Daily Briefing, Mar 21 – Top 5 Things to Watch Today on Thursday
Arslan Butt • 3 min read
Wow, what a day it was. The financial markets moved dramatically on the Federal Reserve monetary policy statement. Gold jumped from $1,301 to $1,317 and it’s a hell of a movement in just one day. Likewise, the US dollar index plunged 0.5%, making it the worst day since January.
The Federal Reserve chose to keep interest rates uniform but it’s not the only thing they said. Fed shocked the market by indicating that no more hikes will be coming this year. So all the big talks of three rate hikes or two rate hikes in 2019 end here. After the announcement, 10-year Treasury yields plunged to their weakest level in a year.
Well, what’s done is done. Today we need to focus on high impact economic catalysts, especially the monetary policy decisions from the Swiss National Bank and the Bank of England. Besides that, the UK Retail Sales data remains in the limelight.
Top 5 Things to Watch Today
SNB Monetary Policy Assessment
The SNB, Swiss National Bank, is responsible for controlling the money supply in Switzerland. Since the SNB only meets 4 times a year, their policy assessment is worth watching to derive the market trends for the next 3 months.
For beginners, the Monetary Policy Assessment is the primary tool the SNB Governing Board uses to interact with investors about monetary policy. It covers the result of their decision on interest rates and analysis about the economic conditions that drove their decision. Most importantly, it projects the economic outlook and offers clues on the outcome of future rate decisions.
The Swiss National Bank has held its policy unchanged since it lifted the peg beneath EUR/CHF on January 15, 2015. Since then, SNB has sustained the Libor Rate at -0.75%, deep into negative territory.
SNB Press Conference
The SNB Press Conference is due at 09:00 (GMT) and it’s the most significant one. Considering the global economic slowdown, the market sentiment for rate hikes is a bit weak. Swiss National Bank isn’t expected to change its policy in the forthcoming meeting especially after the Federal Reserve announced no rate hikes in 2019. However, they may start speaking about an exit plan from the negative interest rate, a move that could heighten the value of the Swiss Franc.
Investors are advised to follow the Press Conference as in case of no rate hike, the Press Conference will be driving the market trends.
The Office for National Statistics remains in highlights for the release of UK retail sale numbers. If you remember, the UK inflation report came out better than expected which is an early indication of a recovery in UK economic sectors.
But the retail sales at 09:30 (GMT) are forecast to report a drop of around -0.4% vs. 1.0% rise in February 2019. Inflation and retail sales are mostly positively correlated. So better be ready for a positive figure as well. The GBP pairs can stay supported ahead of the news.
The Monetary Policy Committee’s next interest-rate decision is due to be announced today at 12:00 (GMT), just a week before the UK’s planned March 29 exit date which is now very likely to be shifted to June 2019.
It will be unwise to play with the interest rates, especially the rate hike, just a week before the Brexit date. The market is uncertain and already in a state of shock after MPs rejected the Brexit divorce deal.
As per Bloomberg reports, the nine-member MPC will vote unanimously to keep interest rates unchanged at 0.75 %. The MPC’s central view persists that a progressive series of interest rate hikes will be required in coming years. However, a number of officials, including the hawkish Michael Saunders, have shown that they’re ready to wait and understand how Brexit turns out before performing another move.
Summing up, we aren’t expecting a rate hike from the BOE and SNB today, however, any shift in the policy will determine the trend of the market.