Week commencing 16 March 2026

ASX 200 and US equity markets react to geopolitical unrest

United States (US) equity markets are set to finish the week in the red for a S&P 500 is down 1%, and the Nasdaq 100 has eased 0.44%. Escalating tensions in the Middle East and the resulting surge in oil prices are reigniting inflation fears, weighing heavily on risk sentiment, and effectively dashing hopes for multiple interest rate cuts by the Federal Reserve (Fed) this year.

Closer to home, the ASX 200 is currently trading 2.72% lower at 8610, poised for a second week of losses, and down 6.38% at the halfway mark for March. The local index is tracking the global pullback, with higher energy costs adding to inflation pressures and contributing to expectations for the Reserve Bank of Australia (RBA) to lift its official cash rate by 25 basis points (bp) next week.

The week that was: highlights

• US existing home sales for February rose 1.7% month-on-month (MoM), significantly rebounding from January's -8.4% decline and beating the 3.89 million consensus
• The February core inflation rate met expectations, rising 0.2% MoM, and holding steady at 2.5% year-on-year (YoY)
• Initial jobless claims dipped slightly to 213,000 for the week ending 7 March (a touch below the 215,000 expected)
• China's headline inflation rate for February jumped to 1.3% YoY, significantly exceeding the 0.8% consensus and accelerating from 0.2% prior. Core inflation rose 1.0%, up from 0.2% in January
• Chinese balance of trade for January – February came in at $213.62 billion, comfortably beating the $179.6 billion consensus, driven by strong export growth of 21.8% YoY
• Japanese household spending for January fell 2.5% MoM and -1% YoY, significantly missing consensus expectations for a rise
• Australia's Westpac consumer confidence index for March edged up 1.2% to 91.6, improving from February's -2.6% decline
• However, the NAB business confidence for February dropped to -1 from a revised 4 prior, marking its first negative reading in 11 months
• Crude oil surged 6.62% this week to $96.92
• The US dollar index (DXY) lifted 0.90% to 99.73
• Bitcoin rose 6.82% to $70,482
• Gold fell 1.46% to $5095
• Wall Street's gauge of fear, the volatility index (VIX), eased to 27.28 from 29.48 the previous week.

Key dates for the week ahead

Australia & New Zealand

• AU – RBA interest rate decision: Tuesday, 17 March at 2.30pm AEDT
• AU – RBA press conference: Tuesday, 17 March at 3.30pm AEDT
• NZ – Current account (Q4): Wednesday, 18 March at 8.45am AEDT
• NZ – Gross domestic product (GDP) growth rate (Q4): Thursday, 19 March at 9.45am AEDT
• AU – Labour force report: Thursday, 19 March at 11.30am AEDT
• NZ – Balance of trade: Friday, 20 March at 8.45am AEDT

China & Japan

• CN – House price index: Monday, 16 March at 12.30pm AEDT
• CN –Industrial Production (IP), retail sales, and Fixed Asset Investment (FAI)I: Monday, 16 March at 1.00pm AEDT
• JP – Balance of trade (exports): Wednesday, 18 March at 10.50am AEDT
• JP – Bank of Japan (BoJ) Governor Ueda speech: Thursday, 19 March at 1.30pm AEDT
• JP – BoJ interest rate decision: Thursday, 19 March at 2.00pm AEDT
• CN – Loan prime rate (1Y & 5Y): Friday, 20 March at 12.15pm AEDT

United States

• US – Producer Price Index (PPI): Wednesday, 18 March at 11.30pm AEDT
• US – Factory orders: Thursday, 19 March at 1.00am AEDT
• US – Federal Open Market Committee (FOMC) meeting: Thursday, 19 March at 5.00am AEDT
• US – Initial jobless claims: Thursday, 19 March at 11.30pm AEDT

Europe & United Kingdom

• UK – Employment: Thursday, 19 March at 6.00pm AEDT
• UK – Bank of England (BoE) interest rate meeting: Thursday, 19 March at 11.00pm AEDT
• EA – European Central Bank (ECB) interest rate meeting: Friday, 20 March at 12.15am AEDT

Key events for the week ahead

AU: RBA interest rate decision

Date: Tuesday, 17 March at 2.30pm AEDT

At its last meeting in February, the RBA raised its official cash rate by 25 bp to 3.85%. This was the RBA's first hike since November 2023 and came just six months after its last cut, underscoring a rapid pivot back to tightening as resurgent inflation pressures became impossible to ignore.

Since the February meeting, domestic data has mostly come in firmer than expected. January’s labour market report showed employment rising a solid 17,800, with the unemployment rate holding steady at 4.1%. Core inflation edged up to 3.4% in January, marginally firmer than anticipated, while fourth-quarter (Q4) GDP exceeded expectations, rising 2.6% YoY — its fastest rate of economic growth since the first quarter (Q1) of 2023.

While household spending and house prices have shown some moderation, and the government is signalling a tighter fiscal stance in the upcoming May budget, the board confronts a difficult dilemma from the conflict in the Middle East.

Global oil price shocks are, in principle, the type of supply-side events central banks try to look through. But with inflation already above target, combined with this week's sharp jump in inflation expectations, the RBA can hardly afford to sit on its hands given the risk that inflation expectations could become unanchored.

This position was further cemented by hawkish communication from RBA Deputy Governor Andrew Hauser, who explicitly warned that higher oil prices would only add to already ‘too high’ inflation pressures.

Consequently, pricing in the Australian rates market has shifted aggressively this week. It is now pricing in around 20 bp of tightening for next week's board meeting — equivalent to roughly an 80% probability of a 25 bp hike, which would lift the cash rate to 4.10%. Looking further ahead, the curve embeds approximately 71 bp of cumulative hikes by the end of 2026.

That aligns closely with expectations for three 25 bp increases in total, which would lift the cash rate from its current 3.85% to 4.60%, the highest level since October 2011.

RBA official cash rate chart

US: FOMC meeting

Date: Thursday, 19 March at 5.00am AEDT

At its January meeting, the FOMC maintained the target range for the Fed funds rate at 3.50% – 3.75%, emphasising a data-dependent approach in the face of resilient growth and lingering core inflation pressures.

No change is widely expected next week, with futures pricing in a near-100% probability of a hold, but all eyes will be on the updated summary of economic projections, the new dot plot, and Chair Powell’s press conference.

The escalating Middle East conflict and surging energy prices have resulted in a dramatic repricing of expectations around further easing by the Fed this year. The US rates market is now pricing in just 20 bp of easing for the whole of 2026 — a sharp reduction from the 50 bp of cuts priced in at the end of February.

That repricing occurred despite last week’s softer-than-expected February non-farm payrolls report, which showed a loss of 92,000 jobs added against consensus forecasts for 70,000, accompanied by a rise in the unemployment rate to 4.4% from 4.3%. The disappointing print has reignited concerns that the US labour market is beginning to cool more noticeably, even as the overall picture remains relatively solid.

The softer labour market data puts the Fed in somewhat of a bind as it faces higher inflation pressures, making the balance of risks in the updated projections and Powell’s remarks especially critical for setting the tone on rate expectations well beyond the immediate decision.

Fed funds rate chart

AU: labour force report

Date: Thursday, 19 March at 11.30am AEDT

For January, Australian employment rose by 17,800, roughly in line with expectations after December's outsized surge. The unemployment rate held steady at 4.1%, beating forecasts for a small uptick to around 4.2%, while the participation rate also held steady at 66.7%.

Despite some recent data volatility, January's print reinforced the picture of a resilient labour market, aligned with RBA liaison reports of ongoing labour market tightness.

While next week's labour force report won't directly influence the outcome of the RBA's board meeting on Tuesday (given its release two days later), it will be a critical input ahead of the RBA’s May decision.

The RBA is highly attuned to inflation risks stemming from the Middle East conflict (on top of already elevated inflation) and will be watching keenly for any signs that increasing labour market tightness could feed through into higher wages. Another unexpectedly strong number would undoubtedly reinforce the need for further rate hikes ahead.

At this point, the market is looking for a modest gain of around 15,000 jobs, with the unemployment rate expected to hold steady at 4.1%.

Australian unemployment rate chart

UK: BoE interest rate meeting

Date: Thursday, 19 March at 11.30am AEDT

At its last meeting in February, the BoE held the official bank rate steady at 3.75% on a close 5 - 4 vote, with four members voting to cut the bank rate by 25 bp to 3.5%. The committee noted that ‘the risk of greater inflation persistence has continued to become less pronounced, while some risks to inflation from weaker demand and a loosening labour market remain.’

However, the evolving conflict in the Middle East and the associated rise in oil prices have injected fresh uncertainty. Higher energy costs could easily slow the disinflation process and add to near-term inflationary pressures.

This development comes at a crucial time. Markets, which had been pricing in a high probability of a 25 bp cut at this meeting following the narrow February vote and dovish signals from Governor Bailey, now firmly expect the BoE to keep rates on hold at least until the second half of this year.

BoE official bank rate chart

EA: ECB interest rate meeting

Date: Friday, 20 March at 12.15am AEDT

At its last meeting in February, the ECB kept its deposit facility rate unchanged at 2%, reiterating its expectation for inflation to stabilise at the 2% target over the medium term while stressing a data-dependent approach.

While no change in rates is anticipated next week, the new staff projections and President Lagarde’s press conference will be keenly watched. The energy-price surge from Middle East tensions has clouded the disinflation path, likely injecting more hawkish overtones into the outlook   a shift already foreshadowed by ECB policymaker Peter Kazimir, who warned that a 'rate hike on Iran may be closer than thought.'

After spending the first two months of 2026 expecting the ECB to keep rates on hold for the majority of 2026, the European rates market has now aggressively repriced.

A first 25 bp rate hike is fully priced for the July meeting, with a second 25 bp increase almost fully priced for the ECB’s December meeting.

ECB deposit rate chart