Smats FX weekly market report | Monday 16 March 2020

USD

The USD slumped on Monday after the Federal Reserve cut its interest rates once again now bringing it to zero, this will formally relaunch its quantitative easing program. It was an unscheduled announcement on Sunday and policymakers had a split decision to cut rates between 0% and 0.25%. They also stated that they would buy US$500 B worth of treasuries and US$200 B worth of agency mortgage-backed securities. The US retail sales figures for February is due out on Tuesday with expectations are at 0.1% from 0.3% in January.

Influences on HKD, SGD & AED

There isn’t too much coming out of our exotic currencies this week, their rates will largely be driven COVID-19 developments worldwide, but more importantly within the US. We can expect data reports to have less of an impact than normal but Singapore will be releasing their balance of trade figure for February on Tuesday, it is expected to drop from SG$1.58 B to SG$1.3 B, no real changes in the rate are expected from this data point. Hong Kong will be releasing their unemployment data on Tuesday; the unemployment rate is expected to climb to 3.5% from 3.4%.

AUD

The Aussie Dollar will be hoping to recover from its heavy losses last week after Coronavirus cases in South Korea nearly doubled and weaker than expected employment data dragged the AUD lower. This week, China will be dropping a whole load of data which includes the retail sales, industrial production and both the 1 year and 5 year prime loan rate, these will have an impact on the Australian Dollar’s strength due to the close trade ties between the two countries. Going forward, COVID-19 updates will drive the markets until further notice.

NZD

The Reserve Bank of New Zealand has pledged to keep their rates at 0.25% after they just cut their rates by 75 basis points in order to combat the hit of COVID-19 on the local economy. Governor Orr did suggest that negative rates are not an option. Then on Wednesday the quarterly GDP results are out as analysts expect to see 0.5% growth in the final quarter of last year following the 0.7% growth in Q3. COVID-19 updates are set to be the driving force behind the NZD’s price action this week as well as some of the scheduled central bank decisions.

EUR

The GBP/EUR rate closed at one of its worst weeks on Friday as it suffers more a loss of more than 4%. This week we can expect all data reports to have a subdued impact and ultimately virus spread is set to be the most important factors for currencies going forward. This week the ZEW economic sentiment will be released on Tuesday as the German index is set to fall to -25.00 from +8.70 while the Eurozone’s headline figure is forecast to drop from +10.4 to -23.10.

GBP

The British Pound starts the week on the back foot as the Euro and US Dollar as global investors take control of how the UK currency performs. Without many domestic reports this week it will all be down to how COVID-19 develops in the UK as the sole data report is the jobs data, we can expect the unemployment rate to remain at 3.8% while the claimant count change is expected to come in at 6 200 against 5 500.