Forex Weekly Outlook March 9-13 – German and U.S. Inflation, ECB Rate Decision in Focus

With the markets still buzzing over the deep rate cut by the Federal Reserve, investors will be keeping an eye on the ECB policy meeting this week. We’ll also get a look at eurozone GDP and German inflation. The UK will release monthly GDP and the annual budget, while the U.S. publishes consumer inflation reports.

Australia’s central bank wasted no time in following the Federal Reserve’s lead, as the bank trimmed rates by 0.25%, lowering the benchmark rate to 0.50%. The Aussie actually gained ground after the move, as investors were pleased to see that central banks were coordinating their moves in response to the coronavirus crisis. GDP improved to 0.5% in Q4, up from 0.4% in the third quarter. The Bank of Canada also cut rates by 0.50%, lowering rates to 1.25%.

In the U.S., the Federal Reserve shocked the markets with a dramatic rate cut. The Fed slashed rates by 0.50%, which was the first cut between meetings since 2008. At a press conference, Fed Chair Powell acknowledged the severity of the coronavirus threat and added that he expected the rate cut to boost the U.S. economy. The week wrapped up with sharp employment data. Nonfarm payrolls sparkled, climbing to 273 thousand in February, up from 225 thousand.

1. British GDP: Wednesday, 9:30. This GDP release is published every month. In December, the economy rebounded with a gain of 0.3%, after a decline of 0.3% a month earlier. The reading edged above the estimate of 0.2%. Analysts are projecting a smaller gain of 0.2% in January.
2. British Annual Budget Release: Wednesday, 11:30. The brand new Chancellor of the Exchequer, Rishi Sunak, will present the new UK budget. This event, also known as the Spring Statement, will consist of new forecasts for the economy.   With the markets in turmoil over the coronavirus crisis, any downgrade could spook investors and hurt the pound.
3. Eurozone Revised GDP: Tuesday, 10:00 Economic conditions in the eurozone remains weak, with growth of just 0.2% in the past two quarters. The estimate for Q4 stands at 0.1%.
4. US Inflation: Wednesday, 12:30. Consumer inflation remains weak, as the paltry gain of 0.1% in January was the weakest reading since September. The downtrend is expected to continue, with a forecast of 0.0% for February.
5. ECB Rate Decision: Thursday, 12:45. The ECB has been content to keep interest rates at zero since 2016 and no change is expected at the upcoming meeting. A dovish rate statement could put pressure on the euro.
6. German Final CPI: Friday, 7:00. Consumer inflation in the eurozone’s largest economy remains weak, as CPI has posted two declines in the past three readings. The January reading came in at -0.6%. Analysts expect a stronger showing in February, with an estimate of 0.4%.