Week ahead: Central banks and GDP

A hectic week ahead as companies and countries start to position themselves to exit the pandemic in the best shape possible. Total Coronavirus Cases top 29 Million, with over 924 thousand deaths. Here is your week ahead.

Monday, 14th September – UK Parliamentary vote on Brexit

Boris Johnson has stated that he plans to change part of the terms in the Northern Ireland Protocol. Johnson agreed to keep the border open between the UK and Ireland a year ago. However, he plans to renege on this agreement bypassing UK legislation to override the clause. This has caused a stir between the EU and the UK as if the legislation is passed, would technically be violating international law. This has forced the UK’s top government lawyer to quit in protest). This is on top of a possibility of a no-deal Brexit; amongst the global pandemic that has consumed every single politician’s attention, a further wrench in the works may send the markets swinging this week ahead.

Tuesday, 15th, Wednesday 16th and Thursday 17th September – UK Unemployment Rate 3 months, UK CPI and Bank of England Monetary Policy decision

An Institute for Employment Studies Freedom of Information requests showed that 380,000 jobs were planned to be cut from May to July in the UK this year. In comparison, around 180,000 job cuts were planned from January to March 2009, around the financial crisis. The UK has taken a massive hit due to the Coronavirus, with cases continuing to rise even after the first lockdown. Social distancing measures have forced lower traffic to shops, forcing redundancies, which forces a vicious cycle. The Market predicts a 3.9% unemployment rate, which is identical to the rate three months ago. However, the CPI is predicted to increase by 0.3% by 1.3%, showing the potential effects of inflation on the UK economy.

The Bank of England, like many other central banks, are set to keep rates as is at 0.1%.

Wednesday, 16th September – US Retail Sales MoM

As US-China Tensions starts to ramp up before the election period, eyes on the consumer, which were regarded as the “Backbone of the economy” before the pandemic, has stayed relatively healthy due to government stimulus. With US retail sales rising three months in a row, economists predict that with stimulus checks ending soon, US consumers’ total income should decrease, therefore seeing a drop in retail sales this month. Analysts expect a 0.1% decrease in retail sales to 1.1% in the next month.

Wednesday, 16th September – Fed Interest Rate Decision

As the Federal Reserve kicks into gear their higher inflation tolerance, the Market has its eyes set on any other support from the Federal Reserve to support the United States recovery. The Market predicts, like always, for the Fed to keep rates as is at 0.25%.

Wednesday, 16th September – GDP New Zealand QoQ and YoY

With New Zealand being touted as one of the most prosperous countries in trying to curb the Coronavirus, the country of 5 million is not immune to the economic damage caused by the virus. The country is set to see a GDP contraction the largest in history, with the Reserve Bank predicting a -14.3% fall in GDP growth. The Reserve bank is looking to Sweden as a template for negative rates. The currency markets pricing in a 72% possibility of the RBNZ cutting rates below 0% in February next year.

Thursday, 17th September – Japan BoJ Interest rate decision

With Yoshihide Suga being voted in by the party as the replacement of the current Prime Minister Shinzo Abe, Japan is currently enduring a turbulent period as it continues to grapple with the Coronavirus. Cases in Japan have recently been surging, as a reopening of the economy with no official lockdown has come back to bite the country. With declining GDP pre coronavirus, the Bank of Japan is set to keep interest rates as is at -0.1%. It is interesting to note that all the central banks with negative interest rates have left rates during the pandemic.

This week, with M & A kicking into gear, alongside further political action and central bank decisions, this week will undoubtedly be an extremely busy week ahead in the markets. Trade safe!