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Forex Major Currencies Outlook (Mar 30 – Apr 3)

Government actions and news events will dominate the week along with resurgence in importance of employment data from US.

USD 

Fed has announced that it will keep purchases of MBS and Treasuries in the amounts needed. They will purchase $75bn of Treasuries and $50bn of agency MBS each day this week. This is essentially open-ended QE that will lead to Fed owning entire debt. US Senate has reached a deal on $2 trillion bill that includes cash payment for low and middle-income earners of $1200 for adults and $500 for children and $500bn of corporate and local government assistance. Almost $365bn is penned for small and medium-sized businesses with unemployment compensation being increased and broadened. Hospitals will get $150bn. 

Initial jobless claims, data that threatens to overtake NFP as most tracked economic measure, for the week of March 21 skyrocketed to 3283k vs 1640k as expected and up almost 11 times from the previous week’s reading of 282k (more than 3 million). The report is with a week delay, so it refers to the week of March 14 and we can only assume that the number will continue growing as lockdown goes on. President Trump hopes that country can reopen by April 12, that is when Easter is. The time period is very short and it is frowned upon by most scientists as eight weeks are thought to be minimum for the virus cycle. 

This week we will have ISM PMI, trade balance and employment data. Initial jobless claims rose to over 3 million in the past week and they could continue their rise to over 4 million while NFP is expected to show a drop of almost 300k. Projections for the unemployment rate go from 4% all the way up to 7%. 

Important news for USD: 

Tuesday:

  • Consumer Confidence Index

Wednesday:

  • ISM Manufacturing PMI

Thursday:

  • Trade Balance
  • Initial Jobless Claims

Friday:

  • Nonfarm Payrolls
  • Unemployment Rate
  • Average Hourly Earnings
  • ISM Non-Manufacturing PMI 

EUR 

German government has signed the €750bn economic package to fight off the fallout caused by the virus outbreak. The size of the package is whopping 22% of the GDP. The package will have €150bn in supplementary government budget, €100bn for an economic stability fund that can take direct equity stakes in companies, €100bn in credit for loans to struggling businesses, and €400bn in loan guarantees to secure corporate debt at risk of defaulting. 

Preliminary March manufacturing PMI came in at 44.8 due to the supplier delivery times being inversely calculated. The longer delivery times are calculated as a positive. Services PMI show the full picture of the slowdown coming in at 28.4 vs 39.5 as expected and dragging composite PMI to 31.4 vs 38.8 as expected. Preliminary consumer confidence index came in at -11.6 vs -13 as expected. Ifo numbers for March showed decline both from February readings and from preliminary March readings indicating the deterioration in economic conditions. Business climate came in at 86.1 vs 87.7 preliminary announced last week, down to the July 2009 level. Ifo economist stated that drop in GDP for 2020 could be between 5 and 20% and it will depend on the length of the shutdown. 

This week we will have sentiment data, preliminary March inflation, consumption and employment data as well as final PMI readings. 

Important news for EUR: 

Monday:

  • Business Climate Indicator
  • Industrial Confidence Indicator
  • Services Sentiment Indicator
  • Economic Sentiment Indicator
  • Consumer Confidence Index

Tuesday:

  • CPI

Wednesday:

  • Markit Manufacturing PMI (EU, Germany, France)
  • Unemployment Rate

Friday:

  • Markit Services PMI (EU, Germany, France)
  • Markit Composite PMI (EU, Germany, France)
  • Retail Sales 

GBP 

Preliminary March manufacturing PMI came in at 48 vs 45 as expected due to disruption in the supply chains. Services came in at 35.7 vs 45.0 as expected dragging down the composite to 37.1 vs 45 as expected. February CPI came in at 1.7% y/y as expected, a tick down from 1.8% y/y the previous month due to the drop in oil prices. Core CPI however pushed higher to 1.7% y/y from 1.6% y/y the previous month. The rise in core is encouraging, however it is a pre-virus data and as such it will not have an impact. Retail sales came in at -0.3% m/m vs 0.2% m/m as expected and they were flat on the year vs 0.7% y/y as expected. 

BOE has left bank rate unchanged at 0.10% stating that MPC can expand asset purchases further. The economic package is estimated to be around 15% of GDP making it the largest fiscal stimulus in the Western world. British Parliament that is scheduled for recess from March 31 to April 21 due to Easter holidays was closed as week earlier amidst the virus fears. 

This week we will have final Q4 GDP and PMI data. 

Important news for GBP: 

Tuesday:

  • GDP

Wednesday:

  • Markit Manufacturing PMI

Friday:

  • Markit Services PMI
  • Markit Composite PMI

AUD

Australian government announced a fiscal package that combined with central bank's measures to almost 10% of GDP. More than 50% of it is assistance for small and medium-sized businesses and it also includes expanding the eligibility of collecting benefits and doubling the income support for job seekers allowance.

Singapore reported Q1 GDP and the figure is abysmal. It came in at -10.6% q/q annualized, much worse than already very bad expectations for -8.2% q/q annualized. This is just the beginning of terrible Q1 reports from around the Globe. As a result of the GDP reading Singapore added additional S$48bn to their stimulus package. As a part of fiscal measures they tripled cash payouts to S$300-S$900 which will total to around S$4.6bn. China will implement $344bn stimuuls of which majority will be in fiscal measures. That constitutes around about 2.5% of GDP.

This week we will have consumption data from Australia as well as official and Caixin PMI data from China.

Important news for AUD:

Tuesday:

  • Manufacturing PMI (China)
  • Non-Manufacturing PMI (China)
  • Composite PMI (China)

Friday:

  • Retail Sales
  • Caixin Services PMI (China)
  • Caixin Composite PMI (China)

NZD

RBNZ has announced a bond purchase program. They will buy NZD30bn of bonds over the next year at a pace of around NZD750mn per week. Governor Orr stated that aim of the QE program is to keep rates very low and that they may consider buying additional assets. RBNZ has bought NZD250mn with their first QE move while there was NZD810mn offered. Trade balance for February returned to surplus with NZD594mn due to rise in exports and drop in imports.

This week we will have ANZ business confidence and activity outlook which are closely watched by RBNZ.

Important news for NZD:

Tuesday:

  • ANZ Business Confidence
  • ANZ Activity Outlook

CAD

Canadian parliament has passed an emergency spending plan that will total CAD107bn out of which CAD55bn will be in tax deferments. CAD was a beneficiary of weak USD during the week so USDCAD retraced almost 50% and then BOC cut rates by additional 50bp pushing USDCAD higher. Current rate is at 0.25%. They have launched QE program pledging to buy government bonds in the amount of CAD5bn per week and plan to continue doing so “until the economic recovery is well underway”. Separate program has been announced that will concern with buying of commercial paper. They stated that policy rate is now at the effective lower bound. Their intent is to support financial system and to lay foundation for return to normalcy.

This week we will have January GDP and February trade balance data.

Important news for CAD:

Tuesday:

  • GDP

Thursday:

  • Trade Balance

JPY

Preliminary March manufacturing PMI came in at 44.8 while services plunged to 32.7 for a composite of 35.8. Finance minister Aso stated that stimulus to consumers will most likely be in vouchers, not in cash as cash can be saved while vouchers will be spent and put back into the economy. Headline CPI for Tokyo area came in same as the previous month at 0.4% y/y.

Summer Olympic Games that were supposed to be held in Tokyo in 2020, have been postponed to 2021. Another heavy blow for Japanese economy that hoped to use the games as a springboard. Government has downgraded their economic view and assessed the situation as severe, extremely depressed by the Novel Coronavirus.

This week we will have employment, consumption and industrial production data as well as final PMI readings.

Important news for JPY:

Tuesday:

  • Unemployment Rate
  • Retail Sales
  • Industrial Production

Wednesday:

  • Markit Manufacturing PMI

Friday:

  • Markit Services PMI
  • Markit Composite PMI

CHF

SNB total sight deposits have been rising for the second week in a row indicating that SNB is intervening in the FX markets to keep CHF from strengthening too much. They have stated in last week that the Franc is now “even more highly valued” which explains their actions. Later on during the week SNB set up refinancing facility and deactivated counter-cyclical buffer with no upper limits.

This week we will have consumption and inflation data.

Important news for CHF:

Tuesday:

  • Retail Sales

Thursday:

  • CPI

You can follow all economic events on the Economic Calendar page on our Website. MT4 server time is set to GMT+3 and if you need assistance converting MT4 server time to your local time you can use some of the online time converters such as WorldTimeBuddy.

Please note that this analysis should not be used as investing advice as it is only an overview of the economic events influencing the markets. Please remember that MT4.VAR. and MT4.ECN. accounts have Market Execution. Please note how Execution works during high impact news and other times of low liquidity.

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