Major Events of Last Week
At the end of a dramatic week, global equities and oil prices rallied strongly as a direct result of the US Dollar weakened across the board against a basketful of other major currencies. The primary catalysts behind an extensive surge in volatility were the dovish comments issued by the US Federal Reserve last Wednesday catching many investors totally unawares. The US Central Bank surprised the markets by insinuating that an interest rate hike, which was expected in June, may now be postponed until later in the year. These developments subsequently helped the leading US indices to surge higher last Friday illustrated by the Dow Jones Industrial Average soaring by nearly 200 points; the S&P500 edging higher by just over 19 points and the NASDAQ climbing by 34 points.
The pivotal event last week was unquestionably the disclosure by the US Federal Reserve of its latest future guidance policy. During a supporting press conference, Janet Yellen, the Chair of the US Federal Reserve, stunned analysts by adopting a more dovish stance than anticipated. Although the key word ‘patience’ was removed from the Fed wording as widely expected, Yellen still presented a cautious tone. Essentially, she advised that interest rates will be increased at a slower pace and by smaller increments than previously advised. She also inferred that the timing of the first increase was still heavily data dependent and, as such, may not be instigated until after June.
These dovish comments sparked a new wave in volatility which drove stocks and commodities substantially higher. The bullish trend of the US Dollar index was abruptly terminated resulting in the greenback posting its worst weekly decline against the euro in nearly two years. The US dollar also recorded its biggest weekly losses against both the Yen and the Swiss Franc in almost 2 months. Specifically, investors dumped the greenback amid growing concerns about reduced future profits of Multi-National Corporations; downgraded Fed forecasts for US inflation and growth and the prospects of a later-than-expected US interest rate hike.
Elsewhere, the Greek debt crisis continued to boil over. Angela Merkel, the German Chancellor, advised towards the end of last week that Greece would only be eligible to collect new bailout funds if its creditors sanctioned a set of comprehensive reforms that are presently being prepared by Athens. However, she did stress that some negotiating room did still exist depending on the proposals presented. For instance, Jean-Claude Juncker, the President of the European Commission, introduced a significant incentive by stating that 2 billion euros from European Union funds could be made available to Greece with the intent of alleviating the stress suffered by Greeks from many years of excessive austerity.
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What to Expect This Week
The next key global economic indicators will be published over the coming days.
After a quiet Monday, China will post the first sighting of its Manufacturing PMI for March on Tuesday. Expect consensus is currently favoring growth of 50.4. Malcom Edey, the Assistance Governor of the Reserve Bank of Australia, is then scheduled to deliver a speech. He is expected to focus on the present strength of the Australia Dollar. The Eurozone will next disclose its Services, Manufacturing and Composite PMIs for March. The single currency may receive a boost if readings above 50 are registered.
Later on Tuesday, the United Kingdom will reveal its Consumer Price Index for February which is expected to extend many months of consecutive declines. The USA will also publish its Consumer Price Index for February and analysts are predicting a rebound into positive territory this time around. New Zealand will complete the session by releasing its Trade Balance for February which is forecasted to register growth from its prior reading of 56M to 355M.
On Wednesday, Germany will proclaim a key business confidence survey for March. Sentiment is expected to improve amid a weakening euro and the introduction of a massive Quantitative Easing program by the European Central Bank. The US will next print its Durable Goods Orders for February. After many months of depressing returns, a positive snapback would be registered on Wednesday.
Great Britain will present its Retail Sales for February on Thursday. An increase of 0.8% is the current preferred prediction. Japan will then terminate the day by releasing its Household Spending for February. This parameter should decline lower for the eleventh successive month by returning a negative value of 3.1%.
The USA will publish the only major economic indicator on Friday by proclaiming the final version of its Gross Domestic Product for the fourth quarter of 2014. This release could be just a non-event as no significant changes are on the cards.
