With the virus epicentre starting to shift

With the US on the brink of approving a massive stimulus of 2.3 trillion USD, Europe arguing about the need of a mutual response, Japan postponing the Olympics and the UK worrying about the economic effects of the outbreak, we enter the next week. As for financial releases a high number of them are due out and could rock the markets once again, albeit their relevance seems to be lower given the threat of the coronavirus outbreak. Nevertheless, we tend to note the preliminary HICP rate for European countries, from China we get the PMIs for March, while the star of the week is expected to be the US employment report for March.

USD – Is the US going to be the new epicentre of the coronavirus outbreak?

In the past days the US has been sending worrying signals for the Coronavirus outbreak. The US has surpassed China regarding confirmed cases and now lists at the top, while the spreading seems to be at its initial stages. New York is often mentioned as the epicentre for the US, as it has by far the highest number of cases along with New Jersey. Experts mention that the virus outbreak is to intensify at the two US coasts and then could expand further in the inland. As for the economy, after the massive monetary stimulus announced by the Fed, US President Trump prepares to sign also a massive 2.3 trillion USD bill, as fiscal stimulus. As per media, the program seems to include $500 billion for hard-hit industries, a similar amount for direct payments of up to $3,000 to millions of U.S. families, as well as $350 billion for small-business loans, $250 billion for expanded unemployment aid and $75 billion for hospitals. The bill at the current stage, was approved by the US Senate and awaits approval by the House of representatives, probably today. Nancy Pelosi, the speaker of the House, stated yesterday that she expects the bill to pass, with strong bipartisan support raising hopes further. The US president stated that he will sign the bill as soon as it clears from the US Congress. However, the release of the initial jobless claims figure on Thursday, shocked the markets as it reached a historic high of 3.28 million claims, underscoring the negative impact of the coronavirus on the US economy. The USD tumbled after the release of the initial jobless claims figure. Next week, the market reaction on US employment data may also be adverse for the USD, should the actual results be worse than expected. Furthermore, measures aiming at restricting movement may intensify and the economy may be hit hard. Please note for next week, that the US will be releasing its consumer confidence for March on Tuesday, the ISM Mfg PMI for March on Wednesday, the initial jobless claims for the current week on Thursday and on Friday the US employment report for March.

GBP – Cable rebounds from 1985 low levels

Cable bounced off from last week lows and the pound showed signs of strengthening also against the common currency, as well as against the JPY. It should be noted that as expected, BoE remained on hold yesterday maintaining rates at one of the lowest levels, reaching +0.10%, as it had allready proceeded twice with rate cuts in March. The bank retained its QE program and kept its lending program unchanged. At the same time, BoE stated that it was prepared for further action. Also, the bank stated that it will monitor whether commercial banks will follow up on the lowering of their interest rates, in order to ease credit terms for the market. Finance minister Rishi Sunak on the other hand, rolled out on Thursday a package to pay 80 percent of the earnings of self-employed people who lost income because of the lockdown of the country. The measures were on top of prior measures of more than 300 billion pounds for distressed businesses. Overall the meassures taken by the UK Government seem to be quite satisfying, yet the outbreak has not ended yet. Definitely the fact that Boris Johnson was tested positive for Coronavirus, as per media, does not help. Experts forecast, London to hit its peak in the beginning to mid April, while intensification of the outbreak for the rest of the country could follow. As for financial releases, we tend to note the release of the nationwide house price index for March on Monday, the GfK consumer sentiment for March and the final GDP growth rate for Q4 on Tuesday, as well as the final manufacturing and services PMIs for March on Wednesday and Friday respectively.

EUR – In the eye of the storm

With EU countries combined having the highest number of confirmed cases, and the death toll rising, EU is at the current stage confronting the hardest hit of the planet. The hardest hit member states continue to be Italy and Spain with Germany and France following. As for the economics of the area the situation becomes even more worrisome. Readings are hitting lows, mirroring the economic distress af the area and albeit the ECB announced a number of measures to support the economy, fiscal stimuluses seem to be less generous. It is characteristic that the issuing of EU joint “corona bonds”, as demanded by nine Eurozone countries, which are among the hardest hit, seems to be hitting a wall of denial from Germany and the Netherlands. An alternative would be the use of the European Stability Mechanism as a credit line, a scenario which is widely discussed, yet there are doubts if it is going to be sufficient. The situation is critical, as whether Europeans will help out eachother, quickly and effectively or not, could shape perceptions about the block internally. As for financial releases EUR traders are to have a heavy schedule next week. We start the week with the release of Eurozone’s Economic Sentiment for March on Monday as well as Germany’s preliminary HICP for March. Eurozone’s preliminary HICP is to follow on Tueday and on Wednesday, we start getting the final readings of the area’s PMI’s, with Germany’s manufacturing PMI gathering most of the interest. On Thursday we get Germany’s trade data for February and on Friday the rest of the area’s final PMI readings for March and Eurozone’s retail sales growth rates.

JPY – Rescheduling the Olympics

JPY seems to be reversing course after its recent weakening against the USD. Safehaven flows seem to be guiding the JPY once again, yet the situation remains complicated in the land of the rising sun. In a joint statement, the head of the International Olympic Committee said that, based on the current conditions “the Games of the XXXII Olympiad in Tokyo must be rescheduled to a date beyond 2020 but not later than summer 2021”. Financially, Japan’s touristic sector prepares for an economic ‘bloodbath’. However, the economic consequences could be far reaching than one may think and could engulf the whole Japanese service sector. However, the coronavirus threat is considered as far wider for the Japanese economy and the Japanese government has not been idle on the issue of delivering additional stimulus for the economy. According to media, the Japanese government is about to start working on a stimulus package equal to 10% of the country’s GDP and Prime Minister Abe is to deliver a press conference tomorrow about the government budget. As for financial releases the calendar tends to include Japanese data in the early days, namely on Tuesday we get the preliminary industrial output growth rate, the unemployment rate and retail sales growht rate, all for February. While on Wednesday we get the Tankan Big Manufacturers and the Non Manufacturers Indeces for Q1.

AUD – Retail sales and Chinese data in focus

Further to the south of Japan, the Aussie continued to stengthen against the USD in the past week. Analysts tended to note that the rebound was intensified after the Australian Parliament quickly passed a bill for a 80 billion AUD, fiscal stimulus for the coronavirus-stricken economy. The bill aims to help businesses and jobs and at the same time increases unemployment aid for citizens. Analysts tend to note that as the crisis seems to continue, another injection from the government seems to be in the cards for the Australian economy. As for financial releases, Aussie traders are expected to eye the release of the retail sales growth rate for February on Friday, but before that the housing credit growth rate for February on Tuesday and the building approval growth rate for February on Wednesday. However, Aussie traders could be having their eyes fixed on the release of China’s manufacturing PMI’s for March, as China goes back on line. Forecasts, tend to expect the readings to improve yet remain below the cut off point of 50, showing a contraction. Yet, it looks like the Chinese factories are slowly recovering from the coronavirus hit. Yet analysts tend to warn that a second wave may be hitting the Chinese manufacturing sector. Reports are surfacing that Chinese factories are finding little demand for their products, especially from their European and US customers. As the coronavirus has a firm grip on both continents, orders are being delayed or cancelled and a new slowdown threat seems to emerge for the crucial Chinese manufacturing sector.

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