Fundamental Comment

Economic Week: PMIs, Coronavirus developments

PMIs, Coronavirus developments this week

Financial markets' participants will be carefully monitoring a number of important reports due this week, most notably the Service and Manufacturing Purchasing Managers Index, which will be out from a number of major economies.

The PMI report should provide an initial outlook about growth at the beginning of the second quarter, in the midst of the Coronavirus crisis that will be driving the global economy into recession.

US Dollar

The most important this week in the US will be the preliminary Composite purchasing managers for the services and manufacturing sectors for April, which may indicate an increase in the contraction to 38.6, compared to March’s reading of 40.9.

Another important report will be the Durable Goods Orders, which may show a decrease of 11.4% in March after it recorded a rise of 1.2% in February.

The dollar may be affected by the general trend in financial markets, especially developments related to the spread of the Corona pandemic, which have recently given some support to the US dollar as a safe haven.

Last but not least, any statements by Donald Trump regarding the date for reopening the US economy may have a positive impact on financial markets in general.

Pound Sterling

This week, the UK will release important reports related to Britain's major sectors, the labor market, inflation and consumer spending, which are expected to significantly shape the movements of the British Pound.

The preliminary PMI for the services and manufacturing sectors for April may indicate a wider contraction to 21.0, compared to the previous reading of 36.0 recorded in March.

Analysts expect the consumer price index, the Bank of England’s preferred measure of inflation, may decelerate to 1.5% in March, on an annualized basis, from a prior of 1.7%.

As for retail sales, it may witness a decrease of 2.5% in March, after recording a drop of 0.3% in February.

Euro

The euro will most likely be affected by the general direction in the markets due to the absence of highly important economic data, except for the PMI and some reports on confidence in the German economy.

The preliminary Composite PMI of manufacturing and services in the euro area may show a widening contraction to 26.0 in April from 29.7 in March.

Commodities

Gold prices rose significantly to hit their highest level since November 2012, but witnessed noticeable declines at the end of last week after a wave of optimism, following US President Donald Trump announcement of plans to reopen the US economy.

This week, gold prices will depend on the important economic data issued by the major economies, as well as the market reaction to any developments related to the Coronavirus.

Regarding crude oil, prices fell on Friday as the first economic downturn in China erased the positive impact of US President Trump's plans to restart economic activities.

Oil prices are expected to be affected this week by data related to global growth, in addition to the weekly US crude inventory report.

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