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Week ahead - Fed Interest Rates, GDP

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.

Fed Chairman Jerome Powell set to speak this week ahead

Tuesday, 26th January – United Kingdom's Unemployment Rate

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.

Wednesday, 27th January – Australia's CPI Figures

Source: Bloomberg

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.

Wednesday, 27th January and Thursday 28th January – Federal Reserve's Interest Rate Decision and United State GDP

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.

Friday, 29th January – Germany's GDP Figures.

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.

UK CPI, Japan GDP - Week ahead

There will be a week ahead post where the data being released will revolve around how well the economy chugging along, and analysts will argue whether a country has reached its peak or whether the NASDAQ is undervalued at 40 times earnings. However, this week isn't that week. Coronavirus continues to be the primary context around headlines, showing that we are still in the pandemic's neck. I have a feeling that it will be like this until real progress regarding a vaccine is achieved. Here is your week ahead.

Sunday, August 16th – GDP of Japan, Quarter over Quarter

Japan continues to post significant Coronavirus figures, with over 1,200 Saturday, topping 1,000 for the third straight day with cluster outbreaks as summer holidays begin. Initially praised for their laissez-faire regarding their quarantine strategy, i.e., has come back to bite them. However, unlike New Zealand, where they essentially forced everyone back into their homes at the slight hint of a potential outbreak, Japan continues to allow its residents outside. For example, they placed restrictions on the maximum number of spectators, concerts, professional sports, and other events – to 5,000. This has made analysts wary of Japan, considering they had low GDP growth before the Coronavirus pandemic. Analysts predict a contraction of 7.3% last quarter, at an annualized pace of 26%. A 7.3% contraction this week ahead would mark the largest GDP decline post-world war.

Tuesday, August 18th – RBA Meeting minutes, report

Like Japan, Australia was praised for its laissez-faire approach resulting in early positive results in Coronavirus cases. However, also similar to Japan, that approach has come back to bite them. Most notably in the state of Victoria, in which the Coronavirus has run rampant. Although the rate of daily increase in cases has slowed down due to the Premiere of Victoria, forcing a mandatory quarantine to all citizens, they are still recording triple-digit cases regularly. They recorded 279 new cases today, with 16 deaths. However, this is an improvement from 2 weeks ago, when they were recording jumps from 200 to 700 new cases in a day. Australia's RBA before the "second wave," took a confident approach that Australia would be capable of pulling out of the pandemic similar to New Zealand with a lower economic cost, and their monetary policy showed that. However, due to the second wave, the report being released will likely be extremely dovish and hint and further rate cuts in the future.

Wednesday, August 19th – UK CPI figures

The UK has seen its Coronavirus curve slowly rise, and that has made government officials anxious. They have recorded over 1,077 new Coronavirus cases in the pasty day, which is slightly under their 1,097 seven-day moving average. However, analysts predict CPI a small change from a 0.6% increase in the CPI to a 0.7% increase this week ahead. If the increase is larger than expected, we should see the GBP strengthen against its peers.

Wednesday, August 19th – Canada CPI Year over Year

Canada was one of the only nations to not impose a strict lockdown for its citizens and come out flattening the curve. Yesterday, Canada confirmed 237 new cases. While not entirely eliminated, the country has not experienced breakouts similar to that of Japan and Australia. Previously, the CPI was up 0.7% compared to a year ago, with analysts predicting a CPI increase of 0.2% this week ahead. With such wild variations, it is yet to be seen what the CPI is going to be. However, a rise in CPI signals a bullish stance in the Canadian dollar, with a hawkish central bank.

Thursday, August 20th – USA FOMC Minutes

The United States is not close to flattening the curve.

A staggering number: 5,565,114 Coronavirus cases, 173,080 deaths – a 6% mortality rate. The United States has not been able to flatten the curve. With an election coming up, President Donald Trump has tried to re-open the economy to boost his chances come election time. However, this has not worked. His selflessness has cost many people their lives. Usually, a market-moving event, TD Securities analysts noted that "at the July FOMC meeting, the Committee did not imitate any new policy actions, and that changes to the statement were minor." Combining this with August being a month were a lot of traders and managers take leave for their summer holidays, we should expect this to be relatively non-market moving.

As stated above, this month tends to be quite slow due to many traders, investors, and asset managers taking leave for the summer holidays. Therefore, the market should be relatively muted at this time. This may be an excellent opportunity for traders and investors to backtest their strategy or even paper trade to practice for the coming months. Many elections are coming, such as the United States and New Zealand general elections, which will cause significant market moves.

Trade safe! Have a good week ahead.

Week ahead: GDP, FED Decision. Markets Recap

It has been a turbulent week for the markets and social stability. The markets extend their risk on rally during protests around the world for the death of George Floyd and a surprising 2.5m jobs that were created for non-farm employment. This is your week ahead.

The SP500 has gapped higher at the start of each trading week

All dates are in NZDT.

Japan’s GDP Annualized – Today, 8th June

Japan is an example of a nation that has returned to a relativel normal without fully squashing the curve. This is slowly showing the cracks of their method of not officially entering a lockdown, as the daily number of average cases grow. With an aging population and slowing pre-coronavirus GDP rate, a growing Coronavirus case may not bode well for the long-term view of Japan’s GDP. Analysts forecast a drop in the growth rate by -2.3%.


Euro GDP Growth Rate Year over Year – Tuesday 9th June

With Italy and Spain opening their borders after a brutal Coronavirus period for both countries, citizens are looking forward to a relatively familiar normal. With the EU’s GDP predicted to shrink by 8.7%, Christine Lagarde led a charge for the ECB to inject an extra $1 Trillion into the economy. There have been 6.8M Coronavirus cases confirmed, with just under 400k deaths.

Federal Reserve Interest Rate Decision – Thursday 11th June

A turbulent week for the United States with protests over George Floyd’s death engulfing the public with rage. However, markets seemed to ignore the unrest, rallying on unexpected news such as the 2.5m Jobs non-farm jobs gained – a far cry from the anticipated 13.3 million job loss. Analysts predict Federal Reserve Chairman Jerome Powell to keep rates steady at 0.25%. However, investors may be interested in Jerome Powell’s Economic Projections on the same day for market-moving statements. 

United Kingdom’s GDP Year over Year – Friday 12th June 

Suffering one of the highest death rates for the Coronavirus at around 14.17%, the UK government has had many controversies with regards to their response to the pandemic. Finance ministry officials predict that the government deficit could swell to over 337 Billion pounds this year from just 55 Billion in March. GDP YOY Growth is expected to drop by 22.3%.

Market recap