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Economic Week: ECB rate decision, coronavirus developments

ECB rate decision and coronavirus developments

Financial markets' participants will be on monitoring a number of important economic events and data this week, as the European Central Bank will set the rate of interest while the U.S. will release inflation data.

In addition, markets will continue following the latest developments regarding the spread of the deadly corona virus and its economic impact on major economies, especially China.

Euro

The ECB’s interest rate and monetary policy decisions will probably be the most influential on the euro's movements, as monetary policy makers will meet this week to determine the interest rate and monetary policy path.

Although the chances of an economic recession in the euro area doubled in the past month, markets do not expect the ECB to follow the Federal Reserve suit by cutting interest rates to alleviate the economic threat posed by the outbreak of the Coronavirus.

However, markets will wait for the latest updates on the economic conditions in the euro area, as the central bank will release its latest economic forecasts, which includes growth and inflation projections.

Investors will also keep their eyes open on any hints about the future of monetary policy, as there are around 40% of economic analysts expecting the ECB to cut interest rates at some point this year.

US Dollar

The movements of the US dollar will probably be determined by economic data, the most important of which are the reports related to inflation, as if the economic situation in the United States deteriorates, the Fed might further cut interest rates.

The consumer price index may indicate a 0.1 percent rise in February and a slowdown to 2.3 percent (year-on-year) from the previous reading of 2.5 percent.

In addition, some data on consumer confidence and weekly unemployment claims may receive some attention from investors.

Pound Sterling

This week, the movements of the British pound will depend on the general direction in the markets, due to the absence of high-relevance economic data from Britain.

Nevertheless, MPC members ’statements about the possibility of a rate cut and any discussions related to the trade agreement between Britain and the European Union remain the most important for the sterling.

Commodities

Gold hit a record high last week, taking advantage of the panic in financial markets because of the rapid spread of the Corona virus worldwide, as well as the decline in the US dollar and increasing expectations for lower interest rates by major central banks.

Prices of the yellow metal will rely this week on the latest developments concerning the spread of the Covid-19 virus and the response of financial markets to the continuing increase in infection cases and deaths.

With regard to oil, prices fell sharply last week, as the spread of the Corona virus increased fears of a slowdown in global demand for oil and its products, as well as Moscow's refusal to support OPEC's call for additional cuts in oil production.

The movements of oil prices will probably hinge on the developments of the virus, as well as the ability of OPEC and other major oil producers to take steps to halt the fall in crude prices.

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