There will be a kener focus on macro economics now
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There will be a kener focus on macro economics now

For a snapshot of markets closing on Friday, see here: Forex Today: Mild-optimism weighs on the greenback

Meanwhile, there was little news from the weekend that will impact the open significantly, although it is apparent that COVID-19 cases continue to climb especially in the US which has now toppled 750,000 cases. 

However, in many other nations, the headlines were more encouraging. In Spain, the death toll rose at the slowest pace in three weeks while in Germany, cases rise by the least in four days. Also, in France, the death toll rose at the slowest pace in three weeks as well. Markets will be on standby this week for a macro picture and how nations are responding to the virus. 

The market’s focus is on how the US will get people back to work and timings of it while monitoring the performance of the global economy. The recession is already priced in and we have seen the cat bounce in equity markets. With sounds of nations trying to normalise again, there will be a major focus on economic data from here on and whether a cure can be found in time before the cases spread out of control. 

However, there is a tail risk due to the uncertainties of COVID-19 and the downside for markets will be worst than expected economic data and/or the spread of the virus which could encourage additional stimulus which is unlikely to be taken so positive next time around. 

COVID-19 was like an asteroid has hit planet earth to the global economy. The virus has stopped economic activity everywhere in a synchronised recession which is risking a depression, perhaps worst than the 1930s. A V-shape recovery could well be out of the picture when are seeing data, such as unemployment claims coming out 15 times higher than the average in just three weeks. 

Key data ahead

There will be a keen eye on the US jobless claims again this week and, if NY and Philadelphia Fed surveys could be used as a prelude, April data could be a lot worse than the March data considering social distancing generally did not start until around mid-March. There will also be UK Retail Sales, European Flash PMIs, Canadian Consumer Price Index and the Reserve Bank of Australia minutes as highlights.

Fr the immediate session, New Zealand Q1 CPI data is out. “We expect CPI lifted 0.5% q/q, with annual inflation accelerating 0.3% pts to 2.2%. Non-tradable inflation of 1.0% q/q will be just enough to see the annual number hold on to its 3 handle – for now,” analysts at ANZ Bank explained.

Tradable inflation is flattered by 2019’s weak Q1 read dropping out of the calculation, but weak petrol prices loom in Q2. In today’s context, what inflation did in Q1 is hardly relevant for monetary policy settings. The RBNZ has already thrown the kitchen sink at it, but even more will be needed. We see RBNZ QE roughly doubling to around NZD60bn.



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