On Thursday, stock market index S&P 500 fell by 5.9%, which was the largest one-day drop since March 16. Stock market sell-off was caused by pessimistic forecasts by the Fed regarding the pace of economic recovery, as well as due to growing concerns about the second wave of the pandemic.
A sharp increase in the number of new cases of coronavirus was registered in some US states, which may lead to the reintroduction of lockdown restrictions. A new outbreak of the Covid-19 epidemic also occurred in Beijing, leading to a new wave of risky assets sell-off.
Based on the results of the Fed meeting on Wednesday, the regulator decided not to amend its monetary policy. The Fed announced its intention to keep the interest rate in the range of 0 – 0.25% at least until 2022 and pledged to continue the quantitative easing program.
The Fed forecasts a 6.5% GDP contraction in 2020 with an unemployment rate at 9.3%.
An increase in demand for safe-haven assets supported the dollar, which restored some of its lost positions. The British pound dropped to a 2-week minimum amid stronger dollar, disappointing UK GDP data, and lack of progress in the Brexit negotiations. The Australian dollar and New Zealand dollar also weakened due to lower demand for risky assets. Euro is also in a downward correction phase.
Main events of the current week
On Tuesday, minutes of the meeting of the Reserve Bank of Australia will be published, as well as data on UK claimant count change and average earnings, the economic sentiment index in Germany, and retail sales in the United States. There will also be a meeting of the Bank of Japan and testimony by Fed Chairman Jerome Powell before the Senate Banking Committee.
On Wednesday, data on the consumer price index in the UK, the eurozone, and Canada will be presented, as well as data on New Zealand’s GDP, the number of building permits issued in the US, and changes in crude oil inventories.
Jerome Powell will testify before the US House of Representatives Financial Services Committee.
On Thursday, data on employment change in Australia and jobless claims in the United States will be released. The Bank of England and the National Bank of Switzerland will hold monetary policy meetings. The Bank of England may decide to expand the quantitative easing program by 80 billion pounds. A meeting of the OPEC + technical committee will also take place.
On Friday, data on retail sales in Australia, the UK, and Canada will be published. Jerome Powell will deliver a speech.
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