The week 39 may turn out to be quite turbulent in terms of the dynamics of financial markets under the influence of the FRS members, as well as the published economic data.
The growing risk of a second coronavirus pandemic in Europe, the dominance of this problem in North America, unimpressive economic statistics among economically developed countries, as well as the increased likelihood that the Fed will start raising interest rates sooner rather than later, are forcing investors to fix the previously obtained profit, which by the combination of these factors supports the US dollar rate.
The main events of the coming week
This week the market will focus on speeches by the heads of the Federal Reserve, the ECB and the Bank of England. I believe that they will certainly touch upon the negative impact on the global economy of the COVID-19 pandemic and will affect the decline in the recovery processes of the economies of the United States and Britain, as well as the Euro Zone region. In addition, J. Powell, the head of the Fed, will try to convince the markets that the rise in interest rates will start sooner than expected in order to calm the financial markets.
In his speech today, ECB President K. Lagarde will also comment on the prospects for the European economy, and if she fails to convince investors that everything is so bad, then the fall of the European stock market will resume with renewed vigor. An unresolved issue of Brexit hangs with heavy weights on the British economy, which will undoubtedly be an important reason for the resumption of the fall in the sterling rate and the local stock market.
In addition to Powell, Fed members Evans, Brainard, Bostic, Williams, Bullard, Quarls and Dali will comment on the situation and the prospects for the American economy this week.
Meetings will be held on the monetary policy of the Central Banks of New Zealand and Switzerland, which may affect on the rates of the New Zealand and Swiss currencies. Also, there will be some published data on PMIs in the manufacturing sector of countries in Europe and the United States, figures on durable goods orders and sales of new homes in the United States.
Thoughts and conclusions
I expect that the publication of weak economic data in the coming week will help reduce investor interest in risky assets, the increased possibility that the Fed may start raising interest rates sooner rather than later will contribute to this process. The escalation of hysteria around the second wave of COVID-19 will only contribute to the fall in stocks & indices, as well as the growth of tension between the United States and China. Observing the growing trends, I also believe there is a high risk that the American stock market will continue to decline.