Attention on the Board of Directors and Financial Policy Announcement! ~ Highlights and Schedule for the Week of March 4 ~

Last week, with a sharp rise in the pound and a weaker yen, I think many people were burned. The pound's ascent seems to reflect the market pricing in a postponement of the Brexit deadline.

The Canadian dollar, which had been steadily rising, fell after Friday’s GDP release disappointed expectations, and it is believed that profit-taking also contributed to a substantial decline.

Additionally, over the weekend, President Trump criticized Fed Chair Jerome Powell by name, saying, “We are seeking a dollar level that is favorable to the United States. We do not want a too-strong dollar that hinders foreign business deals,” “There is one gentleman inside the Fed who likes hiking rates, who likes quantitative tightening, who likes a very strong dollar,” and, “Imagine what would happen if rates were held steady and quantitative tightening did not occur. The dollar would have been a little weaker.” This criticism suggests possible gaps for the Fed. The market may open with gaps at the start of the week.

◎ This Week’s Focus

1) ECB Governing Council

Europe is worried about a recession, but since QE ended last year, there is increasing focus on future monetary policy.

There are rumors about “TLTRO” driven by remarks from key figures. The topic was also discussed at the previous council meeting. For more on “LTRO” and “TLTRO,” see below.

“LTRO” and “TLTRO” — ECB Easing Measures Now! FX Terminology

The point of interest this time is about the introduction and timing. If ECB is seriously considering implementing it, announcements or press conferences may soon follow. Based on ECB history of providing guidance about three months prior to implementation, if they plan to implement in the summer, it wouldn’t be surprising to see guidance. Depending on the scale and duration, this could lead to euro selling as part of an easing policy.

2) BOC, RBA, TCMB Policy Rate Announcements

The Bank of Canada is expected to hold rates, but attention is on whether there will be any statements about expectations for a rate hike within the year. With oil prices stable, a rate hike was anticipated, but last week’s GDP disappointment has reduced those expectations.

The RBA is expected to hold, but the focus will be on the statement and the governor’s remarks the next day. In the previous RBA meeting, the market was volatile due to concerns about rate cuts and a dovish stance. This time, the concern for rate cuts remains a key point.

For TCMB, the Turkish central bank, a hold is expected, but with CPI cooling, there is rising pressure for rate cuts. If there is a surprise in this week’s policy rate, it would likely come from the Turkish central bank.

3) US-China Trade Talks and Japan-US Trade Talks

Last week, US-China trade talks progressed but did not reach an agreement. Although additional tariffs were postponed, attention remains on the future direction. China seeks to compromise by adjusting import/export volumes and exchange rates, while the United States appears intent on pursuing currency clauses and reforms such as reducing state-owned enterprises. The Huawei CFO extradition is also likely to be contentious. Regarding 5G, responses differ among the US allies, European countries, and emerging markets. The future of US-China relations warrants close watch.

Furthermore, after US-China talks, Japan-US talks await. This will be a critical period for Japan. The main concern is currency terms. Prolonged negative rates and easing policies could be perceived as a yen depreciation policy. Close monitoring of Japan-US trade talks is necessary.

4) Geopolitical Risks

Armed clashes between India and Pakistan and the downing of fighter jets have become issues. As two nuclear-armed countries, tensions across the region attract global attention and do not appear likely to improve soon. It will be important to monitor whether relations deteriorate further.

Last week, the US-North Korea summit ended in failure, but during the summit, the US Congress heard testimony from Michael Cohen, President Trump’s former lawyer. While the testimony deepened questions about Trump, it did not lead to immediate impeachment. However, it is likely to affect his domestic support. Opposition to the border wall remains, and the summit with North Korea ended in a stalemate, increasing resistance. Given next year’s elections, expect some strategic moves. Trump’s own actions remain a risk and require caution.

◎ This Week’s Economic Calendar

March 4 (Monday)

09:30 AUD Construction Permits

16:00 TRY Turkish CPI

18:30 GBP Construction PMI

National People’s Congress (NPC) — until the 15th

10:45 CNY Caixin Services PMI

12:30 AUDRBA Rate Decision and Statement

16:30 SEK Sweden Services PMI

16:30 CHF Switzerland CPI

17:45 EUR Italy Services PMI

17:50 EUR France Composite & Services PMI

17:55 EUR Germany Composite & Services PMI

18:00 EUR Italy GDP

18:00 EUR Spain Consumer Confidence

18:00 EUR Eurozone Composite & Services PMI

18:30 GBP Services PMI

19:00 EUR Eurozone Retail Sales

23:45 USD US Composite & Services PMI

March 6 (Wednesday)

NPC Opening — until the 15th

00:00 USD ISM Non-Manufacturing PMI

00:35 GBPCarney, BoE Governor Remarks

01:30 USD Barkin, Richmond Fed President Remarks

04:00 USD Monthly Budget Statement

07:10 AUDLow, RBA Governor Remarks

09:30 AUD Q quarterly GDP

10:30 JPY Harada, BoJ Board Member Remarks

20:00 TRYTurkey Policy Rate Announcement

21:15 GBP Bank of England Deputy Governor Carney Remarks

22:15 USD ADP Employment Change

22:30 USD US Trade Balance

22:30 CAD Canada Trade Balance

March 7 (Thursday)

NPC Opening — until the 15th

00:00 CADBank of Canada Policy Rate and Statement

00:00 CAD Ivey PMI

00:30 USD Crude Oil Inventories

02:00 USDWilliams, New York Fed President Remarks

02:00 USD Mester, Cleveland Fed President Remarks

02:30 GBP Saunders, BoE external member Remarks

04:00 USD Beige Book

09:30 AUD Trade Balance & Retail Sales

15:45 CHF Switzerland Unemployment Rate

17:30 GBP Halifax House Price Index

18:30 GBP Timberlake BoE external member Remarks

19:00 EUR Employment & GDP

21:45 EURECB Council & Policy Rate Announcement

22:30 EURDraghi ECB President Press Conference

23:00 MXN Mexico CPI

March 8 (Friday)

NPC Opening — until the 15th

02:15 USDPowell, Fed Chair Remarks

06:45 NZD Manufacturing Sales

22:30 CADCanada Employment Change & Unemployment Rate

22:30 USDNFP Employment, Unemployment Rate, and Average Hourly Earnings

March 9 (Saturday)

NPC Opening — until the 15th

00:00 USDPowell, Fed Chair Remarks

03:00 USD Baker Hughes Rig Count