The upcoming week will focus on U.S. President Donald Trump’s plans for new tariffs. Alongside this, markets will also watch U.S. jobs data, an Australian central bank meeting, and a key eurozone inflation report.
Asia Pacific Markets
The main focus this week in the Asia Pacific region will be Chinese inflation and Japanese wage data as the BoJ eyes a rate hike in the coming months.
Next week, China’s low inflation could give the central bank (PBoC) room to cut interest rates. March inflation data, due Thursday, is expected to show consumer prices staying weak, with a slight rise of just 0.1% year-on-year.
Meanwhile, producer prices are likely to remain negative for the 30th straight month as input costs keep falling. These deflationary pressures and high real interest rates could push the PBoC to lower rates, though it has held off so far, waiting for the right moment.
The Bank of Japan will be watching wage data this week as the central bank eyes another rate hike. Wages are expected to improve gradually. February saw stronger labor cash earnings, helped by solid bonus payouts. However, real cash earnings are likely to keep shrinking as inflation peaked in the same month. Inflation eased in March due to energy subsidies and lower fresh food prices, supporting the outlook for a steady rise in wages over time.
The Reserve Bank of New Zealand will announce its interest rate decision on Wednesday next week. Market participants are expecting the central bank to cut rates by 25 bps. Given the tariff developments and the backdrop of the New Zealand economy a 25 bps cut seems all but certain at this point.
Europe + UK + US
In developed markets, the US is the major data player next week with the Euro Zone and the UK enjoying a data reprieve.
The US economy is facing growing challenges as President Trump’s new trade policies spark concerns about higher prices and slower economic growth. Steep tariffs, which are paid by importing companies, could hurt profit margins and reduce consumer spending, especially as worries about job losses grow and stock markets decline. While markets are increasingly expecting the Federal Reserve to cut interest rates, another high core CPI and PPI reading next week might make the Fed cautious about acting soon.
I will also be watching consumer confidence, which could drop further after recent events, and monitoring whether government spending cuts tied to DOGE are improving the fiscal situation.
The UK does not have any high impact data releases but I will be keeping a close watch on Friday’s GDP data print. After a slow January, I expect a small rebound in February’s monthly GDP. These figures can be quite volatile, but despite a quieter end to 2024, the outlook for 2025 still seems positive, even with the recent tariff news.
There are still of course challenges as evidenced by the Goldman Sachs group which lowered its UK GDP forecast down to 0.7% from a previous 0.8%.
The UK government is significantly increasing spending this year, which should help support growth. However, weaker economic activity in the US and eurozone could become a big challenge later this year and into 2026.
