TD Securities reports a heavy US data week covering GDP, the PCE Price Index, ISM manufacturing, and consumer confidence, plus durable goods orders, trade data, housing data, and regional Fed surveys. The releases are expected to shape the near-term picture for the US Dollar.
The week’s data is expected to show early effects from the Iran conflict through higher oil prices and tariff pressures. These factors are expected to lift headline inflation and support nominal spending, while weighing on real spending.
Key Inflation And Spending Signals
March core PCE inflation is forecast at 0.26% m/m and 3.2% y/y, with headline PCE at 0.64% m/m and 3.5% y/y. Personal spending is projected at 0.7%, while real spending is expected at 0.1%.
Q1 GDP is expected to rise to 2.2% q/q annualised after 0.5% in Q4, led by a rebound in government spending after the shutdown. Consumer spending within GDP is expected to slow to 1%.
ISM manufacturing is forecast to increase to 53.5 despite higher input costs. Consumer confidence is expected to edge lower due to higher petrol prices.
We are facing a familiar environment of stagflationary risks, echoing the concerns we analyzed back in early 2025. The recent March 2026 CPI report showed inflation remains sticky at 3.8% year-over-year, which is complicating the outlook for interest rates. This persistence is forcing a reassessment of how long the Federal Reserve can maintain its current policy.
Unlike the growth rebound we anticipated in Q1 2025, current signals for the U.S. economy are weakening. The Atlanta Fed’s GDPNow tracker is currently pointing to a modest 1.5% annualized growth for the first quarter of this year. This combination of slowing growth and elevated inflation puts pressure on corporate earnings and real consumer spending.
Market Implications For Traders
Just as we saw with the Iran-related oil shock in 2025, we are now facing another supply-side pressure from recent OPEC+ production cuts, which have pushed WTI crude back above $90 a barrel. This directly impacts upcoming headline inflation figures and is likely to weigh on real household spending. For derivative traders, this means pricing in higher volatility for energy and transportation sectors.
With the Federal Reserve’s hands tied by inflation, expectations for rate cuts are being pushed out, with Fed Funds futures now pricing the first potential move for early 2027. This policy uncertainty is causing the VIX, which had been hovering near 14, to creep back toward the 18 level. Traders should consider buying puts on broad market indices like the SPX as a hedge against a potential downturn driven by these stagflationary pressures.
This environment generally supports a stronger US Dollar, as capital seeks safe havens amidst global uncertainty. We believe long call options on the U.S. Dollar Index (DXY) offer a favorable risk-reward profile over the next several weeks. Selling short-dated, out-of-the-money puts on interest rate-sensitive sectors could also be a viable strategy to collect premium while the market waits for more clarity.
