Trading Week Ahead: 9th – 13th March 2020
Key Events This Week
USD ISM Manufacturing PMI
AUD Building Approvals, Cash Rate, RBA Rate Statement
NZD RBNZ Gov Orr Speaks
GBP Annual Budget Release
USD CPI, Core CPI USD CPI, Core CPI
EUR Main Refinancing Rate
ECB Monetary Policy Statement and Press Conference (12:30am)
USD Prelim UoM Consumer Sentiment
(Times adapted to AEDT timezone)
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We haven’t seen volatility like this for stock indices since the 2008 Global Financial Crisis. The U.S. indexes saw unpredictable movements, the US30 gained 5.87% as it opened at the start of the week, before dropping over 2%, and then gaining another 4% the following session. These swings were experienced across most Indices as markets were seen to crash in the previous weeks as well as mixed influences which came out during the week. Rate cuts came in thick and strong with the RBA, BOC, and the FED all cutting funding rates. The FOMC 50 percent cut was quite the surprise for investors and sent gold prices soaring back to 1680. The prime driver for most of the rate cuts was the economical damage caused by the coronavirus.
This brings us to the ECB, who meet this Thursday and have continued to state that they don’t see a need just yet to cut rates to combat the negative effects the virus is driving. This is despite a recent surge in infection cases in Italy, and a clear sign that it is spreading to other countries within the trading bloc. We may not yet see a cut from the ECB but will the statement hint at ready action if needed? If there are hints of a cut it will really deflate the current EUR/USD rally. If they decide to follow the likes of the FED and make a surprise rate cut we need to be looking out for the EUR to be cut down as a result.
Furthermore, the EURUSD continued its stunning run last week, and one thinks it could have a lot to do with the ECB’s tone.
The next round of Chinese data is being released on Monday. Last week we saw some shocking manufacturing data come out of the country, which although widely expected by traders, confirmed the extremity of the damage inflicted on the Chinese economy by the coronavirus.
This week we have the Chinese trade balance and USD denominated trade balance, both figures are expected to come in lower, Trade Balance, 329B down from the last figure of 306B – USD Denominated Trade Balance, last 46.8B expected 36.8B. With the markets already anticipating a drop, the question here is could it come in even worse than expectations, and how will the markets react should that happen?
Without trying to sound like a broken record, coronavirus continues to be the overriding story of the moment. Australian GDP increased last week despite recent events, and that gain is expected to have dropped with worries now emerging that the Australian economy could be on track for a recession. That’s an opinion, but the concerns are there. It drives home just how much impact coronavirus continues to have.