5 to 11 March: Weighing it Up

Last week, there were a number of important data releases and events for markets:

• In the US, average hourly earnings did not accelerate, and Trump’s tariff proposals were watered down.
• In Europe, the SPD voted to end Germany’s political deadlock and the ECB stayed dovish despite removing their easing bias by reducing their inflation forecast.
• In Japan, the Governor of the BOJ appeared to talk down the potential for policy normalisation
• Gary Cohn, Trump’s chief economic advisor, resigned in protest at Trump’s protectionist change of course.
• In Italy, the election result left no clear path for government and risks populist and unhelpful policy going forward.

We continue to believe we are in a new, higher volatility regime, and we also now see a tail risk of a Trump inspired trade war. Nonetheless, we think last week’s news flow, in aggregate, should be taken positively; there is not enough evidence that US inflation is accelerating (albeit we have another reference point on Tuesday with the release of February CPI) and, across the rest of the world, policymakers appear in no hurry to tighten the monetary purse strings.

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