The repercussions of Crimea's referendum to join Russia which will take place on Sunday is likely to be a focal point in the market next week. The result of the referendum is expected to be in favour of joining Russia, so focus will be on Russia's reaction to the request and how Europe and the US will respond to a possible Russian annexation of Crimea.
The FOMC meeting on Wednesday is set to be the highlight of the week. While we think the US is experiencing a genuine slowdown in the short run, it is likely to be temporary and we expect the FOMC to continue the tapering course and cut its asset purchasing programme by an additional USD10bn, reducing the QE3 to USD55bn.
February's final euro area HICP inflation figure is also due for release next week and may get some attention as we expect a slight downward revision to 0.7% y/y from the 0.8% y/y flash estimate.
Global macro and market themes
Following a strong rally in stock markets during February and early March, we are increasingly concerned that we are in for more of the correction that started over the past week. Most notably the Chinese, Japanese and US economies all have showed weak signs lately and tensions are rising in the Russia/Ukraine conflict.
The pressure is also rising on the ECB to deliver further easing. The EUR/USD keeps making new highs and the ECB's Mario Draghi on Thursday said that the euro's level is becoming 'increasingly relevant in our assessment of price stability'. Overall we continue to look for easing from the ECB.
To Read the Entire Report Please Click on the pdf File Below