Central banks dovish stance

Aside from waiting for a trade accord between China and the U.S, this was a busy week for central bank’s monetary policy announcements.

At China’s National People’s Congress, authorities lowered their 2019 economic growth target to a range of +6.0-6.5% amid rising concerns over a downturn in the world’s second largest economy and will aim for consumer inflation of +3% this year and a fiscal deficit of +2.8%.

Down-under, the Reserve Bank of Australia (RBA) Governor Lowe signaled it is hard to think rates will rise after Australia’s Q4 2018 GDP reading was the weakest quarterly reading in three-years.

Even the U.S was not immune from growth worries, now that the U.S trade gap with the rest of the world jumped to a 10-year high of +$621B (£472.5bn) last year. Exports to the rest of the world fell -1.9% to +$205.1bn, while imports rose by 2.1% to $262.9bn.

The Bank of Canada (BoC) took the market by surprises and was very “dovish.” Governor Poloz held its key interest rate steady at +1.75% as weaker global and domestic growth prospects led policy makers to express more caution about the pace of future rate increases. He insists that the economic outlook continues “to warrant a policy rate that is below the neutral range, which is currently estimated around 2.5% to 3.5%.”

ECB’s President Draghi was not going to be left behind other G7 central banks. The ECB surprised everyone by announcing a new series of refinancing operations and delaying when it expects to raise interest rates. Euro policy makers now say interest rates will remain at their present levels “at least through the end of 2019” versus “at least through the summer of 2019” at its previous statement. They also announced new targeted longer-term refinancing operations on a quarterly basis, starting in September 2019 and ending in March 2021.

Brexit timeline:

Latest rumor is that PM May could pull the vote on ‘no deal’ next Wednesday (Mar 13) and to extend Brexit on Thursday if she narrowly loses the meaningful vote on Tuesday (Mar 12). A draft plan for low key debates has been drafted for Wednesday & Thursday if votes are pulled.

On the Economic Calendar, no releases are scheduled for this weekend. Fed Chair Powell is due to speak Friday evening (Mar 8, 10:00 pm) about monetary policy normalization at Stanford University, in California

**On Sunday (Mar 10) daylight saving time shift in North America

Market concerns:

• U.K/Brexit fallout
• US-China trade deal details
• Trans-Atlantic trade tensions to intensify
• Weaker China data
• Muller/Trump – AG Barr is set to announce the completion of the report
• OPEC, Saudis, Venezuela & Trump
• Geo-political concerns in Russia, Ukraine and France
• India/Pakistan – tension remains high amongst two nuclear nations
• US ramps up trade talks with India and Turkey
• ‘Twitter Trump’
• U.S debt ceiling worries
• Spanish snap elections expected to be full of surprises April 28

Next week: U.S retail sales (Mar 11), U.K GDP, U.K manufacturing production, U.K parliament vote & U.S CPI (Mar 12), U.K annual budget release, U.S core durable goods & U.S PPI (Mar 13), Bank of Japan (BoJ) monetary policy announcement (Mar 14).

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell