Next week, the macroeconomic calendar has scheduled the publication of inflation data for March. It is already possible to estimate, based on the food price index published by the FAO, that inflation could break new records.
Global food prices rose nearly 13 percent in March, reaching a record high, as the war in Ukraine caused turmoil in markets for staple grains and edible oils, the U.N. food agency reported Friday. The Food and Agriculture Organization of the United Nations (FAO) food price index, which tracks most globally traded food commodities, averaged 159.3 points last month, compared with an upwardly revised 141.4 points in February. In February, the index was 140.7 points, which was a record at the time. So not only is the index at its highest level on record, but the rate of increase also appears to be the highest on record.
The market seems to be expecting a rise in CPI inflation next week. In Germany, the price index in March could rise by 7.6 percent, compared to 5.5 percent a month earlier. In the United States, on the other hand, prices may rise as much as 8.3 percent on an annualized basis, up from 7.9 percent in February. This would again be the highest reading in four decades. In Spain, on the other hand, the market consensus is that prices may have risen 9.8 percent in March from 7.6 percent earlier. Friday, in turn, will see data from Poland, where the preliminary estimate showed that prices may have risen by 10.9 percent in March in annual terms.
It seems that inflation will not slow down soon, which may influence further actions of central banks - rapid tightening of monetary policy and raising interest rates. This in turn could potentially increase volatility in the currency market. In the coming week, on Wednesday, the Bank of New Zealand may raise interest rates from 1 to 1.25 percent and the Bank of Canada from 0.5 to 1 percent. The consensus seems to indicate that the European Central Bank will leave interest rates unchanged.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service)
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