The dollar mounted a broad-based recovery against the majors last week. NOK, CHF, and CAD outperformed while AUD, EUR, and JPY underperformed. The Fed delivered the cautious hold that we expected last week but stressed that tariff-induced inflation was likely to be transitory. This week brings March global PMI readings that will help determine if U.S. exceptionalism is indeed over.

AMERICAS

The markets are still digesting last week’s hold from the Fed. To us, the most noteworthy aspect of the decision was Powell’s insistence that tariff-related inflation would be transitory. While that remains to be seen, it appears that markets are giving Powell the benefit of the doubt, at least for now. When all is said and done, market pricing has remained steady, with three cuts still priced in this year. Bostic and Barr speak Monday. Kugler and Williams speak Tuesday. Kashkari and Musalem speak Wednesday. Barkin speaks Thursday. Barr and Bostic speak Friday.

Preliminary March S&P Global PMIs Monday will be important. Manufacturing is expected at 51.8 vs. 52.7 in February, services is expected to remain steady at 51.0, and the composite index is expected at 51.3 vs. 51.6 in January. If so, the composite would fall for the third straight month to the lowest since April 2024, and would confirm that U.S. economic outperformance has likely ended for now. That said, markets put more weight on the ISM PMIs, which will be reported next week.

Chicago Fed reports February National Activity Index Monday. Headline is expected at -0.17 vs. -0.03 in January. If so, the three-month moving average would fall to -0.01 vs. 0.03 in January but would remain well above the -0.7 threshold that typically signals recession.

Conference Board reports March consumer confidence Tuesday. Headline is expected at 93.6 vs. 98.3 in February. if so, this would be the lowest since January 2021 and would move below the rather narrow range that’s held throughout the past several years. Watch out for the labor index (jobs plentiful minus jobs hard to get). In February, this index fell to a four-month low of 17.1 vs. 19.4 in January. This suggests consumers are less optimistic about future labor market conditions and could ultimately restrain household spending intentions. University of Michigan reports its final March consumer sentiment Friday.

The growth outlook remains mixed. The Atlanta Fed GDPNow model estimates Q1 growth at -1.8% SAAR and will be updated Wednesday. This update will include the growth estimate adjusted for foreign trade in gold. Elsewhere, the New York Fed Nowcast model is tracking Q1 growth at 2.7% SAAR and Q2 growth at 2.6% and will be updated Friday. Of note, we get the final revision to Q4 GDP data Thursday, with growth expected to remain steady at 2.3% SAAR.

February PCE data will be reported Friday. Headline is expected to remain steady at 2.5% y/y while core is expected to pick up a tick to 2.7% y/y. The Cleveland Fed’s inflation Nowcast model estimates headline and core PCE at 2.4% and 2.6%, respectively. Looking ahead, that model estimates March headline and core at 2.1% and 2.5%, respectively. The median FOMC forecast for 2025 headline PCE inflation was raised two ticks to 2.7%, while core PCE inflation was raised three ticks to 2.8%. According to Powell, “a good part” of the marked-up inflation comes from the expected impact from tariffs.

Personal income and spending data will be reported at the same time. Personal income is expected at 0.4% m/m vs. 0.9% in January. Meanwhile, personal spending is expected to recover after being negatively affected by the cold weather in January, with nominal spending expected at 0.5% m/m vs. -0.2% in January and real spending expected at 0.3% m/m vs. -0.5% in January. The mixed February retail sales report and worsening consumer confidence point to softer consumer spending activity ahead. Indeed, the Atlanta Fed GDPNow model estimates that Q1 real personal consumption expenditures declined from 1.1% to 0.4%.

Canada reports January GDP data Friday. In December, Statistics Canada advance information indicated that real GDP by industry increased 0.3% m/m after rising 0.2% in December. The February GDP estimate will be published at the same time and will likely point to deteriorating economic activity. Bank of Canada Governor Macklem warned that the pervasive uncertainty of U.S. trade policy is “already causing harm” to the Canadian economy. However, with both headline and core CPI inflation tracking above the BOC’s Q1 projection, the bank has limited room to ease policy further to offset the drag to growth from heightened trade policy uncertainty. Markets are pricing in 50 bp of easing over the next 12 months that would see the policy rate bottom near 2.25%.

EUROPE/MIDDLE EAST/AFRICA

Eurozone reports preliminary March PMIs Monday. Headline manufacturing is expected at 48.2 vs. 47.6 in February, services is expected at 51.1 vs. 50.6 in February, and the composite is expected at 50.7 vs. 50.2 in February. if so, the composite would be the highest since August. Looking at the country breakdown, the German composite is expected at 51.1 vs. 50.4 in February while the French composite is expected at 46.1 vs. 45.1 in February. Italy and Spain will be reported with the final PMI readings in early April.

German March IFO business climate survey will be reported Tuesday. Headline is expected at a seven-month high of 86.8 vs. 85.2 in February, with current assessment expected to rise six ticks to 85.5 and expectations expected to rise 2.5 points to a nine-month high of 87.9.

ECB February inflation expectations will be reported Friday. 3-year expectations are expected to remain steady at 2.4%. With longer-term inflation expectations still well anchored around 2%, the ECB has scope to deliver on market expectations for 50 bp of easing over the next 12 months. Holzmann, Makhlouf, and Escriva speak Monday. Kazimir, Holzmann, Vujcic, and Nagel speak Tuesday. Villeroy and Cipollone speak Wednesday. Guindos, Villeroy, Wunsch, Escriva, and Schnabel speak Thursday.

U.K. highlight will be February CPI data Wednesday. Headline CPI is expected at 2.9% y/y vs. 3.0% in January, core CPI is expected at 3.6% y/y vs. 3.7% in January, and CPIH is expected at 3.8% y/y vs. 3.9% in January. Of note, services CPI is expected at 4.9% y/y vs. 5.0% in January. For reference, the BOE projects headline CPI at 2.8% y/y and services CPI at 5.1% y/y in February.

At last week’s meeting, the Bank of England kept rates steady at 4.50%, as expected. The bank stuck to its guidance of “a gradual and careful approach” to further rate cuts. However, the 8-1 vote split to stay on hold was a hawkish surprise and triggered an upward adjustment to U.K. rate expectations. Staunch dove Dhingra preferred a 25 bp cut after voting in favor of a 50 bp cut in February. Furthermore, Mann voted with the majority to keep rates steady after supporting a 50 bp cut in February. The swaps market continues to price in 50 bp of easing over the next 12 months, but has fully priced out any odds of an additional 25 bp cut following the less dovish MPC vote split. Bailey speaks Monday. Dhingra speaks Wednesday.

Chancellor of the Exchequer Reeves will deliver the Spring Budget Statement Wednesday. Reeves is expected to turn to public spending reduction rather than tax hikes to balance the books. Also, gilt issuance for the 2024/2025 financial year is forecast to be raised GBP10 bln to near a record sum of GBP310 bln. The fiscal backdrop is not pretty. Borrowing in the first eleven months of the 2024-25 financial year totaled GBP132.2 bln, reflecting both higher spending and lower tax receipts. This was GBP14.7 bln more than at the same point in the last financial year and the third highest financial year-to-February borrowing since monthly records began in 1993. It’s also GBP20.4 bln above the monthly profile consistent with the Office for Budget Responsibility’s forecast.

U.K. reports preliminary March PMIs Monday. Manufacturing is expected at 47.2 vs. 46.9 in February, services is expected to remain steady at 51.0, and the composite is expected to remain steady at 50.5. Given recent softness in the U.K. data, we see downside risks to the PMIs.

February retail sales data will be reported Friday. Retail sales ex-auto fuel is expected at -0.5% m/m vs. 2.1% in January, while headline is expected at -0.4% m/m vs. 1.7% in January. Weak consumer sentiment remains a major barrier to growth.

Riksbank publishes minutes from the March meeting Wednesday. At last week’s meeting, the bank kept rates steady at 2.25% and signaled it was done easing. The Riksbank stressed that “the rate will remain at this level going forward” which is line with its December forecast. The swaps market is moved into line with Riksbank guidance and is no longer pricing in one last 25 bp cut.

Norges Bank meets Thursday and is expected to keep rates steady at 4.50%. However, the market is split. A third of the 12 analysts polled by Bloomberg look for 25 bp cut, while the swaps market sees around 30% odds of a 25 bp cut. At the January meeting, the Norges Bank kept rates steady at 4.50% and reiterated that “the policy rate will most likely be reduced in March.” Since then, inflation has overshot the bank’s Q1 projection and the bank’s Regional Network contacts report a pickup in growth in Q1. These developments have strengthened the case for delaying the start of easing. The swaps market is pricing in only 25 bp of easing over the next 12 months, followed by another 50 bp over the subsequent 12 months that would see the policy rate bottom near 3.75%. Of note, updated macro forecasts will be released at this week’s meeting and 2028 will be added to the forecast horizon.

ASIA

Bank of Japan releases minutes of the January 23-24 meeting Tuesday. At that meeting, the bank delivered the expected 25 bp hike. Only Nakamura dissented on raising rates, which is not surprising as he also voted against raising rates last July. Governor Ueda also cautioned that the policy path will be guided by the impact of rate hikes already undertaken. This argued against an aggressive pace of tightening.

The summary of opinions from the March 18-19 meeting will be released Friday. At last week’s meeting, the bank delivered the expected hold and still sounded cautious. The decision was unanimous. Governor Ueda reiterated the bank’s guidance that it would continue to raise the policy rate if the outlook for economic activity and prices will be realized, adding that the real interest rate is very low. However, the BOJ cautioned “there remain high uncertainties surrounding Japan's economic activity and prices, including the evolving situation regarding trade.” The comments reinforce market pricing for a BOJ terminal rate around 1.25% over the next two years, with the next 25 bp hike priced in for September.

Japan reports preliminary March PMIs Monday. In February, the composite PMI rose to the highest since September.

March Tokyo CPI data will be reported Friday. Headline is expected to remain steady at 2.8% y/y, core (ex-fresh food) is expected to remain steady at 2.2% y/y, and core ex-energy is expected to remain steady at 1.9% y/y. Despite low Tokyo core inflation, the national reading remains elevated.

Australian Treasurer Chalmers will deliver a pre-election budget Tuesday. The government is expected to show spending restraint to avoid complicating the RBA’s job of curbing inflation pressures. Australia must hold an election by May 17 and the Labor government is almost neck-and-neck with the center-right opposition coalition in polls.

February CPI data will be reported Wednesday. Headline is expected to remain steady at 2.5% y/y. It’s worth noting that the RBA focuses on the quarterly CPI prints as they are less volatile and capture more items than the monthly CPI indicator.

Australia reported firm preliminary March PMIs. Manufacturing came in at 52.6 vs. 50.4 in February, services came in at 51.2 vs. 50.8 in February, and the composite came in at 51.3 vs. 50.6 in February. This was the highest composite reading since August and suggests some underlying strength in the economy.