Forex Major Currencies Outlook (Mar 16 – Mar 20)

USD 

Inflation in February came in at 2.3% y/y vs 2.2% y/y as expected and down from 2.5% y/y the previous month. Core measure climbed to 2.4% y/y vs 2.3% y/y the previous month. Fed will increase the amount offered in its repo operations from $100bn to at least $150bn in attempt to ramp up the liquidity and then again raised the amount to $175bn indicating critically illiquid conditions in the repo market. Finally, the NY Fed has pumped $500bn in the repo market and pledged to do so 3 days in a row making this an extraordinary $1.5 trillion liquidity injection. There are talks about $5 trillion injection over the next month. President Trump enacted a 30-day ban on all travel from the EU Schengen zone and later clarified that it refers only on travel of people, not goods. 

This week we will have data on consumption, housing and industrial production. Fed interest rate decision will dominate the markets. The question is not will Fed cut, but how much? Estimates are varying from 0.50% to full 1% as stated by Goldman Sachs. New economic projections, the dot plot, will provide us with more insight in how Fed sees the impact of the virus on US economy. 

Important news for USD: 

Tuesday:

• Retail Sales
• Industrial Production

Wednesday:

• Housing Starts
• Building Permits
• Fed Interest Rate Decision
• FOMC Press Conference
• FOMC Economic Projections

Friday:

• Existing Home Sales 

EUR 

Final Q4 GDP came in at 0.1% q/q and 1% y/y. Industrial production in January came in at 2.3% m/m vs 1.5% m/m and -1.9% y/y vs -2.9% y/y as expected. Better than expected results for the Eurozone as a whole on the back of previously reported improvements from Germany and France. The caveat with data is that it is pre-virus. 

ECB has left the interest rate unchanged, however it has announced a bonds purchase of EUR120bn until the year and on top of EUR20bn that are already conducted. Additional TLTROs will be conducted in order to provide immediate liquidity. More favourable terms will be applied to TLTROs during period from June 2020 to June 2021. Governor Lagarde stated that decision on package was unanimous and that reversal rate has “definitely” not being reached yet. She also asked for coordinated fiscal support to go along with monetary policy measures. The virus has been characterized as a major shock and ECB will use measures best targeted for crisis. 

This week we will have ZEW survey, final February inflation and trade balance data. 

Important news for EUR: 

Tuesday:

• ZEW Economic Sentiment Indicator (EU and Germany)

Wednesday:

• CPI
• Trade Balance 

GBP

BOE followed the Fed and cut the interest rate between the meetings by 50bp, so new rate is 0.25%. In the accompanying statement it was said that move will help support business and consumer confidence during these difficult times by improving the availability of funding. Governor Carney, who will be leaving the post and will be replaced by Andrew Bailey next week, stated that move was necessary to prevent temporary disruptions from causing long-term damage. He added that they further cut rates from 0.25% but close to and above 0%. They will launch a lending scheme of around £100bn to small and medium-sized business. Today’s move was characterized as “big, big package”. Government will also prepare a set of measures intended to fight of the economic slowdown and assist households and businesses. 

GDP in January came in flat vs 0.2% m/m as expected. Manufacturing production came in line with expectations while industrial production and construction output missed expectations. Seems that post-election exuberance did not hold for long in UK and with disruption caused by the virus the figures will only get worse, therefore the BOE’s decision. Visible trade balance in January came in at -£3.7bn due to big drop in exports (-2.8%) and rise in imports (0.7%). Again, these are pre-virus data. 

The UK delivered a huge support package for workers and businesses in order to fight the coronavirus. Statuary sick pay will be made for all that are advised to self-isolate. Temporary loans will be provided to businesses with government guaranteeing 80% of bank loans for up to £1.2m for small businesses. Self-employed people will get sick benefits from day one and business rates will be abolished for small businesses 'entirely' for a year. Total stimulus package will be worth around £30bn with further loosening of up to £18bn on the year. Total coronavirus measures will cost £7bn. 

This week we will have employment data. 

Important news for GBP: 

Tuesday:

• Employment Change
• Unemployment Rate
• Average Weekly Earnings

AUD

Economic package from Australia will provide AUD17.6bn stimulus to the economy. The two-year package will total AUD22.9bn, almost 1.2% of GDP, out of which AUD11bn will be distributed before June 30 of 2020.

January-February trade balance data from China showed a decline in trade surplus due to huge drop in exports of -17.2% while imports dropped -4%. Trade surplus with US almost halved to $25.37bn vs $42.16bn at the same time previous year. Inflation figures for February show drop in both CPI (5.2% y/y) and PPI components (-0.4% y/y).

This week we will have meeting minutes from RBA’s meeting and employment data from Australia as well as consumption and industrial data from China followed by decision on loan prime rate on Friday.

Important news for AUD:

Monday:

• Retail Sales (China)
• Industrial Production (China)

Tuesday:

• RBA Meeting Minutes

Thursday:

• Employment Change
• Unemployment Rate

Friday:

• Loan Prime Rate (China)

NZD

Business surveys plunged as preliminary business confidence for March dropped to -53.3 from -16.4 the previous month and activity outlook went back into negative territory with -12.8% vs 12% the previous month. RBNZ is closely monitoring these surveys and they influence their decisions so this can be additional sign, apart from global easing moves, that RBNZ will cut at their March meeting. Governor Orr stated that they are prepared to do everything that is needed as well as that they see lower bound for rates in the negative territory. Electronic card retail sales for the month of February beat expectations and came in at 0.6% m/m and 8.6% y/y.

This week we will have bi-monthly GDT auction as well as Q4 GDP which is expected to weaken from the previous quarter.

Important news for NZD:

Tuesday:

• GDT Price Index

Wednesday:

• GDP

CAD

Saudi Arabia plans to increase their oil production next month and they have cut their price for all crude. The move is equivalent to a “price war” and crude oil plunged on opening to $33/barrel and with it USDCAD gapped up 150+ pips. USDCAD climbed as high as 1.3750 level while oil dropped down to barely above $27/barrel level.

January was a strong month for housing with building permits coming in at 4% m/m vs -3% m/m as expected due to good weather. February housing starts came in a bit weaker from than the previous month but still better than expected at 210.1k. The government has announced CAD1.1bn stimulus package to fight off the coronavirus and stated their readiness to add more., h However in the light of other country’s measures this seems utterly insufficient. BOC has announced that they will expand their operations in the repo market, similar to Fed’s. They will be conducted weekly starting from March 17. Late on Friday BOC cut the interest rates additional 50 bp for a second cut in a month putting it at 0.75%. 

This week we will have data on manufacturing sales, inflation and consumption.

Important news for CAD:

Tuesday:

• Manufacturing Sales

Wednesday:

• CPI

Friday:

• Retail Sales

JPY

Final Q4 GDP data came in even worse than preliminary reported at -1.8% q/q and -7.1% y/y. Capex fell -4.6% q/q for the biggest quarterly drop in over a decade. Private consumption came in a bit better at -2.8% q/q vs -2.9% q/q preliminary. Domestic demand contribution came in at -2.3% q/q vs -2.1% q/q. Chances of the economy contracting again in Q1 are rising due to drops in exports and production as well as private consumption. Government approved an additional $4.1bn package to fight off the coronavirus induced economic fallout. This will be a part of greater economic package of approximately $16bn.

This week we will have data on core machinery orders, industrial production and national inflation. BOJ will meet on Thursday and additional easing measures to keep the liquidity are expected.

Important news for JPY:

Monday:

• Core Machinery Orders
• BOJ Interest Rate Decision

Wednesday:

• Trade Balance

Thursday:

• CPI

CHF

February seasonally adjusted unemployment rate keeps steady for months now at 2.3%. Swissy has strengthened on the back of risk aversion in the markets. On market open and in first hours of trading USDCHF fell below 0.92 level.

This week we will have trade balance data. SNB will be forced to take more easing measures to fight the strength of CHF.

Important news for CHF:

Thursday:

• Trade Balance
• SNB Interest Rate Decision

_{You can follow all economic events on the Economic Calendar page on our Website. MT4 server time is set to GMT+2 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.}