Christine Lagarde, current managing director of the IMF. Image source: Getty Images
Christine Lagarde to Expound Upon the ECB's Response to the Coronavirus Crisis
The most impactful event this week is going to be the speech of the European Central Bank's President Christina Lagarde, delineating on the efficiency of the Bank's response to the coronavirus crisis so far.
The timing of the speech is of prime importance, given the recent developments in the Eurozone and the EU as a whole.
The industrial activity in France and Germany has finally managed to pick up in May and the two countries' bilateral agreement to issue common debt, are two such recent developments supporting investors' optimism for a relatively quick economic recovery.
Christine Lagarde's rhetoric can, therefore, underscore all of the progress in mitigating the economic fallout that has been made over the last several weeks, which could also highlight the steps that remain to be made before the stabilization process can be completed.
Such a course of action could, therefore, support the reeling stock market in Europe, which has been hit the hardest due to the Eurozone's dependency on the uninterrupted operation of the global supply chains.
On the other hand, if the President of the ECB somewhat surprisingly chooses to implement a more cautious stance similarly to Jerome Powell's recent warnings, this could have the adverse effect of offsetting investors' sentiment and thereby driving European stocks lower.
The Market Braces for Another Round of Disappointing GDP Data in the US
The Bureau of Economic Analysis in the US is scheduled to release its preliminary GDP report for the previous quarter this Thursday.
The report is going to cover the three months to March, and it is going to represent a more thorough measurement compared to the advanced findings released a month prior.
US GDP Growth Rate. Image source: TradingEconomics.com
The consensus forecasts anticipate the findings of the report to be inlined with the previous data, which would confirm the observed economic contraction of 4.8 per cent.
Such a massive dropdown would not only underline the severity of the COVID-19 recession, but it would also effectively end the longest bullish run in history.
Despite these gloomy expectations, however, the market has had a month to price in the advanced data, which means that there should not be a considerable market shock following the release of the data.
Instead, the report is more likely to serve as a benchmark for the FED, against which the Central Bank could project its future expectations for growth, and thereby shape its policy accordingly.
RBNZ's Financial Stability Report to Illustrate the Financial Conditions in the Pacific Region
On Tuesday, the Reserve Bank of New Zealand is going to release its comprehensive report on the underlying financial conditions in the country, that have been observed following the initial market crash and the Bank's subsequent monetary policy interventions.
The report will be crucial not only because it would shed light on the possible future adjustments to the RBNZ's interest rate and monetary policy, but also because it would represent a significant indication of the economic recovery process in the South Pacific region.
The economies of New Zealand and Australia are closely tied to that of China, which means that a potentially hawkish report tomorrow would underline the stabilization of the Chinese supply chains. This is a necessary condition in the path to an eventual full recovery in the three states.
Conversely, a potentially dovish-sounding report would expose the fragility of the aforementioned supply chains, which, in turn, would delineate on the specifics that still need to be improved upon.
At any rate, tomorrow's data in New Zealand is going to affect the country's most prominent stock index (The NZ50), which has been performing quite well. It has even been able to thread close to the S&P 500.
The EU50, in contrast, is still gaining momentum, but it remains more strained compared to the other two.
Indices 4H Comparison Chart. Image source: Trendsharks ©, created with TradingView.com
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