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Are Markets Set for Further Fiscal and Monetary Policy Announcements as COVID-19 Fears Grows?

16th March 2020

weekly 24 feb

Last week, it’s fair to say it was a monumental week that may have a lasting effect on the global economy for the remainder of 2020. Economic data was in large ignored for the best part as developments in the Covid-19 story continued to drive action and reaction.

GBP fell to its lowest level since October against the EUR and US Dollar, whilst the single currency fell nearly 3% against the Greenback.

Below are some of the takeaways for the week that sent markets into their most volatile state since the financial crash of 2008:

  • Monday - Oil price war between Saudi Arabia and Russia sends oil down towards $34 a barrel, nearly 25% on the day. This is down from $70 a barrel at the start of the year. Turmoil spills into equity markets, Dow has its single largest point drop in history whilst other markets down circa 7%
  • Wednesday - The BoE cut interest rates by 0.50% to 0.25% and introduced measures to support liquidity to the wider economy; the UK Budget saw the Treasury announced a £30bn fiscal stimulus package. In the US, President Donald Trump's enforces a coronavirus travel ban on 26 European countries.
  • Thursday – Stock markets have another shocking session as reaction to Trump’s travel ban with a close to 10% move lower. ECB hold interest rates but introduce stimulus measures. UK government move from to “contain” to “delay” stage of Covid-19 plan.
  • Over the weekend – President Trump announces that he will extend travel ban to UK and Ireland. Spain and France extend emergency restrictions to combat the spread of the coronavirus. UK announces over-70s are to be asked to self-isolate for an extended period. Germany is to restrict border entries. On Sunday evening, the Federal Reserve took further action by cutting interest rate by a full percentage point to match record lows at 0-0.25% while it also introduced a $700bn programme of bond purchases.

The week ahead is undoubtedly going to focus on the measures from all nation states to contain Covid-19. So far, the UK Government has maintained the stance that it is business as usual, albeit with a cautious tone and a focus on business continuity. As a result, the market will pay attention to any governmental announcements from UK officials.

 

With developments moving at a rapid pace below is a summary of the economic data and events that are scheduled for the week ahead; however as mentioned the situation remains fluid.

 

Monday

The week ahead is undoubtedly going to focus on the measures from all nation states to contain Covid-19. So far, the UK Government has maintained the stance that it is business as usual, albeit with a cautious tone and a focus on business continuity. As a result, the market will pay attention to any governmental announcements from UK officials.

With developments moving at a rapid pace below is a summary of the economic data and events that are scheduled for the week ahead; however as mentioned the situation remains fluid.

 

Tuesday

  • UK labour data
  • GER ZEW sentiment
  • US retail sales

Key economic data from the UK, GER and the US are due for release; however, it is hard to say how much attention will be paid due to the historic nature of two of the releases. The German ZEW may be watched as it is a sentiment reading, for an understanding of negative institutional sentiment currently surrounding the economy.

 

Wednesday

  • FOMC meeting and press conference

The US Federal Reserve cut interest rates on Sunday evening by a full 100 basis points to match the record lows rates of 0-0.25%, so it is unclear if this meeting will happen. If it does go ahead as scheduled the market will decipher the comments from central bankers.

 

Thursday

  • US Philly fed manufacturing

It is likely that the market will decipher the messages from the overnight FOMC meeting to understand what this means for the economy, articulating any signposting from the FOMC and what the overall tone was. The Philly fed manufacturing maybe watched for activity ratios.

 

Friday

  • US existing home sales

Price action volatility could be in play dependent on what activity has taken place during the week. Profit taking may be in play if a big weekly move has occurred

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