March 5, 2021 | by sandeep
5 Issues to Look Out for This Week – 8/3/21
By Mateo Jarrin Cuvi
The world’s second largest economy takes center stage this week. What else can we expect? Find out here!
China to Unveil Details of its 14th 5-Year Plan
This week’s highlight is certainly China’s National People’s Congress (NPC), a weeklong session involving lawmakers and governmental officials to lay out the road ahead for Chinese development, including a 5-year plan covering the first half of this decade.
Part of this programme is to transform China into a “developed” country by the end of 2035, focusing on economic growth via its “dual circulation” development model, large investment in technology and innovation in sectors such as AI, 5G, electric vehicles and quantum computing, and care for the environment via a shift to clean energy and pollution control.
All of these efforts aim to help China become autonomous in terms of technology and achieve food security, thereby blocking themselves from external shocks..
The meeting will kick off on Friday, March 5th and is expected to last ten days.
As information on the many decisions made by Chinese President Xi Jinping hits the headlines, keep your eye peeled for trading opportunities in equities, exotic currency pairs such as USD/CNH, indices like Hong Kong’s Hang Seng (.HK50_), and commodities.
This is one of the most important meetings in decades for China so there should be plenty of action in the markets!
US Inflation: On its Way Up!
Inflation in the US is on a steady climb with analysts expecting it to go as high as 3% in the upcoming months.
Inflationary pressure was rather weak for the month of January with the cost of food and utilities decreasing by 0.9 and 0.7%, respectively. This was offset by a 3.5% rise in the cost of gasoline, 2.2% in clothing and 1.1% in transportation, which led to only a 0.3% increase in the overall CPI for the month.
Despite this minute gain, inflation is expected to pick up steam moving forward.
Following several months of price cuts due to the COVID-19 pandemic, the US economy should rebound and prices will rise with businesses in the hospitality and leisure industries looking to make up lost ground.
Tag onto this higher energy and commodity prices and you have a recipe for a significant spike in inflation.
Obviously, greater inflationary pressure results in a weaker dollar, which presents you with a good opportunity to place your USD trades.
So tune in on Wednesday, March 10th at 13:30 GMT for the US’s latest CPI figures to find out where inflation’s headed.
Will the European Central Bank Change its Monetary Tune?
On Thursday, March 11th at 13:30 GMT, the European Central Bank (ECB) will be revealing its monetary policy for the upcoming months.
Will interest rates and Europe’s pandemic emergency purchase programme (PEPP) stay steady? Or are changes in sight?
During its previous announcement back in January, the ECB kept the interest rates on the main refinancing operations, marginal lending facility and deposit facility at 0.00, 0.25 and -0.50%, respectively.
The ECB has been struggling with rising bond yields, which are putting pressure on lending costs and rising the interest burden for countries with high debt ratios such as Italy and Greece. Europe’s financial authorities are not expected to change the region’s monetary policy just yet, banking on verbal intervention to bring the bond yields back down.
Additionally, the ECB vowed to continue to procure asset purchases under the PEPP, which is valued at 1,850 billion Euros, until “at least the end of March 2022” or “until it judges that the coronavirus crisis phase is over” as a way of keeping “favourable financing conditions over the pandemic period.”
You never know when there might be surprises, so pay close attention to the ECB’s press conference and prepare those EUR trades!
Is the UK’s GDP on the Mend?
Will the UK’s GDP continue to rise following a positive turn in December? Or will lockdown further stall growth?
After a 1.2% growth in GDP for the month of December spurred by the services and healthcare sectors, analysts expect the UK’s economy to experience another downturn in January as a result of stricter mobility measures being put in place to curtail the spread of COVID-19.
According to ING, January’s drop in GDP “is likely to be more pronounced than in November” since “schools are closed, which directly feeds into GDP, but also limits worker availability given childcare needs,” and “fewer people are going to workplaces.”
Grab a piping hot mug of coffee, review the UK’s latest GDP figure on Friday, March 12th at 7:00 am GMT and prepare to unleash your GBP trades!
The Rush for Gold: Are You Bullish or Bearish?
Gold is trading at a 10-month low and this might present plenty of opportunities for you to trade.
Rising interest rates and the strengthening of US Treasury yields have dampened the world’s interest in gold as a safe haven asset, driving the commodity’s price down.
Also, investors are apparently looking into Bitcoin instead of gold, a move that has pushed the price of gold down by around $200 per ounce.
As succinctly put by BullionVault’s Director of Research, Adrian Ash, in an interview with India’s The Economic Times, “The problem is now that interest rates are turning higher and for gold, the level of interest rate does not matter, it is the direction that matters.”
“As the direction of interest rates is moving up in the bond market, that is hurting gold prices,” Ash explains .
With this in mind, will the price of gold continue its decline or will it eventually regain its luster as an asset?
Study the market closely, pick your position and trade!
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