Last Week’s Highlights
- Japan in Technical Recession:
Japan’s final revised GDP figures for the fourth quarter of 2019 were confirmed at -1.8%. This was slightly worse than the 1.7% decline initially announced. The declines in quarterly GDP ended a fragile recovery. And Japan’s economy is already forecast to dip into recession due to the pandemic.
- UK’s Rate Near Zero Bound:
The Bank of England, in its monetary policy meeting last week announced a 50 bps rate cut. This brings the UK’s interest rates back to 0.25%. The decision to cut rates came as the economy battles the impact of the COVID-19 outbreak. The UK Treasury also unveiled additional spending plans to combat the effects of the virus outbreak. The sterling was, however, unmoved by the decision.
- US CPI Ignored:
Consumer prices in the United States rose 0.1% on the headline on a monthly basis. This was slightly higher than the flat reading that economists projected. The core inflation rate, which excludes volatile food and energy prices, rose 0.2% as forecast. However, the markets did not react much to the backward-looking data amid the current global health crisis.
- ECB Surprised But Stimulus Expected:
The European Central bank held its monetary policy meeting on Thursday. The central bank did not cut interest rates but announced stimulus measures. The ECB will be conducting its LTRO temporarily in order to provide liquidity for the eurozone until June 2020 when the TLTRO III operation is scheduled to begin.
Upcoming Economic Events
- China Industrial Production:
China’s industrial production figures will kick off the week ahead. Production is forecast to fall by 3.0%, following a 6.9% increase in the month before. The declines are all but unexpected, with more economic indicators likely to show slower activity. However, the data is unlikely to surprise investors. It will only show the extent of the COVID-19 virus outbreak.
- Germany ZEW Economic Sentiment:
The German economic sentiment from the ZEW institute is due mid-week. Expectations are for the economic sentiment to fall to -25 on the index for March. This comes after a positive 8.7 reading on the index a month ago. The health crisis will be the major issue behind the weakness in the economic sentiment.
- FOMC Meeting:
The Federal Reserve Bank will be holding its monetary policy meeting on Wednesday. Analysts are widely expecting the bank to cut interest rates to 0.50% – 0.75%. This will be the second rate cut within a span of a week as the central bank battles the impact of the health crisis. The Fed will also be giving its economic projections. Fed Chair Jerome Powell will be holding a press conference later in the day.
- RBA Meeting Minutes:
Australia will be releasing its RBA meeting minutes and employment figures. The data comes on the back of RBA’s rate cut a week ago. On the employment side, investors will get to see how the labor market is faring. The data is for February when the impact of the virus outbreak was still minimal at the time. Expectations are for the Australian unemployment rate to remain steady at 5.3%.