Global markets face a decisive week with the Fed meeting Wednesday amid sticky inflation and weakening consumer confidence. Trump's tariffs are stoking recession fears, with more planned for April. Major central banks (BoJ, BoE, PBoC) announce decisions as gold trades near record highs. Today's US retail sales will provide crucial insight into consumer resilience amid growing economic uncertainty.

Key Events and Data to Watch This Week

Monday, March 17

• 02:00: China Industrial Production (Feb)

• 02:00: China Retail Sales (Feb)

• 12:30: US Retail Sales (Feb)

Tuesday, March 18

• 12:30: Canada Consumer Price Index (Feb)

• 13:15: US Industrial Production (Feb)

Wednesday, March 19

• 03:00: Japan BoJ Interest Rate Decision

• 10:00: Eurozone Harmonized Index of Consumer Prices (Feb)

• 18:00: US Fed Interest Rate Decision

Thursday, March 20

• 00:30: Australia Employment Change (Feb)

• 00:30: Australia Unemployment Rate (Feb)

• 01:15: China PBoC Interest Rate Decision

• 07:00: UK Claimant Count Change (Feb)

• 11:00: UK BoE Interest Rate Decision

• 23:50: Japan National Consumer Price Index (Feb)

Friday, March 21

• 07:00: Canada Retail Sales (Jan)

All Eyes on the Fed: Inflation Sticks, Growth Wobbles, and Trade Tensions Escalate

Last week's data showed that underlying price pressures in the U.S. remained firm while consumer confidence declined, and at the same time, Donald Trump's escalating trade tensions continued to raise concerns about the economic outlook.

At first glance, both consumer price data and wholesale prices indicated a slowdown in inflation. However, a closer look at the subcomponents revealed that underlying inflation remained sticky. While consumers becoming more cautious in their spending has helped ease price pressures, concerns persist that tariffs will accelerate inflation.

Meanwhile, last week Trump's 25% global tariffs on aluminum and steel imports took effect. In response, the European Union and Canada announced countermeasures, further escalating trade tensions. However, Trump has vowed that more tariffs are coming in early April.

Speaking to reporters on Sunday, Trump stated that on April 2, both broad reciprocal tariffs and sector-specific additional tariffs would be implemented. The targeted sectors include automobiles, microprocessors, pharmaceuticals, lumber, and copper.

Trump's tariff policies and growing concerns over a full-scale trade war are weighing on consumer sentiment and driving inflation expectations higher. According to a survey conducted by the University of Michigan on Friday, U.S. consumer sentiment fell more than expected, reaching its lowest level in over two years.

Additionally, consumers now expect prices to rise by 3.9% annually over the next 5 to 10 years, a 0.4 percentage point increase from a month ago and the highest level since 1993. Short-term inflation expectations have also jumped from 4.3% to 4.9%.

Meanwhile, the survey indicates that consumers are becoming increasingly worried about job and income prospects. This reflects broader market concerns that tariffs will undermine growth and push the economy toward a recession. According to Bloomberg's analysis of news sources, social media posts, and other textual data, references to a recession have surged dramatically over the past two weeks.

At the same time, a separate Bloomberg survey of economists shows that growth forecasts for this year have been revised downward, while inflation projections have been adjusted upward. 74% of economists believe that Trump's policies will result in weaker-than-previously-expected growth in 2025, and two-thirds now anticipate higher inflation.

In a scenario where inflation remains sticky while the economy weakens, the Federal Reserve will face difficult decisions. Two-thirds of economists expect the Fed to prioritize inflation risks and keep rates steady under such circumstances. However, Fed Chair Jerome Powell has indicated that if the labor market weakens, rate cuts could be considered. As a result, such a scenario might eventually force the Fed to continue easing.

Indeed, economists expect the Fed to remain in "wait-and-see" mode in the first half of the year but to implement two quarter-point cuts starting in September. Swap market expectations are even more aggressive, with traders pricing in three quarter-point cuts this year, the first of which is anticipated in June.

This week, Fed policymakers will convene on March 18-19 and announce their policy decision on Wednesday, with no adjustments expected.

As Duhani Capital Research team, we see that the uncertainty surrounding the scale, timing, and targets of upcoming tariffs complicates the monetary policy outlook. As a result, we expect Fed officials to maintain a cautious stance on further easing. Policymakers are likely to acknowledge rising two-sided risks while attempting to reassure markets that the economy remains on solid footing.

During this meeting, Fed officials will also release updated economic projections. Markets will closely analyze these projections and Powell's press conference remarks for further clues on the path ahead.

Later today, attention will turn to February's retail sales data. Following last month's report, which showed a decline in consumer spending, economists expect a 0.7% increase. This data will reflect the balance between front-loaded demand ahead of the tariffs taking effect and the pressure that deteriorating consumer confidence is placing on discretionary spending.

Gold Hits $3,005: Tariffs, Rate Cut Bets, and Global Uncertainty in Focus

Gold pulled back after briefly hitting a new all-time high of $3,005 in Friday's session, as profit-taking and easing concerns over U.S. government funding weighed on the metal.

Gold has continued to benefit from increased safe-haven demand in recent weeks, driven by heightened economic and geopolitical risks stemming from Trump's policies. Tariffs are increasing the risk of a U.S. recession, which is boosting expectations for Fed rate cuts and weakening the U.S. dollar. A weaker dollar makes gold cheaper for foreign buyers, while lower interest rates reduce gold's opportunity cost and enhance its appeal.

Meanwhile, markets remain focused on geopolitical tensions. Negotiations regarding a ceasefire in the Russia-Ukraine war are ongoing, with Trump set to meet Russian President Putin on Tuesday. Previously, Putin had dismissed the prospect of a swift ceasefire, insisting on a set of conditions that Kyiv is unlikely to accept. Reaching a lasting agreement appears to be a challenging task.

At the same time, Trump announced that he had ordered a major offensive against the Houthis in Yemen. The U.S. Secretary of Defense stated that military operations would be relentless until the group ceases its attacks on civilian and military vessels in the Red Sea.

As a result, geopolitical tensions persist in both the Middle East and Eastern Europe. Considering these factors, along with ongoing global economic uncertainties, the recent pullback in gold prices is likely to be short-lived, and the upward rally may continue.