Central bankers back to the stage this week

Central bankers back to the stage this week

Posted on Sunday, April 26 2020 at 1:58 pm GMT+0000

Risk sentiment remained volatile the past week. The United States is deeply divided over the correct economic and health response. Until now, no drugs or other therapeutics presently approved by the U.S. Food and Drug Administration (FDA) to prevent or treat COVID-19. On Thursday, the leading experimental drug Remdesivir that had been heralded as a potential miracle treatment, failed its first clinical trial. And with the U.S. coronavirus death toll topping 51,000 and nearly one in six workers out of a job, Georgia, Oklahoma and several other states took tentative steps at reopening businesses on Friday, despite disapproval from President Donald Trump and medical experts.

Last Thursday, The U.S. House of Representatives passed a $484 billion bill to expand federal loans to small businesses and hospitals overwhelmed by patients, and the European Union leaders agreed to build a trillion euro emergency fund to help recover from the coronavirus pandemic, but left out crucial details like its size, when it will be set up, and how it will be financed – all of which has been tasked to the Commission to ‘study’.

This week, central bankers will get back to the stage. The Fed which will meet on Tuesday and Wednesday and the ECB on Thursday are not expected to announce any new policy initiatives, having taken lots of emergency actions over the past period. However, markets will nevertheless still be interested in any signals about any changes to the Fed’s existing credit facilities, and also in what the Fed has to say as the FOMC updated economic projections will be published.

On the data front, there’s a bunch of key data releases out of the US, notably the CB Consumer Confidence on Tuesday, and the advance GDP report for the first quarter on Wednesday, which is expected to show the economy shrinking at an annualized quarterly rate of 4.1%. Any negative surprises in the GDP numbers or in the FOMC forecasts will most probably damp risk sentiments and support the US dollar which is expected to continue acting as a safe haven.

While on its meeting on Monday, the BOJ is expected to discuss unlimited buying of government bonds, as it seeks to cushion the economy against a sharp downturn caused by the coronavirus outbreak. It might also consider a sharp increase in the amount of commercial paper and corporate bonds it purchases. The Japanese yen’s reaction to any surprises by the BOJ is expected to remain minimal, since the Yen is expected to continue to remain driven by the developments of risk sentiments in general.

In brief, this weeks’ economic highlights:

 

Tuesday, April 28, 2020:

  • BoJ Monetary Policy Statement (03:00 GMT)
  • BoJ Outlook Report (YoY) (03:00 GMT)
  • BoJ Press Conference (07:00 GMT)
  • US CB Consumer Confidence (Apr) (14:00 GMT)

 

Wednesday, April 29, 2020:

  • Australia CPI (QoQ) (Q1) (01:30 GMT)
  • US GDP (QoQ) (Q1) (12:30 GMT)
  • US Pending Home Sales (MoM) (Mar) (14:00 GMT)
  • Crude Oil Inventories (14:30 GMT)
  • FOMC Statement (18:00 GMT)
  • Fed Interest Rate Decision (18:00 GMT)
  • FOMC Press Conference (18:30 GMT)

 

Thursday, April 30, 2020:

  • China Manufacturing PMI (Apr) (01:00 GMT)
  • German Unemployment Change (Apr) (07:55 GMT)
  • EU CPI (YoY) (Apr) (09:00 GMT)
  • EU Deposit Facility Rate (Apr) (11:45 GMT)
  • ECB Marginal Lending Facility (11:45 GMT)
  • ECB Monetary Policy Statement (11:45 GMT)
  • ECB Interest Rate Decision (Apr) (11:45 GMT)
  • US Initial Jobless Claims (12:30 GMT)
  • Canada GDP (MoM) (Feb) (12:30 GMT)
  • ECB Press Conference (12:30 GMT)

 

Friday, May 1, 2020:

  • US ISM Manufacturing PMI (Apr) (14:00 GMT)

 

The major mover last week was oil, The May WTI Crude Oil contract fell as low as -$40.32/barrel on Monday, as the devastation in demand and excess supply have overwhelmed physical storage capacity, leaving investors nowhere to store oil. So some investors were left holding a contract they did not want and could not have delivered, and when they all attempted to sell in a market without buyers, prices literally fell through the floor. However, prices recovered on Wednesday after a tweet by President Trump threatening Iran squeezed out many short sellers.