This week will be the first trading week after the Spring Festival holiday, investors will usher in many key risk events. Here are the top five global market highlights this week from Reuters.
Focus 1: Will the global central bank send another "pigeon"?
The Fed officially suspended its interest rate hikes for just over a week, and central bank governors around the world have been busy turning to doves. Australian Federal Reserve Chairman Rowell has said the next timeinterest rateThe action will be a rate hike, and in this case he said it for a year, but he suddenly announced that it may raise interest rates and may cut interest rates. European Central Bank (ECB) minus 0.40%interest rateIt’s almost impossible to fall again, but it’s widely expected that the central bank may take a new round.bankFinancing stimulus measures.
This wind has also blown into emerging markets – India cut interest rates for the first time in 18 months; several other central banks, including Brazil, also hinted that interest rates will be cut. The upcoming policy meeting of the New Zealand and Sweden central banks will definitely emphasize economic growth.
This shift in the central bank’s position is being reflected in the currency market. The dollar fell in December and January as the market digested the Fed’s suspension of interest rate hikes. Now it’s all the othercurrency: The Australian dollar has fallen more than 2% since the speech of Reserve Bank of Australia Chairman Lowe on February 6; the euro hit its biggest weekly decline in four months, MSCIAlumThe emerging currency index fell after rising for three consecutive months. If you join the Fed's dove camp, the dollar with the highest interest rate in the G10 currency may resume its gains.AnalystThe dollar's gains have been stagnant, but only time will give an answer.
Focus 2: Will the Brexit process suppress the pound?
Less than 50 days before the Brexit, the market’s belief that no agreement will be avoided will begin to subside. Britain's Prime Minister Theresa May will inform the British Parliament on February 13 of the latest British retreat, but there is not much new content. After the parliament will debate, members can propose changes, that is, amendments.
There are signs that traders at the exchange rate are increasing their prudential bets on the pound as the session approaches.
The pound short-term risk reversal index indicates that investors are now more inclined to buy options that prevent the pound against the dollar, rather than expecting the pound to rise against the dollar. The index refers to the ratio of the right to buy and sell. The demand for sterling selling rights also bottoms up the implied volatility. The implied volatility is an indicator of expected volatility of the pound and an important component of the option price. Implied volatility in one month and a week has risen in the past week and has been steadily declining in January.
The prudential tone has been extended to the spot market. GBP/USD has fallen below the important technical level – the 200-day moving average, indicating that investors are no longer looking at more pounds. In fact, the pound has traded below the moving average since May 2018, and is only slightly above the moving average in January.
Focus 3: Will the Eurozone economy be completely caught in the cold winter?
For months, many people have questioned whether the US economy is entering a recession, but it seems that the first recession may be in the euro zone.
The European Commission’s decision to cut the euro zone’s economic growth and inflation estimates last week surprised the market. Regional GDP released on Thursday (GDPThe initial valuation may show a 0.2% growth in the fourth quarter of the Eurozone. Many signs have already shown that Germany, the largest economy in the Eurozone, is on the verge of recession by the end of 2018, due to poor global trade and a cooling of the Chinese economy.
I am afraid that the situation is even less optimistic. German industrial production has fallen for four consecutive months, further strengthening expectations that the economy has shrunk in the fourth quarter, and that after the third quarter of economic downturn, the fourth quarter of shrinking will mean Germany's recession.
The market has noticed this. Germany's 10-year bond yields are 10 basis points lower than 0%, reflecting the market's extremely worried economic situation.
Focus 4: Will the US government once again fall into a lockout?
The cloud that is accumulating in front of the United States, including the resistance to global growth, is causing a drag; at the same time, the government may face closure again.
The market will review the US consumer price index in the coming days (CPIAnd the producer price index (PPIData to determine how loose the US Federal Reserve's (FED) policy can be. Federal Reserve Chairman Powell said in January that the rationale for raising interest rates has been "weakened"; and the Fed's post-meeting statement also gave up the previous expectation of "further tightening monetary policy to a certain extent."
The latest employment data shows that the annual increase in labor wages has slightly decreased, indicating that interest rate hikes are further alleviated.
The US government just ended its 35-day partial closure on January 25. This time, the closure of the economy at least cost the economy $3 billion and the unpaid employees were struggling. Members are still resisting President Trump’s request for wall funding for the US-Mexico border. They need to find a compromise before February 15.
(Article source: Global Forex Network)