Economic Data and Monetary Policy Kick Off the Week with a Bang

Earlier in the Day:

It was a busy start to the week on economic calendar this morning. The Aussie Dollar was in action by proxy through the early part of the day, with economic data out of China in focus.

The RBNZ and FOMC were also in the limelight, with press conferences to announce rate cuts ahead of the Asian open.

Out of China

Industrial production, fixed asset investment and unemployment figures for February were the key drivers.

According to figures released by NBS,

• Industrial production tumbled by 13.5%, year-on-year, following a 6.9% increase in January. Economists had forecast an increase of 1.5%, reflecting how far off the markets were from pricing in the impact of the virus.
• Year-to-date, industrial production also fell by 13.5%, compared with the same period in 2019. In January, industrial production had increased by 5.7% year to date compared with the same period in 2019.
• China’s unemployment rate jumped from 5.2% to 6.2%, the jump coming off the back of the coronavirus shutdown in the month.
• Fixed asset investments slumped by 24.5%, following a 5.4% increase in January, year-on-year. Economist had forecast a 2.8% rise.

The Aussie Dollar moved from $0.61278 to $0.61297 upon release of the figures. At the time of writing, the Aussie Dollar was down by 0.58% to $0.6167.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.67% to ¥106.90 against the U.S Dollar.

On the monetary policy front

The FED slashed interest rates to zero in the early hours, whilst also delivering QE5. Rates were cut by 50 basis points to a target range of 0 to 0.25%, with the FED also launching a bazooka $700bn QE program to add further support to the economy.

With the FOMC meeting scheduled for Tuesday and Wednesday of this week, it was classified as another emergency maneuver…

The EUR/USD moved from $1.1189 to $1.11752 upon the announcement.

The RBNZ joined central banks globally, delivering a 75bps emergency rate cut in the early hours of this morning. There was also the promise of an asset purchasing program in the event that more support is required. The rate cut to 0.25% is to take effect from 17^th March and will remain at 0.25% for a minimum of 12-months.

The Kiwi Dollar moved from $0.6074 to $0.61465 upon the announcement. At the time of writing, the Kiwi Dollar flat at $0.6167.

The Day Ahead:

For the EUR

It’s a quiet day ahead on the economic calendar. Economic data is limited to finalized February inflation figures out of Italy.

We will expect the numbers to have a muted impact on the EUR, however. The market focus will be on government steps to contain the spread of the virus and counter the impact on the Eurozone economy.

Last week, we saw the ECB support bank lending by offering -0.75% lending rates to banks to support businesses and consumers. While businesses will look for loans to raise the chances of survival, consumers will not be spending with member states in lockdown mode…

This doesn’t bode well for the Eurozone economy, with the unemployment rate likely to spike in response…

We can also expect the markets to also respond further to the FED rate cut to zero…

At the time of writing, the EUR was up by 0.16% at $1.1125.

For the Pound

It’s a particularly quiet day ahead on the economic calendar, with no material stats due out of the UK to provide direction.

The lack of stats will leave the Pound on the defensive as the number of cases and deaths rose over the weekend. We’ve seen capital outflows and sentiment towards monetary policy already sink the Pound. More of the same could well be on the cards as Brexit negotiations get put on ice.

At the time of writing, the Pound was up by 0.63% to $1.2355, the upside coming from the weaker Dollar.

Across the Pond

It’s a relatively quiet day ahead on the U.S economic calendar. NY Empire State Manufacturing Index numbers for March are due out.

The figures will give the markets an idea of what impact the spread of the coronavirus has had on the sector. Back in February, the Index had risen from 4.8 to 12.9.

Outside of the numbers, updates on the spread of the coronavirus in the U.S will also need considering as will chatter from the Oval Office.

Trump will be looking to push through fiscal policy measures. A number of Republicans have raised eyebrows over some of the proposals. Failure to pass proposals through will raise further doubts over a Trump 2^nd term.

Earlier in the day, the FED’s rate cut to zero left the Dollar Spot Index deep in the red, with U.S Futures on the bounce.

The Dollar Spot Index was down by 0.43% to 98.324 at the time of writing.

For the Loonie

It’s a quiet day ahead on the economic calendar, with no material stats due out of Canada to provide the Loonie with direction.

The lack of stats will continue to leave the Loonie in the hands of crude oil prices and market risk sentiment on the day.

The Loonie was down by 0.28% at C$1.3845 against the U.S Dollar, at the time of writing, with economic data out of China contributing to the downside.