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Bob Mason
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On the Macro

It’s a quieter week ahead on the economic calendar, with 51 stats to monitor in the week ending 28th March. In the week prior, 58 stats had been in focus.

For the Dollar:

It’s a busy week ahead for the greenback, with U.S data making up the lion’s share of stats for the week.

Last week we saw the Dollar on the bounce, supporting those that believe it’s dangerous to bet against the Dollar.

This week, we’ll get a sense of how true that view stands.

Prelim private sector PMI numbers for March are due out on Tuesday. Looking at the estimates, economists have lowered the expectation bar, but could still be overly optimistic.

With the U.S already facing the wrath of the coronavirus, one would expect a marked contraction across both sectors.

On Wednesday, durable goods orders for February are due out that will also set off some early warning signals. Asian markets were already under the cosh, which should be reflected in the numbers.

On Thursday, finalized 4th quarter GDP numbers should be brushed aside, as should trade data. We would expect the weekly jobless claims figures to have a material influence, however…

Look out for any move back towards 300k levels. The last time initial jobless claims breached 300k was back in March 2015. At that time, the unemployment rate had stood at 5.4%. Economists have forecast a jump to 775K, which would be unprecedented. Once again, however, this may also be overly optimistic when considering the shutdowns across the country. The more pessimistic have forecasted claims of as much as 2m and possibly more.

The current historical record sits at 695k, which was hit back in the 1980s…

Consumer spending remains the key driver, irrespective of Trump’s desire to bring industrial production home. Confidence, wage growth, and labor market conditions will factor in the all-important services sector.

In the week, a slump in service sector activity and jump in the weekly initial jobless claims would certainly spook the markets… Service sector activity is expected to slump, which will lead to further job cuts and a further contraction in the sector.

Other stats in the week including housing sector data, finalized GDP numbers, and February inflation and personal spending figures. Expect the numbers to be brushed aside.

Finalized consumer sentiment figures for March will draw some attention at the end of the week, however.

Outside of the numbers, fiscal support is expected this week, which could ease some of the stress.

The Dollar Spot Index ended the week up 4.12% to 102.817.

For the EUR:

It’s a relatively busy week ahead on the economic data front.

The Eurozone’s flash consumer confidence numbers for March get things going on Monday.

On Tuesday, the focus will then shift to Prelim March private sector PMIs for France, Germany, and the Eurozone.

While the focus will have previously been on Germany’s manufacturing and Eurozone Composite, all the numbers will matter.

It will be the 1st set private sector PMIs for March, which will give the markets an idea of what impact the virus will have on the economy. Consumer confidence is certainly going to set the tone ahead of the PMI numbers.

Forecasts are particularly gloomy, which is not surprising when considering the shutdown across the bloc.

In the 2nd half of the week, Germany’s March business confidence and April consumer confidence figures will be in focus.

Again, we’re looking at March and April figures that will have a material influence on the EUR and risk appetite…

Don’t expect any positive numbers, with an EU shutdown certainly a negative for the private sector.

From the ECB, the Economic Bulletin on Thursday will give the markets update on the ECB’s views on the economy. While central banks will not want to send shockwaves, it will be hard to put a positive spin on things.

The EUR/USD ended the week down by 3.77% to $1.0688.

For the Pound:

It’s also a busy week ahead on the economic calendar.

Key stats include private sector PMIs for March, and February inflation and retail sales figures. Again, we expect any positive numbers to have a muted impact on the Pound.

We’re in late March and there are material concerns over how the UK government has handled the coronavirus and impact on the population and economy.

Boris Johnson’s failure to take steps to contain the virus suggests the spread will continue to accelerate. While the Tories may have wanted to avoid a shutdown, it appears to be the only way.

Expect the Pound to suffer should the pace of the spread accelerate and economic data fail to support the government strategy.

Outside of the numbers, the BoE is in action on Thursday.

We’ve had the emergency move, now we will get a sense of what ammunition the bank has left.

Markets are forecasting a hold following the emergency 50 bps rate cut. Look out for another surprise move…

While the economic calendar will influence, the Government’s actions will remain the key driver in the week. The reality is that dire numbers will come from far and wide, it’s just a case of how bad…

The GBP/USD ended the week down by 5.29% to $1.1629.

For the Loonie:

It’s a particularly quiet week ahead on the economic calendar.

Economic data is limited to January wholesale sales figures due out on Monday. With the markets uninterested in January numbers, expect crude oil prices and prelim private sector PMI numbers out of Europe and the U.S to have the greatest impact.

Dire PMI numbers and sliding equities and crude oil prices will bring C$1.50 levels into view… The combination is something that the BoC may not be able to ignore…

Is another emergency move on the cards? We saw the 50 basis point rate cut effective 16th March. There’s still 0.75% of wiggle room before joining the FED at zero…

The Loonie ended the week down by 4.06% to C$1.4366 against the U.S Dollar.

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Out of Asia

For the Aussie Dollar:

It’s a particularly quiet week ahead on the economic calendar.

There are no material stats due out of Australia to provide the Aussie with direction.

That doesn’t mean that the Aussie will be flat, however.

Due to the lack of stats, less influential private sector PMI numbers out of Australia will influence on Tuesday.

Private sector PMIs from the Eurozone and the U.S and coronavirus news updates will be the main driver, however.

Rapidly approaching the end of the 1st quarter, the more optimistic will need to reassess their views on the virus and its impact…

While fiscal and monetary policy tends to be positive for riskier assets, the widening shutdown is not.

Demand is expected to slide further, leaving the Aussie Dollar on the back foot until the spread of the virus slows.

The Aussie Dollar ended the week down by 6.74% to $0.5785.

For the Kiwi Dollar:

It’s a relatively busy week ahead on the economic data front. Key stats are limited to February trade figures.

We are expecting China’s shutdown to be reflected in this week’s figures, which will test the Kiwi.

It’s not about negative numbers, it will boil down to just how bad the numbers are.

China accounted for 28% of total exports at the turn of the year. That would be quite an impact should demand tank…

On the monetary policy front, the markets will now need to wait until 13th May for the next scheduled decision. Dire trade figures could force the launch of an asset purchasing program, however…

The Kiwi Dollar ended the week down by 7.08% to $0.5700.

For the Japanese Yen:

It’s a relatively quiet week on the economic calendar. Key stats include prelim March private sector PMIs on Tuesday and inflation figures on Friday. Don’t expect the numbers to have any influence, however.

Expect market risk appetite to remain the key driver. We saw the Dollar bounce back last week, we could see this unravel should the spread of the virus accelerate in the U.S. Economic data is unlikely to help, though, in times of dire straits, the Dollar has tended to stand tall.

The Japanese Yen ended the week down by 3.08% to ¥110.93 against the U.S Dollar.

Out of China

It’s a quiet week on the economic data front.

February industrial profit figures are due out on Friday and, as we have seen in recent months there’s plenty of interest in the numbers.

We saw industrial production and fixed asset investment tumble in February. Expect particularly dire numbers.

It’s going to be yet another reason for investors to jump ship…

While we can expect influence from the numbers, there will also be updates on the virus to also provide direction.

The hope is that the number of new cases continues to decline in China. Any suggestion otherwise and expect the markets to balk…

The Chinese Yuan fell by 1.25% to CNY7.0962 against the U.S Dollar in the week.

Geo-Politics

Trade Wars:

Nothing to report here as governments grapple with the spread of the coronavirus and economic implications.

UK Politics:

Talks have been on hold, with the EU’s chief negotiator catching the coronavirus. While talks have been postponed, Britain remains scheduled to leave the EU at the end of the transition period. Assuming that the lockdown continues into May, there’s very little time to iron out a plethora of issues. An extension may be the only solution, which would be Pound positive.

For Britain, the good news is that the withdrawal from the UK means that there will be no payment demands from Brussels. There’s talk of Brussels issuing a demand for member states to billions

U.S Politics:

Joe Biden remains the Democratic front runner to face off against Trump in November. Biden sits with 1,201 delegates, leading Sanders by 305. That leaves Biden with a shortfall of just 790. The markets will now need to wait until April for the next primaries. 28th April is the big one, with NY and Pennsylvania offering 274 and 186 delegates respectively. A Biden clean sweep would surely wrap things up for the front runner.

The Coronavirus:

While monetary policy and economic data will continue influence in the week, the news updates on the spread of the coronavirus to remain the key driver.

We are seeing the spread of the virus accelerate in the U.S, which could send more shockwaves. The F&B sector is coming to a standstill and economic data in the week will now begin to reflect the impact of the virus on economies beyond China.

A widening shut down across the U.S, including NYC, will just do even more damage and drive greater uncertainty over the economic outlook.

There may be no historical comparisons for the markets to make…

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