final GDP price index q/q, the unemployment claims data, the Chicago PMI, pending home sales m/m, the revised UoM consumer sentiment and the revised UoM inflation expectations.

On Friday, many markets will observe Good Friday as a bank holiday, potentially resulting in lower liquidity. Nonetheless, Japan will release the Tokyo core CPI y/y data and the U.S. will announce the core PCE price index m/m; personal income m/m and personal spending m/m.

Fed Chair Powell is also scheduled to speak in a moderated discussion with Kai Ryssdal at the Macroeconomics and Monetary Policy Conference in San Francisco. Audience questions expected. Several Fed members are scheduled to deliver their remarks over the week.

New home sales data in the U.S. is likely to see a rise from 661K to 675K. New home sales were strong last year and they're expected to further strengthen this year as the market anticipates the Fed to cut rates in the summer. According to Analysts from Wells Fargo, home builders assess an increase in sales for the first quarter.

In Australia the consumer sentiment improved last month, but remains in pessimistic territory. The fact that inflation has cooled down and the RBA decided to keep rates at current levels contributed to the recent data. An improvement is also expected in this week's numbers, even though the RBA has left the door open for another rate hike if necessary. A better than expected jobs report for February might further help consumer sentiment, as well as the prospect of tax cuts later this year.

In the U.S. the consensus for the core durable goods orders m/m is a rise from -0.4% to 0.3%, while durable goods orders m/m are also likely to rise from -6.2% to 1.4%. Last year registered a significant drop in business equipment spending and consumer demand for durable goods which put pressure on the factory sector. However, this year is likely to see a rebound, as borrowing costs are expected to decrease.

Inflation has started to cool down in Australia lately, but February might show a slight increase. Analysts from ING expect y/y data to print at 3.5% following a 0.3% m/m increase. As a reminder the RBA decided to keep rates unchanged last week, but hinted that further hikes might be possible. Analysts don't expect any decision until September when data for the first half of the year will paint a clearer picture on whether inflation is firmly on a trajectory to the bank's desired target.

After last week's historic decision from the BoJ to raise its interest rates, this week's data might provide further clues on the future of Japan's monetary policy. There has been a lot of discussion on whether the BoJ will deliver another hike, but at this point this remains uncertain with analysts arguing both sides.

Tokyo CPI data will be very important to watch as it can show if inflation will persist above the Bank’s desired target of 2%. Last month, inflation came in hot as the effect of government energy subsidies which lowered the costs for households started to fade away. The consensus is for the CPI to remain steady in March, after the increase in February, with the year-over-year data expected to print at 2.5% and core inflation at 2.4%.

Analysts from ING argue that if inflation remains elevated and if the economic growth continues, the BoJ could be comfortable to do another hike later this year.

In the U.S. the core PCE price index m/m is expected to drop from 0.4% to 0.3%; personal income m/m is likely to rise by 0.4% compared to 1.0% prior and personal spending m/m to rise by 0.5% compared with 0.2% prior.

Last year was good for consumer spending, but the picture doesn't look as promising this year. Fed Chair Powell was not too concerned about the January and February PCE prints which were above expectations as the growth could have been a result of seasonal effects. He reiterated that more evidence was needed that inflation is heading towards the 2% target before starting rate cuts.