Weekly Market Outlook: Focus Turns to ECB Meeting & Fed Minutes

ECB Meeting Likely to be a Non-event

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The week ahead is a bit slow with economic data taking a backseat. The main event risks this week will be the European Central bank’s monetary policy meeting and the Fed meeting minutes. Brexit will remain in the headlines as the EU emergency summit is also due over the week.

Data from the UK will see a mix of economic reports and Brexit related developments. The monthly GDP figures from the UK are due this week including the manufacturing, industrial production, and construction output numbers. The data is, however, unlikely to play a major role as the Brexit saga remains in the forefront. An emergency EU summit has been called to discuss the Brexit extension request from PM May.

Data from the United States this week will see investors taking cues from the FOMC’s the March monetary policy meeting minutes. Amid Trump’s pressures to cut interest rates and loosen monetary policy, the minutes will reveal details about the policy maker’s deliberations on US interest rates. On the economic front, the inflation and producer prices data will be coming up during the week.

A number of Fed members are also due to speak. The lineup includes Fed governors Clarida and Quarles and St. Louis Fed president, Bullard.

Investors will also be keen to see how inflation fared in China. Reports this week will cover the annualized inflation and producer prices index for the month of March. Expectations are optimistic showing that consumer prices might have risen during the month.

Data from the eurozone, with the exception of the EU summit and the ECB meeting, is fairly quiet. The Eurozone Sentix investor confidence report, Germany’s trade balance, and industrial production figures are all due over the course of the week.

Here’s a quick recap of what’s to come in the currency markets this week.

China Inflation and Trade Balance Figures

The economic data from China this week will start off with the consumer prices and the producer prices data. Headline inflation is forecast to rise by 2.4% on the year ending March 2019. This marks a rebound from the 1.5% increase previously.

Producer prices data is expected to rise at a modest pace of 0.4% on the year ending March, following a 0.1% increase previously.

The trade balance figures will be important. Previously, shipments from China fell 20.7% on the year in February, as an effect of the trade wars. For March, exports are forecast to rise by 7.3% while imports are forecast to fall for the fourth consecutive month by 1.3% on the year.

As a result, China’s US denominated trade balance figures could rebound from 4.1 billion in February to 7.7 billion in March. The report comes as the US and China trade talks continue.

ECB to Remain on the Sidelines

The European Central Bank will be holding its monetary policy meeting this week on Thursday. The meeting could be quiet, with no major surprises in store. All key interest rates will remain the same, unchanged.

Investors will be keen to hear from the ECB President Mario Draghi during the press conference. There have been talks about the central bank introducing a tiered system for negative deposit rates. This view gains traction amid the risks of prolonged negative rates in the eurozone.

Overall, the ECB could take a less dovish stance than before. This partly comes with a rebound in the services PMI reports that saw upward revisions to previous data. Investors will be looking to the ECB for any dovish cues which could reflect in the euro’s performance.

Later in the day on Thursday, the US Federal Reserve will also be releasing its monetary policy meeting minutes. As a result, we can expect to see some volatility in the euro currency.

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