The coronavirus outbreak has brought an economic disaster across the globe. Therefore, daily life and economic activity have become halted in most of the affected countries. However, Eurozone PMI and BoE in focus for this week besides the US unemployment rate. What other important events and releases will affect the market this week? Get more insights for the new trading week with AtoZ Markets ‘Forex Weekly Fundamental Forecast’.
23 March, 2020, | AtoZ Markets – Daily life may halt in the coming days as governments and businesses took drastic steps to stop the spread of COVID-19 pandemic. Moreover, the financial markets seized up due to the fear of interruption in economic activity. In the forex weekly fundamental forecast, we will see the Eurozone PMI and BoE decisions along with US Jobless claims.
Forex Weekly Fundamental Outlook Eurozone PMI and BoE in Focus
The economic data has become obsolete for most of the countries as volatility is on extreme due to the outbreak of coronavirus. If the outbreak expands more, we may see a devastating effect on most of the major countries. Eurozone PMI and BoE are in focus for this week while USD is dominating the overall forex market. Now it’s time to see what the unemployment can indicate about the further aspect of the US dollars.
Let’s start the forex weekly fundamental forecast with EURUSD.
Last week, the ECB called an emergency meeting regarding the recent uncertainty. Therefore, it announced a €750B purchase program as a credit risk for regional companies. The ECB also said that it has prepared to adjust the mix of its asset purchase program to implement good policy.
This week, the March Eurozone manufacturing and services PMIs will indicate the first insight into the effect of coronavirus. Therefore, investors’ focus will be on the services sector as it has held up in recent months. There is a possibility of downside risks as the outbreak of coronavirus has decreased the overall economic activity.
On the other hand, Covid-19 has done a severe blow to the American economy. The FED has narrowed its room by lowering the rate to 0.25%. Moreover, it is flooding the market with lending $1.42 trillion to banks on a weekly basis. New York, California, Texas, and Pennsylvania have closed the maximum of the secondary businesses. These states provide up to 35% of the overall US GDP. However, the economies of other countries are facing a greater loss. Despite the effect of coronavirus, the Dollar index has been growing for two weeks in a row.
Since the beginning of March, the EURUSD fell down by more than 800 points. The unemployment data will indicate the further effect of coronavirus around the US, which is expected to increase from 281K to 750K.
The GBPUSD price has never fallen so low since 230 years ago. If we look at history, we can see that in 1791, the GBPUSD price was at 4.555. Later on, in 2000 it was at 1.515 and the latest on March 20, 2020, it was only 1.141. The pound has lost about 1,900 points during the Brexit referendum in 2016. However, the latest downward movement was driven by the news of a rate cut. The Bank of England has decided to cut-rate from 0.25% to 0.10%. Its decision may expand the quantitative easing program by £200 billion. Besides the interest rate decision, investors will see the Flash Manufacturing and Service PMI’s for February. However, both of the results may disappoint investors.
On the other hand, coronavirus has made the US manufacturing outlook obsolete. Therefore, the durable goods orders are set to plummet in the coming months due to the uncertainty among capital investment and manufacturers. The Initial purchasing manager’ indices for March showed a slowdown in activity while the Philadelphia Fed’s current activity index fell from 49.4 points to -12.7
This week’s durable goods report for February may release with an uninspiring result due to a big drawdown in transportation lines. Besides this, the unemployment rate of the US may affect the GBPUSD price.
As the price of GBPUSD has come to the historic low, it is high time to see what big major market movers are doing in the market.
The weakness in Yen against the US Dollar has continued to show from the last two weeks while the USDJPY moved more than 1000 pips towards the upside. The BoJ has taken planes to continue the bond-buying scheme. Therefore, several analysts are waiting for what BoJ is planning as a part of the stimulating program.
The BoJ has left its base rate at -0.1% last week but doubled the asset purchase program by joining most of the other central banks. Currently, most of the central banks are facing an economic slowdown due to the disastrous effect of the Coronavirus.
The bank doubled the asset purchase of the ETF to 12 trillion yen and real estate trust funds to 180 billion yen until the market stabilizes. Therefore, the USDJPY has more potential to move upside if the BoJ decides to expand the asset purchase program. In terms of economic data release, the Flash Manufacturing PMI of japan is currently expected to decline from 47.8 to 42.1 this week besides the BoJ core CPI.
The outbreak of COVID-19 has unsettled communities around the world. It creates uncertainty about the future of the world economy. However, RBNZ is much confident regarding decisions taken by them to cope up with the situation.
RBNZ cut the official rate from 1% to 0.25% and decided to keep the rate unchanged for at least next year. It will allow RBNZ to hold more cash in hand to use for indebted households and firms to use for essential matters.
Moreover, the New Zealand government has decided to participate in a large scale assets purchase program to use for further stimulus in the economy. Therefore, the RBNZ may buy government bonds in return of cash and reduce the longer-term interest rates.
This week will be mute for New Zealand except for the Trade Balance report which may increase from -340M to 550M. Therefore, any weakness in the US report would be positive for NZDUSD buyers for this week.
Coronavirus has already affected the US economy. The retail sales of February dropped to 0.5 percent while the US consumer sentiment was down from 101 in February to 95.9 in March.
The US government has decided to announce a stimulus package to boost economic uncertainty. However, the decision was not enough to help the stock market due to the increase in fear. All of these are indicating that the government expenditures are increasing with a higher deficit and higher debt. Therefore, the increasing money supply and lowering interest rate is an indication of a recession. So the decision is a positive sign for gold due to itself. The similar effects happened when the fall of Lehman brothers where gold failed initially before moving sharply due to the loose in the monetary policy.
The commodity market has become very tricky nowadays. The economic data are not enough to satisfy the market direction. Therefore, any news regarding the world economy regarding the fear effect of coronavirus will affect the gold price for the coming days.
It is high time to see what Saudi Arabia and Russia are doing to settle the crude oil prices. After having a good gain on Thursday, US crude oil lost almost double-digit on Friday. As a result, crude oil was down by 8% more than the other oil benchmarks. The other reason to fail the crude oil price is that traders are unable to respond to economic events surrounding the crude oil. Moreover, the world economy is going through uncertainty; Central banks and governments are cutting rates due to the recent expansion of coronavirus. Therefore, the only way to overcome the situation is to come forward together and work jointly and accordingly.
Overall, Crude oil prices may move with the news from Saudi Arabia and Russia regarding the settlement of oil production. Moreover, the update of coronavirus that is halting the global economic activity is another reason to keep the oil price down.
Overall, the forex weekly fundamental forecast includes economic events from the US, Japan, the UK, and Eurozone. The main focus for investors will be towards the eurozone PMI and BoE interest rate besides the US unemployment rate and effect of coronavirus.