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Weekly Outlook: March 25 - 29

3/25/2019, 3:28:24 PMTrading Strategies
Weekly Outlook: March 25 - 29

This week investors will get to hear remarks from a number of Federal Reserve speakers as they continue to await developments in the U.S.-China trade talks and Brexit will also remain in the spotlight after EU leaders granted the U.K. a two week deadline extension.

Chicago Fed head Charles Evans, Boston Fed President Eric Rosengren and Kansas City Fed President Esther George are some of the Fed officials scheduled to speak this week.

The Fed kept interest rates on hold earlier this month and indicated that there would be no further rate hikes this year — after indicating in December that two could take place.

A U.S. trade delegation, headed by Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin is to travel to Beijing this week to meet with Chinese Vice-Premier Liu He for further talks aimed at resolving the trade conflict between the world’s two largest economies.

Friday’s deadline for the U.K. to exit the European Union has been pushed back by two weeks to April 12 to give British Prime Minister Theresa May more time to persuade lawmakers to accept the withdrawal deal she negotiated. If lawmakers refuse to approve the deal for a third time a number of options, including a no-deal Brexit, open up.

The dollar was sharply lower against the safe-haven Japanese yen on Friday as weak U.S. manufacturing data fueled worries about the wider economy, and Treasury bond yields signaled growing fears of a recession.

The spread between 3-month Treasury bills and 10-year note yields inverted for the first time since 2007 after U.S. data missed estimates. This inversion of the yield curve is widely seen as a leading indicator of recession.

“You have to take it seriously that it is a signal for slowing growth or a potential recession in the next 12 to 18 months. This is what the Fed looks at closely,” said Sean Simko, head of global fixed income management at SEI Investments Co in Oaks, Pennsylvania.

USD/JPY was down 0.81% at 109.92 in late trade, for a weekly loss of 1.4%.

But the greenback rose against the euro, with EUR/USD losing 0.63% to trade at 1.1305 after weak euro zone data added to fears that the bloc’s economy is still slowing.

“March’s flash PMIs add to evidence that GDP growth was subdued in the three largest advanced economies in Q1, with Germany continuing to take the brunt of the global manufacturing slowdown,” Simon MacAdam, global economist as Capital Economics, wrote in a note.

“It helps to reinforce the idea that we are looking at a more meaningful and more widespread slowdown than markets had anticipated a few months ago,” said Karl Schamotta, director of foreign exchange strategy and structured products at Cambridge Global Payments.

“What we are seeing is sort of a recognition that the Fed is reacting to deeper risks in the global economy,” he said.

The pound rebounded against the dollar on Friday, with GBP/USD advancing 0.77% to 1.3208 after EU leaders gave Theresa May a Brexit deadline extension.

Sterling had plunged on Thursday in its biggest one-day fall of 2019 as fears mounted that Britain would crash out of the EU on March 29 without a deal.

Ahead of the coming week, has compiled a list of significant events likely to affect the markets.

Monday, March 25

The Ifo Institute is to publish a report on German business climate.

Chicago Fed President Charles Evans, Philadelphia Fed President Patrick Harker and Federal Reserve Bank of Boston President Eric Rosengren are all set to deliver remarks.

Tuesday, March 26

The U.S. is to release data on building permits, housing starts and consumer confidence.

Chicago Fed President Charles Evans, Philadelphia Fed President Patrick Harker are to speak again, as is Federal Reserve Bank of San Francisco Mary Daly.

Wednesday, March 27

The Reserve Bank of New Zealand is to announce its benchmark interest rate and publish a rate statement, which outlines economic conditions and the factors affecting the monetary policy decision.

European Central Bank President Mario Draghi is to speak at an ECB event in Frankfurt.

Canada is to release data on the trade balance.

Bank of Kansas City President Esther George deliver comments at an event hosted by the Money Marketeers of New York University.

Thursday, March 28

New Zealand is to release data on business confidence.

The U.S. is to publish the final revision to fourth quarter growth as well as data on initial jobless claims and pending home sales.

Fed Vice Chair Richard Clarida, Fed Governor Randal Quarles, Fed Governor Michelle Bowman and St. Louis Fed President James Bullard are all due to speak.

Friday, March 29

Canada is to produce data on GDP and raw material price inflation.

The U.S. is to wrap up the week with reports on personal spending, the core PCE price index, business activity in the Chicago area and new home sales.

Fed Governor Randal Quarles is also to speak.