Last week was very interesting for the markets, as we saw the releases of the US Inflation and Disney’s earnings report. So let's see what we should await this week!
Central banks: all as one
With emergency meetings taking place every two days, it is becoming irrelevant to anticipate outcomes of the planned economic events. For this reason, let’s just recap what happened recently and try to have a broader perspective.
All major central banks have already reacted to the coronavirus fallout by either cutting interest rates or announcing quantitative ease measures – or both. The map below shows what corresponds to the G-7, and note how quickly evolve in the context of the recession fears: this map from Bloomberg’s fresh (this Monday) article only leaves it to the Bank of Japan to take action on March 19 – and the Japanese financial officials have just had an emergency meeting! They left the interest rate unchanged but informed the audience on extensive quantitative ease measures, announcing their full commitment to the G-7 countries to support the level of US dollar liquidity in line with their overseas colleagues.
Any ace up the sleeve?
Quite controversially, the fact the financial authorities reacted to the coronavirus fallout comes with little consolation. Most of the banks have already fired most of the available artillery at the recession risks. That means, there is very little monetary financial capacity left for the financial authorities of the strongest countries – if any. And that’s while the coronavirus has just started its march into the countries of the most developed and wealthy part of the globe. It appears that the true fight for the global economy will be a test for lengthy economic resilience, and there is normally little chance left for a combatant who fires most available ammunitions at the first strike.
The US President, a strategic supporter of low domestic interest rate, finally expressed his joy seeing the US Fed cutting the rate to the target range of 0-0.25%. Was Wall Street happy as well? Barely so. Most observers either called for more stimulus or blamed the Fed for panicking and bringing even more run-for-your-life mood into the investors’ circles. Obviously, we are yet to see how the situation around the coronavirus develops, but the currently, financial circles prefer a cautiously modest economic view of the nearest future. Most of the media prefer to view the situation as multi-alternative and restrain from direct predictions. In the meantime, Goldman Sachs sees S&P dropping to 2000 as one of the scenarios. Currently, it is at 2666, which is 21% lower than its recently left all-time high of 3400. So let hope for the best, prepare for the worst, and use the opportunities we have now!
The volatility that the markets experienced last week promises the second tidal wave! What should your favorite assets anticipate during the first week of February?
The US will reveal Non-farm payrolls on January 7, Friday, at 15:30 GMT+2 (MetaTrader time).
The US Bureau of Labor Statistics will announce average hourly earnings, nonfarm employment change (NFP), and the unemployment rate on July 8, at 15:30 MT time.
The Federal Open Market Committee, a committee within the Federal Reserve, will reveal a detailed record of the central bank’s last meeting on July 6 at 21:00 MT.
The Reserve Bank of Australia will announce its cash rate and make a statement about future rate policy on Tuesday, July 5, at 07:30 MT.