29 February AtoZForex, Lagos – Interesting reactions were seen across markets after the G20 finance ministers made only vague commitments to spur growth at the just concluded meeting in Shanghai. The global market frenzy across stocks and currencies seen earlier this year had prompted calls for G-20 members to do more to foster economic stability. Even though the G20 finance ministers did not come up with a coordinated stimulus package, they concurred to use monetary, fiscal and structural tools to support growth. Also, they reiterated pledges to refrain from competitive devaluations, with Eurogroup chief Jeroen Dijsselbloem clarifying that “there was some concern surrounding Japanese policies.”
The New Zealand dollar opened down with a gap, as the currency looks set to post its largest two-day loss in about four months. Spurred by further weak data, therefore fortifying the case for another interest-rate cut. The ANZ Business Confidence showed a steep decline, as well as a decline in home-building approvals. The ailing data has now prompted the ANZ Bank New Zealand Ltd. to forecast that the Reserve Bank of New Zealand will reduce its benchmark interest rate twice this year.
The Yen seems to be capping a strong month of a 7.3 percent gain in February, after rising about 1 percent for the day so far, its first rise in four days. This came after Japanese Shinzo Abe told parliament Monday that through Abenomics economic reforms, he has sought to correct the excessively strong yen, hence he is not trying to influence foreign-exchange rates.
With markets already opening to some interesting volatility, particularly from the NZD, the week is packed with key fundamentals to ensure a volatile week ahead like the upcoming NFP report.
Australia rate decision
Having left rates unchanged at 2.00% since May, The Reserve Bank of Australia is most likely to continue its wait and watch mode, even though RBA governor Glenn Stevens left the door open for further monetary easing, while remaining optimistic about the local economy. The Aussie is bound to be a major mover this week as we also have the Building Approvals m/m due on Tuesday, quarterly GDP on Wednesday, Trade balance on Thursday and the Retail Sales m/m on Friday.
UK Purchasing Managers’ Index (PMI)
The UK economy recorded a solid growth of 0.5% in the final quarter of 2015, in line with economist’s forecast. However, reports of a surprise drop in business spending have heightened fears of a potential slowdown in the months to come. It remains unclear if the growth is sustainable as the nature of the factors driving the expansion seem precarious. Consumer spending was strong, while exports struggled, manufacturing stagnated and business investment fell at the sharpest pace for almost two years. Further growth is now expected to soften, due to the tough global economic outlook, as well as the risk of a Brexit in the upcoming June EU referendum.
This week, we have the manufacturing PMI, construction PMI and services PMI all due for release. They are forecast to come at 52.3, 55.5 and 55.1 respectively. With the impending risk of a Brexit in the upcoming June EU referendum, this event stands as the major driver of sentiment at the moment. However, developing data remains very important as the Bank of England remains unclear as to the next step for rate hikes. The sterling remains weak, and may now be looking for catalysts for a rebound after exhaustion.
Non-Farm Payroll data (NFP)
The major focus of the week will be the Non-Farm payroll data (NFP report). Last month’s NFP report gave a mixed picture, after the NFP disappointed, coming at 151k against 190k forecast. But the unemployment rate fell to 4.9%, sending the dollar rallying while Global stock markets slumped. As we step into the new month, the latest NFP report will be key as the Federal Reserve try to make up their minds about the next course on interest rate policy, in the face of growing global economic uncertainty. Other data due form the US this week includes ISM Manufacturing PMI on Tuesday, ADP Non-Farm Employment Change on Wednesday, and unemployment claims on Thursday. This week could well determine the medium term for the USD, having been mixed lately against its major counterparts.
Think we missed something? Let us know down in the comments section.