Daily Brief, Mar 25: Economic Events Outlook – Trading CPI, Business Climate & Durable Goods
Arslan Butt • 2 min read
Good morning, traders.
Team FX Leaders hopes you are staying safe from the viral coronavirus disease, and we pray for the safety of everyone. It’s not only impacting human life, but the global financial markets are also suffering due to coronavirus. The greenback surged nearly 7% in the last 15 days, as concerns over the economic slowdown of the coronavirus pandemic have increased traders’ interest in the greenback, but due to an increased number of cases in the US, investors seem to short the dollar.
The US government bonds gained after the Fed’s launch of measures to calm financial markets. The benchmark 10-year Treasury yield diminished further to 0.772% from 0.932% Friday.
The Federal Reserve announced plans to backstop a wide range of credit for households, small businesses, and major employers, citing severe disruptions to the economy caused by the coronavirus pandemic. It stated that it could purchase an unlimited amount of Treasury securities and agency mortgage-backed securities to ensure smooth market functioning. Meanwhile, for a second day, the US Senate failed to move forward with a $1.6 trillion economic rescue package.
Watchlist – Top Economic Events Today
Let’s take a look at the top high impact economic events which are likely to drive movement in the market today.
The UK Office for National Statistics is due to report the UK inflation rate at 7:00 GMT. Initial release time was shifted 150 minutes earlier due to source rescheduling. The annual inflation figures in the United Kingdom soared to 1.8% in January of 2020 versus 1.3% in December and beyond economists’ forecast of 1.6%.
It is the biggest reading in six months, largely supported by prices of transport (1.8% vs 0.7% in December), particularly airfares (0.9% vs -8.5%); fuels and lubricants (4.7% vs 1%, the biggest growth since November 2018); housing and utilities (2% vs 0.4%), namely electricity (8.6% vs 3.3%); restaurants and hotels (2.2% vs 1.6%); and miscellaneous goods and services (2.4% vs 2.2%). Also, prices rebounded for clothing and footwear (0.2% vs. -0.8%).
Conversely, inflation dropped for food and non-alcoholic beverages (1.4% vs. 1.7%) and was poised for entertainment and culture (1.5%). Core inflation, which eliminates energy, fuel, tobacco, and alcohol, surged to 1.6% from 1.4% in December.
Today, economists are expecting a drop of inflation from 1.8% to 1.7% which may pressure the Sterling today.
EUR – German Final Ifo Business Climate – 9:00 GMT
The Ifo Institute will report the German Final Ifo Business Climate at 9:00 GMT. The business climate has been worsening in Germany as well as in the whole of the Eurozone after it peaked at around 117 points at the end of last year and at the beginning of this one.
In February, the business climate indicator surged to 96.1 level for the first time in an extended period, and today, it is expected to decline again to 87.9 points. This may bring selling bias for the Euro currency pairs.
USD – Durable Goods Orders m/m – 12:30 GMT
The Census Bureau is due to report Durable Goods Orders m/m with a forecast of -1.0% vs. -0.2% during the previous month. These economic indicators measure the change in the total value of new purchase orders placed with manufacturers for durable goods, excluding transportation items. The US dollar may suffer on the release of the economic event today as coronavirus has started placing significant impact on the US economy. Good luck!