News & Analysis

Week Ahead – Central Banks and Brexit

March 18, 2019

By Deepta Bolaky
 @DeeptaGOMarkets

Market Overview

The stock markets had a strong finish, and nearly all benchmarks ended the week in positive territory. News flows on Brexit and trade were optimistic and drove the financial markets on Friday. In the FX markets, nearly all G10 currencies were higher against the US dollar.

Week Ahead – Central Banks and Brexit

Monday

It will be a relatively muted Monday on the calendar front with the release of the Trade Balance figures in Japan and Westpac Consumer Survey in New Zealand. Investors will probably be looking for more updates on the trade front and Brexit.

Tuesday

Attention will be on Australia in the Asian trade with the release of the RBA minutes, an RBA’s speech and the House Price Index. Housing prices are considered as a key indicator for inflationary pressures and have been the biggest source of concern for the RBA.

In the UK, we will have more insights on the labour market with the release of the Average Earnings, Unemployment Rate and Claimant Count Change. However, we expect the economic figures to be overshadowed by Brexit events.

In the Eurozone area, the sentiment indicators will be the highlight. Market participants will look for signs of stability in business expectations and whether there is any improvement in investor sentiment. The negative figure reflecting a pessimistic view will prevail, but a slight improvement might bode well with market participants.

Wednesday

The calendar for Wednesday is packed with significant events, but the FOMC and UK Parliamentary Vote will be critical. We do not expect big changes in policy at the FOMC meeting and but the focus will be on the new economic forecasts and the new “dots”. Will the “dot” be lowered to one rate hike? Well, the US economic data is still positive and supportive of the current base case of two rate hikes. However, if the Fed placed more emphasis on the inflation expectations, two rate hikes are less likely.

After a week dominated by key Brexit votes increasing the possibility of an extension of the March deadline, the Prime Minister Theresa May is pinning her hopes on another vote on her Brexit deal this week ahead of the European Council Meeting. It will probably be another week of Brexit and despite the release of top-tier data across the week. The local currency will primarily move with Brexit headlines.

Thursday

The end of the week will be even busier with a slew of economic data releases across major countries. All eyes will be on the central banks on Thursday with the SNB and BoE interest rate decisions and policy meetings. After a number of UK data across the week, and a third attempt from the UK Prime Minister to push her deal, the BoE will be the next event to gather attention in the UK. No changes are expected given the current Brexit uncertainties, but it will be worth monitoring if the central bank deviates to a more cautious tone.

We expect the SNB to remain careful and keep providing signals that the negative interest rate is still needed.

Friday

The week will end with a series of PMI figures in Germany, the Eurozone and the US. The manufacturing PMI fell below 50 into contraction last month which were mainly dragged by the PMI figures in Germany. Services PMI was better in the month of February supported by a rise in domestic demand. The Manufacturing sector is taking a hit due to slow global growth.

In the US, we expect a slight pickup in the Manufacturing PMI from 53.0 to 53.5.

 

Tuesday, 19 March 2019
Indicative Index Dividends
Dividends are in Points
ASX200 WS30 US500 US2000 NDX100 CAC40 STOXX50
0.186 0 0.084 0.074 0.156 7.306 2.387
ESP35 ITA40 FTSE100 DAX30 HK50 JP225 INDIA50
0 0 0 0 0 0 0

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