Trading Week Ahead: 23rd–27th March 2020
Key Events This WeekTuesday
EUR French Flash Services PMI, German Flash Manufacturing PMI, German Flash Services PMI, Eurozone Flash Composite PMI
GBP Flash Manufacturing PMI, Flash Services PMI
NZD RBNZ Rate Statement, RBNZ Interest Rate Decision
EUR German Ifo Business Climate Index
USD Core Durable Goods
GBP Retail Sales, MPC Announcement, Monetary Policy Summary, Minutes
USD Crude Oil Inventories, GDP
(Times adapted to AEDT timezone)
Peak volatility continued to wreak havoc on global indices as concerns around the ever-growing coronavirus pandemic deepened, fuelling another wild week on the markets. Since the outbreak in China in December of last year, the number of virus-related deaths has grown exponentially. Last week the Fed and other central banks hurriedly implemented further rounds of fiscal and monetary stimulus measures to soften the economic blow, while governments continue to urge self-isolation as a means to slow the spread.
There’s been a distinct lack of liquidity after one of the steepest market sell-offs in history and with the financial centres of New York and London the latest cities to descend into lockdown mode, things may be looking to get worse before they get better. Businesses around the world are shutting their doors, and the prospect of a global recession has suddenly become very much a reality, as steep rises in unemployment and disrupted supply chains begin to put pressure on productivity. The U.S. jobs market looks to be particularly affected with employment data forecasts for April already suggesting unprecedented numbers.
In Times of Uncertainty, U.S. Dollar Soars
With Dollar liquidity in short supply, the Fed announced emergency actions to shore up the situation, and coupled with a brief uplift in the price of US crude, the Dollar started a powerful rally that dominated the week. The Dollar Index rose by more than 3% as a number of its rival currencies slumped to multi-year lows, and with Gold continuing to be affected by the wider market sell-off, the Dollar is firmly in the driving seat as investors seek the safest financial asset. With the potential for further emergency action by the Fed this week, will we see the rally dampen, or will the current surge in risk aversion drive the index to new heights? It was certainly a different story for U.S. stock markets with an attempted late-week rally fizzling out Friday as the Dow, S&P 500 and Nasdaq all posted double-digit falls to end the week. Year to date, all three remain in the red, with a year’s growth wiped out after this month-long crash, and it remains difficult to pick a bottom.
Aussie Hits the 50s
The run on the Australian dollar continued last week as it endured another fall from grace, hitting its lowest level in nearly 18 years as it reached $0.55 against the U.S. Dollar. A fresh bout of panic selling drove the downturn and with the renewed demand for its U.S. counterpart and the current global mood for safe assets, there might be further moves to come. The Aussie did rebound Friday but has lost over 17% of its value since the start of the year. Much of that has been driven by the recent market volatility, and during the RBA’s latest emergency meeting last week, the central bank announced a historic 0.25 per cent cut to interest rates amid a wider crisis package to try and stave off further uncertainty. The market certainly didn’t seem to notice and the question now is what will it take to drive a reversal? For now, the 50s may be the new normal.
CHART OF THE WEEK
It was another bad week for platinum, as the precious metal saw a second week of hell due to continuing COVID19 pressures hammering global growth. Sellers followed a steep 15.96% drop the previous week with a near 20% plunge. It was the metal’s biggest weekly fall ever, and we’ll be looking to see if Friday’s 4% bounce turns the trend positive on market open.