The last two weeks were truly chaotic as far as financial markets were concerned as the number of coronavirus cases and fatalities started accelerating outside of China. This prompted authorities around the globe to exercise more caution. The Fed set the tempo by cutting the Funds Rate by 0.5 basis points outside of the scheduled meeting. This move garnered the attention of people but did not satisfy the investors who were looking for a deeper cut. Many other countries around the world also cut rates and the World Bank and IMF pledges prevented a full-blown market meltdown. However, the game is not over yet. Authorities might have to do a lot more over the coming weeks.
After a hectic trading week, the upcoming week of March looks to be extremely lean. In the next week, China Trade Balance, US Inflation, and ECB’s interest rate announcement stand out. Here is an outlook on a few key releases from around the world:
#1: China Trade Balance (03/07/2020 Monday …..GMT)
After announcing a trade surplus of 329 billion yuan for December 2019, China had deferred the release of trade figures in January this year. Customs Department had last month that it would combine the trade data for January 2020 and February 2020. On March 7, China unexpectedly reported a trade deficit of 42.59 billion yuan (US$7.09) for the first two months of this year. Yuan-denominated exports fell 15.9 percent during the January-February period and imports slid 2.4 percent as the coronavirus outbreak disrupted manufacturing activity.
Analysts had expected China to report a trade surplus of US$24.6 billion, down from the previous period’s surplus of US$47.21 billion. China reported a trade deficit for the first time since March 2018, indicating the impact of the COVID-19 outbreak on the nation’s economic situation.
#2: New Zealand RBNZ Governor Arian Orr Speaks (03/10/2020 Tuesday 01:00 GMT)
Adrian Orr, Governor of the Reserve Bank of New Zealand, is scheduled to speak in Wellington on the high-level principles that govern the use of unconventional monetary policy tools. Markets often turn volatile during his speeches. This is because traders make an attempt to understand the direction of interest rates.
#3: United Kingdom Annual Budget Release (03/11/2020 Wednesday 11:30 GMT)
In the United Kingdom, the government budget deficit had narrowed to 1.8 percent of its GDP in 2018-19 from the 2.7 percent level in the prior fiscal year. Released annually, the document outlines the budget of the government for the year. The budget document gives an indication of the anticipated income and spending levels, borrowings, planned investments, and financial objectives. Traders care because the government’s borrowing and spending levels significantly impact the economy. While increased spending creates work for contractors and generates jobs, government borrowings affect the nation’s credit rating and give indications about the underlying fiscal position.
#4: United States CPI (03/11/2020 Wednesday 12:30 GMT)
In the United States, the inflation rate rose to the 0.1 percent level in January from the 0.2 percent level reported in the prior month. Analysts had expected inflation to come in at the 0.2 percent level. The largest contribution came in from Shelter because of an increase in the cost of medical care and food services. However, these increases were more than offset by the 1.6 percent fall in the gasoline index. Energy cost dropped 0.7 percent. Food prices increased 0.2 percent with the rise in prices of both food away from home and food at home.
Forecast for February 2020: 0.0 percent
#5: United States Core CPI (03/11/2020 Wednesday 12:30 GMT)
In the United States, the core CPI, which excludes the prices of volatile items food and energy, increased 0.2 percent in January, following the 0.1 percent increase in December. The indexes for shelter, medical care, apparel, recreation, airline fares, and education registered increases in January. However, the indexes for prescription drugs, used cars and trucks, motor vehicle insurance, household furnishings, and operations declined.
Forecast for February 2020: 0.2 percent
#6: Euro Area ECB Main Refinancing Rate (03/12/2020 Thursday 12:45 GMT)
The President of the European Central Bank Christine Lagarde said that the central bank will act to support the EU nations as the coronavirus outbreak has created risks for the economic outlook and functioning of the financial markets. The ECB also added that it is closely watching the developments and assessing their implications to the economy, inflation in the medium-term, and the monetary policy transmission. Analysts are anticipating a 10bps interest rate cut to the central bank’s deposit facility during the meeting on March 12, 2020. In the meeting January this year, the central bank had left the main refinancing rate steady at 0.0 percent as widely expected by analysts. The marginal lending rate and the deposit rate were also maintained at the 0.25 percent and -0.50 percent levels, respectively.
Forecast for March 2020: 0.0 percent
#7: Euro Area ECB Monetary Policy Statement (03/12/2020 Thursday 12:45 GMT)
The European Central Bank releases the Monetary Policy Statement 8 times in a year. The central bank usually makes small changes to the statement before each release. Traders focus on these changes to understand the outcome of future decisions. Actually, the ECB uses the statement as a tool to communicate with investors as regards the monetary policy and offers the outcome of the members’ decision on setting interest rates and commentary on the economic conditions that impacted their decision. More importantly, the statement discusses the EU’s economic outlook.
#8: Euro Area ECB Press Conference (03/12/2020 Thursday 13:30 GMT)
The President and Vice President of the European Central Bank address a press conference 45 minutes after the announcement of the Minimum Bid Rate. The press conference lasts for about an hour and has two parts: reading a prepared statement and answering questions by the press. As the questions can lead to unscripted answers, heavy market volatility can be expected.
The ECB also uses the press conference as a means to communicate with investors as regards the monetary policy. It covers the factors that impacted ECB’s most recent interest rate and policy decisions. More importantly, it provides clues as regards future monetary policy decisions.