FRB emergency rate cut, what will other central banks do? "March 4 highlights and event schedule"
Yesterday, an emergency meeting was held among G7 finance ministers and central bank chiefs, and a statement was released.
However, although the emergency meeting was announced in advance and the stock markets rose on expectations, the statement did not include concrete measures, leading to disappointment as US stock prices fell.
Furthermore, because the joint statement did not include specific measures, it is expected that each central bank and country will handle things individually, and attention will be focused on forthcoming announcements, remarks, and headlines.
◎ Today’s Points of Attention
1) Monetary policy of each central bank
Today, we will be watching whether additional policy actions are announced by the central banks, and whether fiscal policy is announced by governments.
Yesterday, the U.S. Federal Reserve cut rates by 0.5%.
However, in the joint statement by G7 finance ministers and central bank chiefs, there were no concrete measures included.
Because of this, responses by each central bank are expected to differ.
The RBA (Reserve Bank of Australia) cut rates by 0.25% and left the possibility of further easing.
Still, given that there were some expectations of a 0.5% cut at yesterday’s RBA board meeting, even if another rate cut is priced in, the AUD may not fall very far.
With the RBA’s rate cut, the RBNZ is also expected to move toward a rate cut.
The BOC (Bank of Canada) is scheduled to announce its policy rate today, and a rate cut is anticipated.
The BOE (Bank of England) is expected to move toward a rate cut at the next March meeting.
So far, central banks have room to cut rates, so a rate-cut option is expected to be chosen.
The ECB and the Bank of Japan have little room to cut rates.
This may be the reason why concrete measures were not included in the G7 joint statement.
The ECB is not expected to cut rates but to consider TRTLO at the next meeting.
The Bank of Japan does not yet have concrete plans visible, but is seen as supporting liquidity and stock prices through ETF purchases and other measures.
For central banks with no room to cut rates, expectations are focused on fiscal policy.
In particular, with the ECB and the EU pressing Germany to adopt fiscal policy, Germany’s fiscal policy is attracting attention.
For TRTLO, please see our previous articles below↓↓↓
“LTRO” and “TLTRO” — ECB’s easing measures emerging now! ~ FX terminology guide ~
2) Economic indicators
Australian quarterly GDP
The Australian central bank cut rates by 0.25% yesterday but left the possibility of additional easing open.
Therefore, Australia’s economic indicators are worth watching closely.
Australian GDP is released only quarterly, and this figure does not factor in the impact of COVID-19 (novel coronavirus).
If the result is weaker than expected, expectations for further rate cuts will rise, potentially accelerating AUD selling.
Caixin Services PMI
Recently, the official PMI for China’s manufacturing and non-manufacturing sectors surprised with strong figures.
However, the Caixin Services PMI, issued by private sector, is regarded as more credible and attracts more attention.
The services PMI to be released today is also expected to be weaker than forecast, and if a low figure emerges, risk-off could occur, so be cautious.
ADP employment report
Given that emergency rate cuts have been made, a somewhat poor figure might not be surprising, but it remains a key indicator reflecting COVID-19’s impact on the economy.
Today’s result and market reaction may serve as a reference for this Friday’s NFP employment report.
ISM Non-Manufacturing PMI
With China’s PMI for manufacturing and non-manufacturing sectors being surprisingly strong, attention is increasingly on the US economy’s mood.
The United States relies more on services and consumption than manufacturing, so the mood of the non-manufacturing/services sector is crucial.
Keep an eye on what kind of sentiment the services sector holds.
3) Super Tuesday
Attention on whether Sanders widens his lead, whether Biden closes the gap, and how well Bloomberg performs is crucial.
This time, President Trump’s re-election seems likely, and the attention on the presidential primary has diminished due to COVID-19.
However, if mismanagement of COVID-19 leads to a recession and lowers Trump’s support, Sanders or Biden will become crucial candidates.
Therefore, it’s important to monitor who gains the lead.
◎ Today’s Event Schedule
Wednesday, March 4
09:30 AUD Australian Quarterly GDP
10:45 CNY Caixin Services PMI
16:30 CHF Swiss CPI (Consumer Price Index)
17:45 EUR Italy Composite & Services PMI (revised)
17:50 EUR France Composite & Services PMI (revised)
17:55 EUR Germany Composite & Services PMI (revised)
18:00 EUR Italy GDP
18:00 EUR Eurozone Composite & Services PMI (revised)
18:30 GBP UK Composite & Services PMI
22:15 USD ADP Employment Report
23:15 GBP Bailey’s remarks as incoming BOE Governor (Parliamentary testimony)
23:45 USD US Composite & Services PMI (revised)
Thursday, March 5
OPEC meeting
00:00 USD ISM Non-Manufacturing PMI
00:00 CAD BOC policy rate & statement release
00:30 USD Crude oil inventories
03:00 GBP Broadbent, BOE Deputy Governor remarks Weidmann, Deutsche Bundesbank President remarks
03:30 EUR
04:00 USD Beige Book (Beige Book — regional central bank economic reports)
08:30 USD Bullard, St. Louis Fed President remarks (2022 voting member)09:30 AUD Australia trade balance
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