Weekly Outlook, Mar 22-26: Top Economic Events to Watch This Week
Arslan Butt • 4 min read
The broad-based U.S. dollar will end this week on the bullish track as rising Treasury yields, and a fall in global shares tend to underpin the currency. Investors also continue to contemplate the U.S. Federal Reserve’s deflection of early interest-rate hike expectations. It is worth mentioning that the benchmark U.S. 10-year yields rose to a more than one-year peak of 1.754% during the previous session before dropping to 1.715%, as we know that the Fed handed down its policy decision on Wednesday and promised to carry on with aggressive monetary stimulus. However, the fresh gains in the U.S. dollar could be short-lived or temporary as the U.S. stimulus hopes and the Fed’s dovish tone on inflation keeps the U.S. dollar under pressure.
Apart from this, the slight decline in the global risk sentiment as represented by a softer tone around the equity markets provided some short-covering support to the safe-haven U.S. dollar. Looking ahead into the coming week, the series of Manufacturing PMI and Durable Goods Orders along with Monetary Policy Meeting Minutes and Fed Chair Powell’s speech can drive plenty of headlines to keep the markets on the move. Geopolitical tensions and coronavirus headlines will also be closely followed as they could play a key role in determining risk levels in the market.
Top Economic Events to Watch This Week
1) Fed Chair Powell Speaks – Monday, 13:00 GMT
Jerome Powell took office as chairman of the Board of Governors of the Federal Reserve System in February 2018, for a four-year term ending in February 2022. His period as a member of the Board of Governors will expire on January 31, 2028. Powell previously served as an assistant secretary and as undersecretary of the Treasury under President George H.W. Bush. He also worked as a lawyer and investment banker in New York City. From 1997 through 2005, Powell was a partner at The Carlyle Group. As a central bank leader, which controls short-term interest rates, he has more influence over the nation’s currency value than any other person. In that way, hawkish than expected comments are seen as positive or bullish for the USD currency, conversely, a dovish tone is considered bearish for the USD currency.
2) BoE’s Governor Bailey speech – Tuesday, 11:50 GMT
Andrew Bailey is the current Governor of England’s central bank. He started this journey on March 16, 2020, at the end of Mark Carney’s session. He was working as the Chief Executive of the Financial Conduct Authority before being selected. This British central banker was also the Deputy Governor of the Bank of England from April 2013 to July 2016 and the Bank of England’s Chief Cashier from January 2004 until April 2011. As governor of the central bank, he controls short-term interest rates, which in turn, he has more influence over the U.K.’s currency value than any other person. This is why traders closely observe their public engagements, as they usually leave detailed clues regarding future monetary policy. Thus, the hawkish tone is seen as bullish for GBP currency; conversely, the dovish tone is understood as bearish for the GBP currency.3) Monetary Policy Meeting Minutes – Tuesday, 23:50 GMT
These minutes are published two weeks after the interest rate decision, which normally gives a full account of the policy discussion, including differences. In addition to this, they also record the votes of the individual members of the Committee. Hence, if the BoJ minutes are hawkish about the inflationary outlook for the Japanese economy, then the markets see a higher possibility of a rate increase, which underpins the JPY currency. Conversely, suppose the BoJ is dovish about the inflationary outlook for the Japanese economy, markets see a higher possibility of a rate cut, which is bearish or negative sentiment for the JPY currency.
4) German Flash Manufacturing PMI – Wednesday, 8:15 GMT
German Flash Manufacturing PMI data is released by Markit economics, which examines business conditions in the manufacturing sector. However, the manufacturing PMI is a leading indicator of business conditions and Germany’s overall economic condition as the manufacturing sector manages a large part of the total GDP. In that way, the result above 50 is seen as positive or bullish for the EUR currency; conversely, the result below 50 is seen as bearish or negative for the EUR currency.
5) Durable Goods Orders – Thursday, 12:30 GMT
This data is released by the U.S. Census Bureau, which gauges the cost of manufacturers’ orders for durable goods. It means goods planned to last for three years or more, such as motor vehicles and appliances. As those durable products usually require large investments, they are sensitive to the U.S. economic situation. The final figure shows the state of U.S. production activity. Therefore, the high figures are seen as bullish for the USD currency; conversely, the low figures are seen as negative (or bearish for the USD currency.
6) Gross Domestic Product Price Index – Thursday, 12:30 GMT
DATE:02/25/2021 13:307) Goods Trade Balance – Friday, 7:00 GMT
This data is released by the U.S. Bureau of Economic Analysis and the U.S. Census Bureau, reveals a balance between exports and imports of goods. The figure will be released monthly, 4-7 days before the International Trade Balance, presenting advanced statistics for the reference month. However, the positive value shows a trade surplus. Conversely, the negative value suggests a trade deficit. This data is seen as the key factor that creates some volatility for the USD currency. If a steady demand in exchange for U.S. exports is seen, that will turn into a positive growth in the trade balance, and that would be seen as positive or bullish for the USD currency. Conversely, the low figures are considered as negative or bearish for the USD currency.
8) EUR European Council Meeting – Friday – ALL DAY
This meeting is normally scheduled by Herman Van Rompuy, President of the European Council. They take place in Brussels, in the Justus Lipsius building, with the assistance of the General Secretariat of the Council. The meeting will involve the Heads of State and Government of member states.Good luck, traders and have a very profitable week ahead!