Market movers today
In the euro area, focus remains on inflation with the release of the aggregate figure. We expect headline inflation decline to 1.6% in March, from 2.0% in February, driven partly by a fall in core inflation from 0.9% to 0.7%. If this core inflation figure is correct, it will be the lowest since April 2016. However, our estimate of a decline is due mainly to the early timing of Easter in 2016, causing low inflation in volatile package holiday prices in March this year. Added to the lower core inflation, the latest decline in the oil price together with less support from base effects in energy prices is also likely to have driven headline inflation lower, although energy price inflation should still have a considerable positive contribution to inflation. Finally, food price inflation has surprised on the upside recently, due mainly to cold weather in the winter months, but should not have continued and we look for a lower contribution in March. For more about the inflation outlook see Research: Euro area reflation story ending , 29 March.
US PCE core inflation for February is also due for release today. While headline inflation has been increasing rapidly and is almost at the Fed's 2% target, PCE core inflation has remained stuck around 1.7%. We expect the development of PCE core inflation to attract special interest in coming months given the comments at the last FOMC meeting that the Fed has a 'symmetric inflation target', which could be interpreted as the Fed will be willing to let inflation slightly overshoot the 2% target. Hence, it implies a more dovish tone. However, we will have to see whether it actually means it. Last time PCE inflation was at 2% was at the beginning of 2012. We estimate the PCE core increased 0.2% m/m, implying 1.7% y/y. Thus, we expect core inflation to remain at the same level it has stayed at since August 2016.
In Scandi markets, we expect focus to be on Norwegian unemployment, together with the government's presentation of its Perspectives 2017 report. The Swedish wage negotiating process will also be followed closely before the current contracts run out (midnight).
To read the entire report Please click on the pdf File Below