Weekly Market Review - March 18-22
At the end of Friday, global stock markets fell on the week, being negatively impacted by concerns on slowing economic growth. In the Forex market, Japanese Yen showed the strongest growth even if the government downgraded the country’s economic outlook. EUR/USD showed some volatility starting from Wednesday, but in the end, the pair slightly changed, with the European currency losing 0.09% to 1.1312. The British pound was among the biggest losers on the Brexit updates, which we’ll mention below.
Brexit Saga Goes on
On Thursday, the leaders of the European Union agreed to permit the UK to delay Article 50, moving Brexit beyond March 29, when the country had to officially leave the European bloc. The extended time will be used for a third vote on the Brexit deal next week. If the parliament fails to vote again, then the UK will be forced to decide a way forward.
Fed Surprises Markets
The US Federal Reserve’s Federal Open Market Committee (FOMC) published its quarterly report containing economic forecasts and took the markets by surprise by anticipating zero interest rates increase this year, down from the December outlook of two hikes. The committee now expects a single rate increase in the next 3 years. The Fed gave its forecast for economic growth, which is expected to add 2.1% this year, down 0.2% from the latest outlook.
Japan Has Lower Expectations on Economic Growth
As mentioned in the intro, the Japanese government, led by Prime Minister Shinzo Abe, recently downgraded the country’s economic outlook as it notes lower export and industrial production figures. This is the first time in the last three years when the government lowers its economic forecast. In February, Japanese exports declined for the third month in a row.
EU’s Manufacturing Sector Weakens
The EU’s economy is showing signs of stagnation, with eurozone’s purchasing managers’ index (PMI) in the manufacturing sector declining in March to 47.6 from 49.3 recorded last month, while analysts expected an increase to 49.5. This is the lowest level in about 6 years. Eurozone’s services PMI fell this month to 52.7 from 52.8, in line with analysts’ forecasts.
UK Unemployment Rate Falls
The unemployment rate in the United Kingdom fell to 3.9%, the lowest level in 44 years. The positive news defies the uncertainties related to Brexit. However, the situation might hide some problems, with some analysts being concerned that the Brexit uncertainty might force UK firms to hire more workers instead of investing. Many of the employees might be let go if Brexit goes the wrong direction for the UK’s economy.
Canadian Retail Sales Decline
The retail sales index in Canada was down for the third month in a row mainly because of weaker auto sales. Thus, retail sales fell 0.3% in January, compared to a decline of 0.1% the previous month. Analysts expected an increase to 0.4%. The core retail sales index, which doesn’t touch upon auto sales, added 0.1% in January of this year.
Upcoming News to Watch
Next week, several important events will be in the spotlight. Investors should keep their eyes on the Brexit vote on Monday, which might change the next steps of the UK. The event will surely have a substantial impact on the British pound.
On Tuesday, the US will publish several economic indicators, such as housing starts, building permits, and consumer confidence among others. On Thursday, the biggest economy will release its GDP growth for the fourth quarter. The UK will do the same on Friday.
Also on Friday, Japan will release a series of economic indicators, including the unemployment rate, consumer price index, retail sales, and industrial production.
Anatol has been writing for our news site for a year and is the newest member of our team. While he’s new to us, he’s certainly not new to trading with over 10 years’ experience being a professional financial journalist and working in the markets.