Bank meetings dominate this week
Fiona Cincotta March 18, 2019 10:07 AM
It will be a busy week on the economic front with the Federal Reserve finishing its rate setting meeting on Wednesday, the Bank of England in session on Thursday and the Eurozone’s flash PMIs being released Friday.
It will be a busy week on the economic front with the Federal Reserve finishing its rate setting meeting on Wednesday, the Bank of England in session on Thursday and the Eurozone’s flash PMIs being released Friday. The FTSE has started the week on a positive note, taking its cue from Asia’s close and the higher close on Wall Street Friday as optimism over the Sino-US trade talks infused the market with new vigour.
The Fed has already promised to go slow with rate increases this year to accommodate the changing winds in the US economy but since its last session economic data being released in the US has become a notch worse. Over the coming months the economy wills see some push and pull with the labour market becoming weaker but at the same time housing and consumer spending likely to pick up as mortgages and loans become cheaper.
The currency market seems to be increasingly accepting a scenario in which the US economy slows down even further to the point that the Fed is forced to cut rates later this year and futures contracts on dollar interest rates are indicating a 40% likelihood of a Fed rate cut later this year.
The dollar itself has dropped to a two year low against the euro but is holding up against the pound and the yen.
Brexit vote and the BoE keep sterling on its toes
At home, another Brexit vote this week likely to be held on Tuesday is nudging sterling into negative territory. The currency’s decline against the dollar is still fairly small and the pound is holding above $1.3255 indicating that investors are far less worried about the outcome of Brexit – at least the no deal option - than they were a few weeks ago.
Although Parliamentarians have voted against a hard Brexit this still has to be approved unanimously by all 27 EU member states, which is still not a given.
Eurozone data could weigh on euro
The flash Eurozone PMI data due Friday has the potential to disrupt the euro and major stock European exchanges later this week, particularly given that recent German economic data is showing the first signs of economic shrinkage.
The German stock market is dominated for the moment by the planned Deutsche Bank merger with Commerzbank, with all eyes on the country’s unions, which are fiercely opposed to the move. With the Germany’s manufacturing sector hitting the rocks because of China’s economic woes, problems with the services sector would be bad news for Europe’s biggest economy.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.