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Will Central Banks Hint at More Negative Rates? |
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13th Jul 2020

Will Central Banks Hint at More Negative Rates?

The US dollar declined against most developed and emerging market currencies. It dropped by more than 0.5% against the South African rand and by more than 0.4% against the euro. In the same week, gold, silver, and other industrial metals reached the highest levels in more than three months. Stocks, on the other hand, wavered as traders started to focus on the upcoming earnings season.
The European Central Bank (ECB) will start its two-day monetary policy meeting on Wednesday and deliver its rate decision on Friday. Analysts expect that the bank will leave rates unchanged and commit to the ongoing quantitative easing program. Also, Christine Lagarde is likely to sound cautious on the ongoing economic recovery. In addition to the ECB decision, we will receive inflation data from the Eurozone on Friday. Analysts polled by Reuters expect that the headline CPI will improve from the previous 0.1% to 0.3%. This number will be below the ECB’s target of 2.0%.
The Japanese economy is going through a difficult time as evidenced by the recent manufacturing and services PMI numbers. Recent reports have suggested that many companies in the country are struggling as foreign demand remains weak. Therefore, we will be following the BOJ’s response to the situation on Wednesday. Analysts expect the bank to leave interest rate unchanged at -0.10% and maintain the open-ended quantitative easing program. Additionally, we will receive the national CPI data on Friday. 
The Canadian dollar has been relatively strong against key currencies for three reasons. The number of coronavirus cases in Canada has dropped while the price of crude oil has been rising. Also, upbeat economic data from the country has supported the currency. It is against this backdrop that the Bank of Canada will deliver its interest rate decision on Wednesday. Like other central banks, analysts expect that the BOC will leave interest rates unchanged and remain cautious about the risks ahead. Also, we will receive the country’s inflation, manufacturing PMI data, and ADP nonfarm employment change. The week closes with Canadian retail sales.
China is one of the most significant economies in the world because it is the biggest consumer and supplier of most items. As such, analysts pay close attention to economic activities from the country. On Thursday, the country’s statistics office will release the first reading of Q2 GDP data. Analysts expect that the economy contracted by 9.9% in the quarter while industrial production rose by 5% in June. They also see retail sales falling by 2% last month. On Tuesday, the statistics office will release trade numbers from the country.
This week, we will receive important economic data from the US. On Tuesday, the Bureau of Labour Statistics will release consumer price and real earnings data. These numbers are important because they play an important role in monetary policy. On Wednesday, we will receive the export and import price data followed by retail sales and Philadelphia Fed manufacturing data on Thursday. Finally, on Friday, we will receive the housing starts and building permits data. 
Other economic data to watch this week will be the UK GDP due on Tuesday and consumer prices on Wednesday. NZ consumer prices are also due on Wednesday. Thursday is a busy day on the economic calendar including Australian and UK employment figures. Friday sees a special EU summit to discuss the recovery plan to respond to the COVID-19 crisis.