Major Events of Last Week
The publication of a stellar labor report by the USA on Friday, 6th March, set the tone for last week’s dramatic price movements. The better-than-expected US employment figures increased speculation that the US Federal Reserve will commence tightening its monetary policies during 2015. In contrast, other major global Central Banks are forecasted to introduce further quantitative easing. This stark variance propelled the US Dollar higher against a basketful of other major currencies while exerting significant pressure on global commodities and stock. For example, the premier US indices crashed last Friday demonstrated by the Dow Jones Industrial Average plunging by slightly over 195 points; the S&P500 sinking by nearly 20 points and the NASDAQ dropping by almost 35 points.
The strengthening US employment scene has prompted many economists to predict that the Fed will now instigate an interest rate hike as early as this coming June. If so, then such an action will be contrary to those of many other major trading regions, such as the Eurozone, China, Japan, Australia and Canada, etc. which are presently contemplating further monetary easing.
This serious divergence incited investors to substantially enhance their support for the greenback last week enabling it to post its best fortnightly performance against other global currencies in nearly five years. For instance, the EURUSD nose-dived continuously throughout this period to eventually record its lowest value in almost 12 years towards the end of last week.
Prominent economists summarized this situation by stating that a massive real money transfer into the US Dollar was now prevalent. They added that investors were buying the greenback across the board exerting substantial pressures on short-term inflows and other currencies. They also warned about the dangers of persistently declining oil prices which could eventually impact the labor markets and capital investment plans of many key countries.
European stocks did manage to stage a rally during the course of last week. They acquired support after the European Central Bank launched its massive 1.1 trillion euro bond buying program on Monday. This dramatic action had the immediate effect of suppressing bond yields within the region to record lows.
Analysts will now turn their attention to the two-day conference of the Federal Market Open committee, scheduled to commence on Tuesday. In particular, they will be hoping that this premier occasion will finally provide deep insights into the precise timing of a Fed interest rate hike.
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What to Expect This Week
The following economic indicators will be released worldwide as this week progresses.
China will launch proceedings by disclosing its Foreign Direct Investment for February on Monday. If a significant increase is posted then such an outcome could indicate that the second largest economy is experiencing internal strife. Mario Draghi, the President of the European Central Bank (ECB) is also scheduled to deliver an important speech. If he expresses any optimism about the ECB’s new stimulus package, then the euro could receive a much-needed boost.
On Tuesday, the Bank of Japan (BoJ) will announce its Monetary Policy Statement which will be supported by a subsequent press conference. The BoJ could surprise investors by advising that additional monetary easing may be in the pipeline if the national economy continues to falter. Germany will then reveal a key business sentiment survey for March and expert consensus is presently favoring another increase. The USA will complete the session by posting its Housing Starts and Building Permits for last month. Both these parameters are expected once again to print values in excess of 1 million.
The Bank of England will release the minutes from its latest policy meeting on Wednesday which will also contain the vote counts of the Monetary Policy Committee. Any hawkish signs of a pending interest hike rate would help Sterling countered its current bearish descent across the board. Later, Great Britain will also publish its Unemployment Rate and Claimant Count Change for February. These employment figures are forecasted to extend their increases for the fourth consecutive month. The pivotal event of the week could then occur later in the day when the FOMC issues its Monetary Policy Decision backed by a Press Conference. Both these events will be eagerly monitored by global investors keen to learn when the Fed will most likely hike its interest rates. New Zealand will end the session by proclaiming its Gross Domestic Product for the fourth quarter of 2014, which is anticipated to register growth of 0.8%.
The Swiss National Bank (SNB) will deliver its Monetary Policy Decision on Thursday. Although no major changes are forecasted, the SNB may surprise as it has done a number of times in 2015 already. The USA will subsequently declare a major Manufacturing Survey for March, which is expected to post a rebound to +7.3 after suffering numerous successive months of declines.
Glen Stevens, the Governor of the Reserve Bank of Australia, will make a speech on Friday during which he should iterate his viewpoint that the national currency is presently overvalued. Finally, Canada will end the week by disclosing its Consumer Price Index for last month. A minor rally is the preferred outcome.
