Fundamental Comment

Economic Week: Central bank decisions, growth data

Economic Week: Central bank decisions, growth data

Financial markets' participants will follow interest rate decisions by the Federal Reserve and the European Central Bank this week, as well as some important data on economic growth that will reflect the impact of the spread of the Corona virus.

It is necessary to note that the indicators of manufacturing and services for the month of April released from the Chinese economy are expected to be of great importance, as they will reflect the extent of economic damage caused by the virus on vital sectors in the beginning of the second quarter.

US Dollar

The US dollar will remain in focus, as investors will follow the Federal Reserve's interest rate decision and some important economic data released from the United States.

Expectations indicate that the Fed will keep interest rates unchanged this week after the Fed announced massive stimulus plans during the recent period, but there will be a follow-up to the press conference that will give a talk about the state of the US economy.

Among the most important reports due this week is the first GDP reading, which may show a contraction of 4.1 percent in the first quarter on an annual basis, compared to a growth rate of 2.1 percent recorded in the last quarter of 2019.

The final PMI report for the manufacturing sector for April will also be of interest to investors, as it may confirm a contraction of 36.9, following March's reading of 48.5.

Also, some data on the housing and manufacturing sectors, as well as consumer confidence, may receive some attention from investors.

Euro

The euro will most likely be affected by the European Central Bank interest rate decision, as well as some important data, which includes growth, inflation and unemployment.

The ECB is expected to keep interest rates at their current low rates after the bank unveiled stimulus plans to support the European economy in light of the Corona crisis, but the press conference will be carefully watched as it may provide an update about the economy.

In terms of economic data, the most prominent report this week will be the preliminary GDP reading for the first quarter, which may show a contraction of 3.2 percent, compared to the growth rate of 0.1 percent recorded in the final three months last year.

Investors will also focus on inflation data, where the flash eurozone CPI is expected to drop to 1.0 percent in the year ended April from the previous reading of 0.7 percent.

Pound Sterling

This week, the UK will release its final manufacturing PMI for April, which will probably confirm the collapse to 32.9 in April, after registering 47.8 in March. Other than this report, the pound might move according to the general market sentiment.

Commodities

Gold recorded a strong weekly gain last week, amid fears of a global recession due to the Corona virus, even as central banks continued to launch a wave of stimulus measures.

The yellow metal this week will largely depend on the Fed's interest decision and Jerome Powell's remarks at the press conference, in addition to the important economic data released from major economies.

With regard to crude oil, prices fell by the end of last week to report their third consecutive weekly loss since production closures failed to keep pace with the declining demand due to the emerging crisis of the Coronavirus.

Oil price movements this week will depend on virus developments, besides the weekly US government report tracking the change in crude inventories.

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