APAC should be hogging most traders’ attention in the first half of the coming week. China and New Zealand take the spotlight up to Wednesday. A sprinkling of US and European data helps to round out the offerings.
*Please note; Author is working from UTC +13 when determining the timeline of data releases.
China opens the week and reveals its 1Y Loan Prime Rate. The People’s Bank of China (PBoC) has kept the 1Y Loan Prime Rate at 3.85% for the past 18 months. No change in the rate is expected on Monday. However, looking to a long-term change, China’s Premier Li Keqiang noted on Friday that China is facing “many challenges” in managing the downward pressure on its economic growth and rising commodity prices.
New Zealand releases data on Retails Sales (Q3) in the lead up to the country’s Central Bank Interest Rate decision on Wednesday. Retail Sales in the last two quarters rose 3.3% and 2.8% respectively. A projected -0.5% is expected in Q3 as the country’s largest city has been in lockdown for the entire Q3 period.
European and Great Britain Markit PMI Composite data (NOV) is also released on Tuesday. Aggregating the data from the economies’ Manufacturing and Service sectors, the PMI is a broad indicator of economic expansion or retraction. Although still firmly within an expansionary range, a slight pullback in the PMI values is expected for both economies.
US Markit PMI Composite data (NOV) is up next. Unlike Tuesday’s PMI data, US PMI is expected to lift ever so slightly from 58.4 to 58.8.
As mentioned above, the Reserve Bank of New Zealand (RBNZ) will be updating the market as to its Interest Rate decision. A 25 basis point hike to 0.75% is all but guaranteed at this point. Speculation of a 50 basis point hike has emerged in reaction to Inflation Expectation in the country, reaching 2.96% in two years. Although, such a significant hike is unlikely and deviates from RBNZ precedence.
Thursday is all about the United States. For October, durable Goods Orders, New Home Sales, and Personal Spending data are released in quick succession. Any beat or miss in the slightly optimistic forecasts for these data points should be pounced upon by traders.
The FOMC minutes are then released later in the morning. Fed representatives have been vocal about their stance on inflation, employment, and the need to keep a loose monetary policy for the short term, all last week. These notes should be reflected in the FOMC minutes.
A quiet Friday closes the week. South Korea’s Interest Rate decision should be watched closely. A 25 basis point increase is possible, which would bump the Interest Rate to 1% from 0.75%. Analysts are split as to its likelihood as the South Korean Government has other tricks up its sleeve to curb rising prices (such as removing fuel taxes).
Several reports are arriving this week that are of huge interest to forex and CFD traders. The USD, against major trading partners, could be materially affected by the Monday’s report on Orders of US-made Durable Goods. The rest of the week will see a spattering of Central Bank interest rate decisions and Confidence reports from the US, Japan, and Switzerland.
We have a relatively fair number of economic events this week ahead. However, they are relatively significant in their effect on the financial markets and further fundamental guidance.
We've seen risk-on in currency markets recently, with many pairs against the U.S Dollar rallying on confidence that the economy will fare better in 2021. GBP/USD. Broke 1.40, while NZD/USD and AUD/USD both broke 0.78 and 0.73, respectively. Oil has been rallying on supply restriction due to middle east tensions and the snowstorm currently taking over Texas. Here is your week ahead.
With China stomping the virus faster than any country, their road to recovery has been patchy. With a couple of flare-ups in community transmission similar to that of New Zealand, China acted swiftly to secure the cases, ready emergency and hospital units, and shut the Coronavirus. With their economic recovery fully underway, Yi Gang has stated that China's central will not "prematurely" exit from its supportive monetary policies. "Looking forward, I think our monetary policy will continue" and that "we will keep a delicate balance between supporting the economic recovery, at the same time, preventing risk."
With the strength and the interest in the Chinese Yuan skyrocketing in 2020, the PBOC will introduce some measures to bring down the Yuan's strength as it is fundamental to their exports. With that said, analysts predict the PBOC to lower the headline 1-year rate from 3.85%.
With strict lockdowns imposed earlier in 2020, New Zealand has stomped the virus, China has, and life for its citizens has returned to a relative normal. With a flare-up in Auckland's community cases last week, Auckland was put in a snap lockdown for three days for the government to assess the situation. They had come out of that lockdown after the three days but still face social distancing and capacity constraints in level 2.
However, with the domestic economy has been in full swing before the snap lockdown, analysts predict retail sales to stay healthy at 26.7% growth, slightly lower from the 28% growth the previous quarter.
Regarding the RBNZ's interest rate decision, the mandate for the central bank of New Zealand is like many other central banks: Employment and Price Stability. A mandate they do not have is the control of house prices. However, with house prices skyrocketing almost 20% the past year, there has been pressure from politicians and analysts for the RBNZ to implement pricing controls.
The bank has reinstated loan-to-value ratios from first home buyers and investors, requiring investors to front up 40% of the house price as a deposit when purchasing a house, stating that the initial removal of LVR's has done its job.
The initial optimism on negative rates has subsided on the New Zealand economy's incredible bounce bank. Many banks are now rescinding their calls on negative rates, with banks such as ANZ calling a 15-basis point cut from 0.25% to 0.1%. ANZ's economists stated that "If the housing market and domestic economy maintains momentum well into autumn, the RBNZ will not cut again at all." However, they further stated that "If Covid-19 returns to our shores in a significant way, a negative OCR will once more be game on."
United Kingdom's vaccination program is leading the charge for their recovery. With their seven-day average way down from all-time highs, the start of the recovery is near for the United Kingdom. Nearly 18 million people in the United Kingdom had received at least one Coronavirus Vaccine dose, around 27 doses per 100 people. These were aimed at citizens aged 70 and higher, alongside healthcare workers, who have accounted for 88% of the United Kingdom's Coronavirus deaths. Analysts predict
the 3-month rolling unemployment rate to rise slightly from 5% to 5.1% this week ahead.
Like that of the United Kingdom, the vaccine has led the charge for the recovery in the United States. Seven-day averages are nearly three months now, with over 61 million doses of the vaccine, or around 18.6 doses per 100 people. With Jerome Powell continuing to pledge his unwavering support for the American economy, alongside an optimistic 1.9 trillion-dollar stimulus, the potential for a rebound in the U.S economy may be on its way. Analysts predict a slight nudge higher in GDP growth at the end of the 4th quarter, up 0.1% to 4.1%, compared to 4% in the previous quarter.
A light week ahead events-wise. However, the events are heavy. Stay say, and trade safe.
This week ahead, we have a plethora of data coming out across the world dictating the strength of "main street" and its contribution to the Coronavirus Pandemic's global recovery.
With that said, the Coronavirus continues to present itself as a factor pulling back the global economy's growth. With financial markers such as Brent Crude and WTI prices returning to pre-pandemic levels, evidence of life post Coronavirus slowing down is coming into sight. However, as shown, even the countries who handled the Coronavirus well indicate that we still have to grapple with the strengthening strains.
Case in point – I am currently writing this at home, as New Zealand, renowned for their Coronavirus Response, has placed their largest city, Auckland, back into a level 3 lockdown following three community transmission cases from the stronger UK Strain.
However, as we all know, financial markets do not sleep. Here is your week ahead.
Japan has not had the best success regarding the fight against the Coronavirus. Initially praised for their no lockdown strategy, dependent on the mask-wearing, cleanliness culture Japanese citizens exhibit. Three waves of the Coronavirus later, each larger than the previous, and the Japanese Government depend on the vaccine to help save their citizens from further infections.
However, the Japanese economy is showing its strength, and analysts predict they may come out of the pandemic stronger than expected. Unemployment has stayed at a modest 2.9% due to Bank of Japan's corporate lending scheme, alongside bankruptcies falling by around 20% from a year earlier in recent months. Analysts predict GDP growth of 10.1% in the last quarter of 2020.
Last year today, the Coronavirus had started to hit the shores of many countries. A couple of months later, most of the Eurozone would have concluded that their lockdowns were adequate in eliminating most of the virus and that citizens may freely roam around Europe for the summer.
That decision would cost them many more lives and setback the road to recovery.
It is now 2021, and we're approaching the same period in which these decisions were made. However, now, Europe has been slowly rolling out the Coronavirus vaccine to citizens. However, the President of the European Commission, Ursula von der Leyen, has stated that the EU was late to rollout and authorize Coronavirus vaccines and are "still not where we want to be." However, a better than expected GDP print may mean stronger Euro, which may be detrimental to exports.
With the United Kingdom slowly getting a grasp on the Coronavirus with the help of a vaccine, the new strain provides new challenges as British scientists state the U.K Coronavirus strain is "likely" 30% to 70% deadlier than the original. With that said. Boris Johnson is Optimistic that the Coronavirus Lockdown can be eased soon – however, as history shows, lockdown is only effective if there has not been community transmission for weeks. Analysts predict CPI to drop slightly to 0.5% from 0.6% year over year.
Like the United Kingdom, the United States has been given a tailwind in the form of a vaccine. However, similar to the United Kingdom and Europe, the vaccine's distribution infrastructure has been criticized. With the U.S having many months to prepare for the eventuality of a vaccine. Cases are down from their all-time highs, although still above 100,000 for their daily average. Analysts predict U.S Retail Sales to rise to 0.7% this week ahead, up from -0.7% a month before.
Australia has recovered from a devastating 2nd wave by introducing a drastic lockdown near the middle of 2020. However, there have been many flare-ups around Australia, with one in Sydney and one currently in Melbourne, which has caused the local Government to implement a short lockdown. However, there has been evidence over the past couple of months of Australians using the money they have saved during the past lockdowns and spending it. With that said, analysts predict a slight fall in the unemployment rate to 6.5% from 6.6 in January, with retail sales expected to bounce to 2% from a negative 4.1%.
Busy week ahead. Trade safe, and stay safe.
We have a relatively light data week ahead regarding the amount of significant data points coming out. However, the economic events are extremely significant in determining the state of their respective economies. Hope you all are staying safe. Here is your week ahead.
United Kingdom's Coronavirus situation looks like it's seeing the light at the end of the tunnel. With Vaccinations fully underway, paired with strict lockdown measures, daily cases have fallen from their peak in early January.
However, that's not to say they're entirely out of the woods yet. The 7-day average continues to be at unsustainable levels, around 37,000. Furthermore, with a new Coronavirus strain proving as much as 1.5x more transmissible, the National Health Service struggles to cope. Soldiers have been dispatched to move patents and equipment around London hospitals, showing how overstretched the health system is in the United Kingdom.
The critical thing to note is that the UK's Coronavirus situation is just starting to improve. They are nowhere near the stages of their economic environment improving. This should be considered when looking at the UK's unemployment figures this week ahead, with analysts expecting quarterly unemployment figures to rise to 5.1%, up from 4.9% the quarter before. There is a high possibility that the unemployment rate is higher than this, and my prediction is that it will be given the state in the United Kingdom. We may see numbers up to 5.3% this week ahead.
Australia continues to maintain a good grip on the Coronavirus after a devastating second wave in the middle of 2020. A decrease in rental income in inner cities alongside increased savings in many households has pushed restaurant and café prices higher, alongside commodities such as lumber to record highs. With interest rates at 0.1%, the RBA is having a difficult time spurring inflation. However, the Australian Bureau of Statistics predicts a rise in CPI by 0.3% due to the rise in childcare costs.
A new President at the helm of the United States hasn't deterred Federal Reserve Chairman Jerome Powell from the mandate of the Reserve Bank: Employment and Inflation. In the past couple of meetings, the central bank has reiterated that it is committed to using all the tools available to support the US Economy. Analysts are expecting the FOMC committee to leave rates as is, at 0.25%. Furthermore, Quarterly GDP figures for the US are set to be released this week ahead, with Bloomberg analysts predicting a 4.2% expansion in the last three months of 2020.
With Germany under lockdown till 14th February, a positive economic recovery coming shortly has all but vanished. The country did relatively well in halting the spread of the virus in the first wave – however, they have not been able to contain the second wave. Germany recently surpassed the grim milestone of 50,000 deaths, as many German citizens are refusing to self-isolate, prompting the German government to force them into detention centers.
With Germany in a dire state alongside a shortage in vaccines, Health Minister Jens Spahn told a local German Newspaper that the government had purchased a new antibody-based drug to fight the Coronavirus, costing the government over 400 Million euros for 200,000 doses. Analysts had estimated a 4.4% growth in GDP – however, due to the second lockdown, there has been a Sharp revision downwards to an estimated 3% GDP growth.
A lighter week ahead. However, still an eventful one for sure. Trade safe, and stay safe.
With the new strain of the Coronavirus causing concern across the world, many countries that continue to battle the Coronavirus hope that the vaccine gives them a head start before the strain does any more damage. This week will also see a new President take office, Democrat Joe Biden, on the 20th January US Local time. Here is your week ahead.
It seems like China was on their home run. Cases were initially squashed due to their strict lockdown earlier in 2020. The vaccine's advancement last year was the final factor in cementing China's success against the virus. However, a sharp outbreak in Nangong and Shijiazhuang shows the world that no matter how well your initial response is, only continuous and strict restrictions can keep the Coronavirus out of the community. Five days ago, a plot of land in Nangong, Hebei, laid flat. Now, it has become a 1500 room hospital for Covid-19 patients.
This may be an overreaction by the Chinese government – however, they may just be preparing for the worst. This does give a sign of what the future may hold for countries like the United Kingdom and the United States, where cases are still at record highs. With that said, GDP and Retail Sales are predicted to increase on the back of a boost in the manufacturing sector alongside consumer spending the income they saved during the past lockdown. GDP is expected to rise to 6.1% in Q4, up from 4.9% in the previous quarter. Furthermore, retail sales are predicted to grow. 5.5% in the month of December, ahead of Chinese Near Year.
The Coronavirus situation in many countries highlights the importance of implementing a strict lockdown and following it through. The benefits of a lockdown only work if community transmission is eliminated. However, many countries apart from a small handful tried to balance economic damage alongside the Coronavirus spread, which meant deescalating Coronavirus restrictions too early, rendering the lockdown useless.
Germany is one of the nations that deescalated too quickly, causing massive spikes in their Coronavirus figures. Their total cases now stand at 2.04 Million, with German Chancellor Angela Merkel urgently trying to rush in more stringent restrictions to dampen the virus's spread. However, the recent spike is unlikely to affect analysts' expectation of Germany's CPI,s expected to print at -0.7% for the month of December, the same as a month before.
With just under 3.6 Million initial doses having been handed out to the UK public, the United Kingdom's dire situation looks like it's starting to make a turnaround. The daily Coronavirus rate has slowly decreased in the past couple of days - however, Britons do not seem to be adhering to lockdown and social distancing rules.
The third lockdown in the past 12 months, UK citizens have been seen gathering around beaches with no mask on. The UK government is banking on the vaccine to help control the virus's spread, as hospital beds continue to be filled with Coronavirus patients. The CPI is expected to rise by 0.5%, up from 0.3% a month before.
Canada seems to be avoiding the limelight – however, their Coronavirus cases are continuing to skyrocket after a semi-successful, non-strict lockdown. However, like all countries that did not eliminate community transmission, their cases soared as the latter part of 2020 approached. Coronavirus cases in Canada surpassed 700,000 yesterday.
This may well play into their interest rate decision this week ahead. With the second wave all but destroying any optimism in Canada's economic recovery, analysts predict a rate cut of less than 0.25%, currently at 0.25%. Andrew Kelvin, Chief Canada Strategist at TD Securities, stated that "The fact that the Bank of Canada has kept the door open to ( a rate cut) in the recent month hasn't gone unnoticed by markets."
The news many Australian citizens wanted to hear – "There are no remaining hotspot definitions," Federal Health Minister Greg Hunt stated at a press conference, with only one community transmission in the past couple of days. However, he warned that their not out of the woods yet, stating that "invevitably, there will be days of new cases. There will be days where there may be a requirement for Commonwealth hotspot definition to be reintroduced. But they'll be done on a the basis of that, and cases". This may indicate that Australia is finally able to start its economic recovery – alongside the implementation of the Trans-Atlantic bubble between Australia and New Zealand. Employment Change is expected to decrease from +90,000 in November to +50,000 in December.
Similar to Canada, Japan did not implement a proper lockdown. Instead, they opted for an increase in social distancing measures alongside confidence in their citizens to continue to wear face masks. Just like Canada, initial results were promising. However, as the year passed, it was evident that community transmission is inevitable if it was not thoroughly squashed out. Currently, Japan sits on 325,000 Coronavirus cases, with daily cases reaching an all-time high of 8,000 just a couple of days ago. With negative rates in Japan, monetary policy moves to the downside are rare as not to dig a hole the Bank of Japan can not come out of. Chances are, the BoJ will opt for other tools for yield control, such as asset purchases. However, analysts at Bloomberg Economics forecast the BoJ to keep rates as is not only this week ahead but for the whole year.
Busy week ahead. Trade safe, and most importantly, stay safe.
All eyes will be on the UK’s rollout of the Pfizer-BioNtech vaccine this week ahead, as the first western country to approve a Coronavirus vaccine starts to vaccinate front line workers. However, the NHS medical director warned the vaccine distribution would be a “marathon, not a sprint” and that it will take “many months” to vaccine everybody who needs it. Is this the beginning of the end? Here’s your week ahead.
Japan’s Coronavirus graph symbolizes the problem of loosening coronavirus restrictions when community transmission has not thoroughly be wiped out. Japan has, in essence, entered its third wave of the Coronavirus. Japan recorded over 2,497 new Coronavirus cases on Saturday, alongside 13 deaths.
There are over 161,618 confirmed cases in Japan. Osaka Governor Yoshimura Hirofuki stated, “It’s getting harder to provide treatment to people with serious symptoms. This is the right timing to issue a red alert. It’s a declaration of an emergency in medical care. Our first priority will be protecting life. “This is on a warning to all Osaka residents to refrain from leaving their homes for any non-essential reason until the middle of this month. Note that this is not a strict requirement. Analysts predict a GDP quarter over quarter figure of 5%, identical to that last quarter.
Similar to Japan, Europe paid the cost of reopening early when community transmission was not thoroughly squashed. A second wave has come all across Europe, forcing governments to place their citizens back into lockdown. The attempt to balance economic damage and human lives had backfired. Any optimism on a successful summer had disappeared. This GDP report is likely to show the effects of the premature reopening on the European economy.
Furthermore, the ECB has signaled that they are willing to provide more stimulus coming into 2021 for the European Union. Whether this comes through as further cuts or quantitative easing is unsure. However, a cut this week ahead will be less surprising after the effects of a second have on Europe.
Unfortunately, it will sound like this article is a record on repeat. However, this is the environment around the world due to the premature lifting of restrictions. Canada did not enforce a strict lockdown; however, the government recommended citizens stay at home during the Coronavirus peak earlier this year. Initially, they were praised for their low Coronavirus cases earlier on, like Japan. However, time affirmed that this method was not effective. They’re currently at the peak of their Coronavirus daily cases, with Canada’s Chief Public Health Officer Dr. Theresa Tam stating that it is “unknown” when Canada will reach heard immunity from the Coronavirus. Bank of Canada is set to hold interest rates at 0.25%.
Unlike the previous countries stated above, China went for a hard and fast tactic, restricting citizens’ movements drastically, under police supervision. This has seemed to work, with community transmission staying put in China. With that said, China’s CPI figures are expected to come a little bit softer than the previous month, at 0% growth.
Lighter week ahead. Eyes on the vaccine rollout in the UK. Stay safe and Trade safe.
As the news cycle slows, with the election in the past alongside initial vaccine hype fading away, it is essential to realize that not only is the Coronavirus continuing to ravage the economy, it continues to ravage the families and lives of many around the world.
Many have turned the Coronavirus into a statistical exercise, looking into the future when we eventually look past the Coronavirus. However, it is currently a present problem, with present consequences. Keep this in the back of your head when you trade and invest. Here is your week ahead.
Like many countries in Europe, Germany is experiencing a spike in cases larger than the first wave. They recently recorded 23,000 new cases yesterday. This has directly affected service sector activity, with HIS Markit's flash services PMI's fell to 46.2 from 49.5 in the previous month. Remember, a print below 50 entails a contraction in manufacturing. Analysts forecast Germany to post its deepest recession since World War Two.
In terms of the most frustrated, I am at a country in terms of their Coronavirus response; I am most frustrated in the UK. They had the resources to implement a robust early Coronavirus response. However, Bureaucracy and trying to balance economic damage and human life has placed the UK on its knees. At its peak, the UK recorded over 34,000 daily Coronavirus cases.
After placing a lockdown on citizens, Prime Minister Boris Johnson plans to end the lockdown on 2nd December. However, daily Coronavirus cases still rack up, around 20,000 per day. For reference, New Zealand and Australia lifted restrictions once there were consistently zero community Coronavirus cases. However, the second lockdown could not push the UK's PMI's further down, printing 45.8 with an analyst consensus for 42.5. However, a third wave will push this figure further down.
While the Coronavirus stops many businesses from operating, one sector that was affected less was freight. However, with Australia heightening tensions with China, their largest trading partner, their Trade Balance may see a drop in the next print. Canberra's Officials stated that reports on Chinese authorities telling Chinese buyers to stop purchases of Coal, copper, wine barley, sugar, lobster, and timber as "deeply troubling.
"On the other side of the bond, Beijing has accused Australia of "anti-China hysteria," about Australia prompting an investigation into the origins of the Coronavirus vaccine in China. The previous trade balance was 5.63 Billion.
Japan is one of the only countries that are experiencing the third wave. Each consecutive wave has been larger than the previous in Japan. The method they have adopted, called the "Japan Model," has effectively curbed the spread of the virus in the country.
However, as the third wave is currently in full swing, experts state that the strategy is approaching its limits. Kuroda predicts that "the economy is likely to hit bottom around April-June and is expected to continue improving as a trend" and that it "will help price growth turn positive and gradually accelerate toward [their] 2% inflation target." He further stated that if they hit their 2% target, an "exit from [their] massive stimulus program will come into sight." However, he believes it's currently premature to do so at this stage.
Having beaten the Coronavirus, New Zealand is well on its way to its recovery. With the RBNZ removing LVR's and lowering interest rates earlier this year to cushion the economic effects of the Coronavirus, they have placed it back, quoting "financial stability". Interest rates continue to be at record lows, allowing investors and first home buyers to attain record-low mortgage rates. This has pushed the average house price of over a million dollars in Auckland for the first time.
House prices have been a heated topic with politicians and citizens of New Zealand, with buyers struggling to get into the market and owners going all to increase their assets. However, the RBNZ refuses to implement policy to house prices, stating that "that is not their mandate", and that their mandate is employment and inflation. Orr's speech this week ahead may further see him cement RBNZ's stance on house prices.
The United States recorded 198,585 new cases of the Coronavirus on the 20th November, just shy of the somber record of 200,000. With the country recording an annualized rate of 33.1% during the third quarter showing the effects of government stimulus and quantitative easing by the Federal Reserve, many analysts predict a slowdown in the couple of quarters to come. Aneta Markowska, Chief Financial Economist at Jefferies, wrote in a report to clients on Thursday that "The outlook for Q4 is very shaky in our view" and that "The economy has already lost a lot of momentum over the summer."
Not as a busy week ahead compared to previous weeks. However, news on a Coronavirus vaccine should be watched out for, as it could trigger a risk-on / risk-off event in all assets across the markets. Stay safe, trade safe.
Trump skipped the G20's "Pandemic Prepardness" event to play Golf on that beautiful, cloudy day.
Hello traders! This week ahead, we have many events that directly affect significant currencies such as the GBP, USD, the NZD, and the Euro. Traders should be aware of these critical events not to be whipsawed by the market. Here is your week ahead
UK Inflation dropped sharply to 0.2% in August, as stated last Wednesday, primarily due to the governments' "eat out to help out" scheme, pushing restaurant and café prices lower. After July's higher CPI figures, this conveyed the strong influence the "eat out to help out" scheme had on meal prices. The report explicitly talks about Inflation. However, implicitly talks about what the UK's treasury economic outlook is. A dovish tone may send the GBP against the US lower this week ahead.
We can't seem to escape Jerrome Powell, can we? Dubbed as the Reserve Bank of the World, the Federal Reserve of the United States' economic outlook and changes in policies directly affects traders' and investors' sentiment. It is without saying, traders and investors should be looking at these speeches this week ahead like a hawk to examine any change in Powell's tone about the economy. A more than expected dovish tone should push the USD higher against major currencies, vice versa.
Similar to the Inflation report hearing, Governor Bailey's speech will set the tone for the future of the UK's economy. However, what traders should be looking out for is whether Governor Bailey will give any hints on implementing negative rates in the UK. If he does, this would be a contrast to his position a couple of months ago, which could significantly see the Cable drop.
Australia has had a fierce battle with the Coronavirus. After having initial success with battling the Coronavirus without a strict lockdown, a massive spike in Melbourne, Victoria, has caused a setback of setbacks. A trans-Tasman bubble touted to be around mid this year has been pushed back to at least March 2021. Conditions are better now in Victoria, with the state reporting its lowest increase in Coronavirus cases in three months of 28. This is, in contrast, to triple-digit growth a month ago. With National Australia Bank (NAB) posting an increase of online retail sales of 62.6%, analysts predict a rise in retail sales from 3.2% the previous month. This may provide a push for the Australian dollar higher this week ahead.
New Zealand has been relatively prosperous in controlling the Coronavirus in comparison to other countries. However, that success has come at a brutal economic cost. New Zealand has suffered a 12.2% drop in GDP, higher than Australia, and the OECD average of -7% and -10.6%. With the market pricing in a 72% probability of a rate cut next year (Source: Bloomberg), a rate cut this early will send the New Zealand dollar spiraling downward. However, market consensus predicts that rates will stay the same at 0.25%. All eyes will be on Adrian Orr, which may give a better indication for the timeline of negative rates in New Zealand.
Just some personal perspective. There has been some speculation that the reason why the RBNZ has not implemented negative rates as of yet is to get banks to get their systems ready and bee prepared when negative rates do come. Furthermore, evidence has been shown in mortgage rates. Or more, the duration of low-interest mortgage periods. A couple of months ago, banks would offer 2.55% mortgage rates for six months. However, now, banks are only offering the same quality for one year. This suggests that they are trying to lock borrowers in these rates for a more extended period to minimize remortgages' wave once negative rates come in early 2021.
Europe has faired well regarding the collaboration between the countries regarding the EU's reaction to the Coronavirus in terms of fiscal and monetary policy. With that said, individual states have had different outcomes when it comes to the Coronavirus. Pair that with countries such as Greece and Italy facing economic distress before the Coronavirus, and you have a mixed bag when it reaches the individual countries' future. PMI's measure bearish/bullish sentiment for manufacturing. A figure above 50 signals expansion, while a figure below 50 shows contraction. Consensus state that the UK is set to release a PMI of 56. While still expanding, expansion is less than in the previous month when it was 58.8. Europe is set to release a PMI of 51.7, slightly lower than the 51.9 the last month. Germany is set to release a PMI 54.2, marginally lower than the 54.4 of the previous month.
Busy week ahead as we continue to tackle the Coronavirus around the world. Stay Safe, Trade Safe.
A hectic week ahead as companies and countries start to position themselves to exit the pandemic in the best shape possible. Total Coronavirus Cases top 29 Million, with over 924 thousand deaths. Here is your week ahead.
Boris Johnson has stated that he plans to change part of the terms in the Northern Ireland Protocol. Johnson agreed to keep the border open between the UK and Ireland a year ago. However, he plans to renege on this agreement bypassing UK legislation to override the clause. This has caused a stir between the EU and the UK as if the legislation is passed, would technically be violating international law. This has forced the UK's top government lawyer to quit in protest). This is on top of a possibility of a no-deal Brexit; amongst the global pandemic that has consumed every single politician's attention, a further wrench in the works may send the markets swinging this week ahead.
An Institute for Employment Studies Freedom of Information requests showed that 380,000 jobs were planned to be cut from May to July in the UK this year. In comparison, around 180,000 job cuts were planned from January to March 2009, around the financial crisis. The UK has taken a massive hit due to the Coronavirus, with cases continuing to rise even after the first lockdown. Social distancing measures have forced lower traffic to shops, forcing redundancies, which forces a vicious cycle. The Market predicts a 3.9% unemployment rate, which is identical to the rate three months ago. However, the CPI is predicted to increase by 0.3% by 1.3%, showing the potential effects of inflation on the UK economy.
The Bank of England, like many other central banks, are set to keep rates as is at 0.1%.
As US-China Tensions starts to ramp up before the election period, eyes on the consumer, which were regarded as the "Backbone of the economy" before the pandemic, has stayed relatively healthy due to government stimulus. With US retail sales rising three months in a row, economists predict that with stimulus checks ending soon, US consumers' total income should decrease, therefore seeing a drop in retail sales this month. Analysts expect a 0.1% decrease in retail sales to 1.1% in the next month.
As the Federal Reserve kicks into gear their higher inflation tolerance, the Market has its eyes set on any other support from the Federal Reserve to support the United States recovery. The Market predicts, like always, for the Fed to keep rates as is at 0.25%.
With New Zealand being touted as one of the most prosperous countries in trying to curb the Coronavirus, the country of 5 million is not immune to the economic damage caused by the virus. The country is set to see a GDP contraction the largest in history, with the Reserve Bank predicting a -14.3% fall in GDP growth. The Reserve bank is looking to Sweden as a template for negative rates. The currency markets pricing in a 72% possibility of the RBNZ cutting rates below 0% in February next year.
With Yoshihide Suga being voted in by the party as the replacement of the current Prime Minister Shinzo Abe, Japan is currently enduring a turbulent period as it continues to grapple with the Coronavirus. Cases in Japan have recently been surging, as a reopening of the economy with no official lockdown has come back to bite the country. With declining GDP pre coronavirus, the Bank of Japan is set to keep interest rates as is at -0.1%. It is interesting to note that all the central banks with negative interest rates have left rates during the pandemic.
This week, with M & A kicking into gear, alongside further political action and central bank decisions, this week will undoubtedly be an extremely busy week ahead in the markets. Trade safe!