Corona Virus Pandemic: Central Banks Interest Rate Cuts, ECB in Focus

Daily Update – 12 March 2020

Yesterday's Focus

• GBP Gross Domestic Product (MoM) (Jan); Manufacturing Production (MoM) (Jan); Industrial Production (MoM) (Jan); Trade Balance (Jan); Autumn Budget 

• USD Core CPI (YoY) (Feb)

Yesterday's Explained

Sterling clung to most of its earlier gains on Wednesday after the British government unveiled a 30 billion pound ($39 billion) economic stimulus plan, hours after the Bank of England slashed interest rates to lift the struggling economy. In a double-barrelled response to tackle the risk of a coronavirus-fuelled recession, the government announced the plan as part of a debt-fuelled investment surge after the central bank cut its key policy rate to 0.25%, lifting the pound from a one-week low hit in the previous session.

The euro declined against the U.S. dollar, as investors awaited rate decision by European Central Bank. European Central Bank is expected boost monetary stimulus when it meets today to counter the impact of the coronavirus outbreak on the European economy. Following a 50‐basis point rate cut from the Bank of England, expectations are the ECB will also act, probably with a 10‐basis point cut. Money markets showed that a 10‐basis point rate cut is now being fully priced in by investors. The euro was last down 0.10% at $1.1257.

 

Today’s Market

• EUR Industrial Production (MoM) (Jan); ECB Monetary Policy Statement ; ECB Interest Rate Decision; ECB Marginal Lending Facility; Deposit Facility Rate (Mar)

• USD Initial Jobless Claims; Core PPI (MoM) (Feb)

Today’s Focus

It’s a relatively busy day ahead on the Eurozone economic calendar. Eurozone industrial production figures for January are due out later this morning. With the January numbers too early to reflect the effects of the coronavirus, we would expect any positive numbers to be brushed aside. Italy’s shutdown in the north and the spread of the virus across Europe suggests some dire numbers ahead. And that’s before factoring in an expected slide in demand from the East and the effects of supply chain disruption. Outside of the numbers, however, the ECB monetary policy decision and press conference will be the main event on the calendar. Expect a slide in the majors should the ECB decide to leave interest rates unchanged…

Any chatter from governments and news updates on the spread of the coronavirus will also be in focus throughout the day.