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Global Economy · Inflation · Interest Rates · Middle East War
The global financial markets are closely monitoring upcoming economic data, including U.S. jobs figures and Eurozone inflation, to assess the economic fallout from the Middle East war and its impact on energy prices, which has significantly altered interest rate expectations, with U.S. money markets now pricing a 42% chance of a rate increase in 2026, according to LSEG data.
The article highlights that developments in the Middle East conflict remain the primary driver for markets, overshadowing macro data, as Investec economist Sandra Horsfield states. Key data releases next week include the U.S. nonfarm payrolls report for March, which will provide insight into the labor market's health amidst rising energy costs.
In the Eurozone, flash inflation estimates for March are expected to show an increase, driven by higher fuel and fertilizer prices and a weaker euro, as noted by HSBC analysts. The U.K. market has seen a "massive change" in rate expectations, with LSEG data indicating three quarter-point rate increases in 2026 and a 73% chance of a Bank of England hike next month, a stark contrast to pre-war predictions of two rate reductions.
Across Asia, central banks like the Bank of Japan and the Reserve Bank of Australia are closely watching inflation and economic sentiment, with the RBA having recently raised rates in a split 5-4 vote. China's purchasing managers' surveys will reveal how businesses are managing increased input costs.
Asia FX Plummets; Japan CPI Misses BOJ Target
