Financial markets last week saw continued volatility and disruption as the global economy attempts to decipher governmental actions and aid, central bank action and the spread of the virus and what this means. Sterling dropped to multi year lows against the US Dollar and multi month lows against the single currency as fears emerged surrounding the lighter and slower touch that the UK government was taking combined with ongoing Brexit concerns. Meanwhile, government and central banks continue to announce that further fiscal and monetary stimulus may be necessary, and they stand ready to act if required.
This week the market will continue to focus on the developments surrounding COVID-19 whilst it tries to articulate the ongoing effects. Western economic data will take a backseat but will show data from March, giving the market an indication of the impact of COVID-19 on the economy.
There are reports that suggest that G7 leaders may hold a conference call early in the week, but these are unconfirmed. The market will continue to focus on the developments and action taken from governments around the world.
Looking to the week ahead:
- G20 Virtual Meeting
This year’s chair of the Group of Twenty (G20), will convene a virtual summit today to discuss a global response to the COVID-19 crisis. The emergency meeting could not come too soon. Because global health is a collective public good, any threat to it requires a multilateral response.
- G7 Virtual Meeting (tentative)
- Eurozone and UK PMI services and manufacturing
- US PMI manufacturing
As mentioned earlier, rumours circulate surrounding a G7 virtual meeting, but this remains tentative with the G20 on Monday. The ‘flash’ manufacturing and services PMIs for March will provide the first gauges of the economic impact of the pandemic on the UK and eurozone. Both are expected to have fallen sharply from their February levels
- UK inflation
- German IFO survey
- US durable goods
UK annual CPI inflation is expected to slip to 1.6% from 1.8% in the January reading. However, given the decrease in oil and demand theory across other goods and services, this is expected to slide more aggressively in the coming months. It is expected that the current and 6-month business confidence via the German IFO will confirm the slide from last week. In the US, durable goods come under the microscope.
- UK retail sales
- BoE Meeting
- US jobless claims
UK retail sales will be closely watched for an indication of consumer activity, early stockpiling may offset and distort numbers slightly. Despite the recent policy action, the BoE still plans to conclude its scheduled policy meeting today. This suggests the BoE could still put forward more policy moves if required. The US jobless claims will be watched closely to understand the rate that companies are releasing staff resulting in these claims being made.
- US personal spending
Personal spending numbers are due for release today which could give an indication of how consumer spending could look in the months to come.