Markets and economies around the world continue to suffer from the spread of the coronavirus with statistics showing the extent of the negative impact in what is possibly the worst crisis since the Second World War.
This was evident in last Friday's US labour market data, which showed that the US economy lost more than 20.5 million jobs in April and unemployment rose to record levels of 14.7%.
The attention of the markets this week will be directed to important data from more than one major economy which will show the extent of the damage.
We start with the United States and look at future contracts for the dollar index, which is moving in a cross band over the one-hour time frame, with prices currently inside a rising channel above the $99.70 levels. If this channel is broken and crosses to $99.40 levels, we may see the dollar returning to test the lower band of the range at $98.80.
Inflation data is due to be released in the United States on Tuesday, and April’s consumer price index is expected to decline by 0.7% on a monthly basis. Retail sales data for April is expected to decline significantly by about 11% compared to the 8.7% decline in March.
Also, one of the events that markets will be watching is the speech of Jerome Powell, Chairman of the Federal Reserve, on Wednesday.
In New Zealand, the Reserve Bank of New Zealand is scheduled to announce the interest rate decision which is largely expected to remain unchanged at 0.25%. Others expect the bank to reduce interest to the negative range and possibly launch a program of quantitative easing given the strong decline in economic activity.
UK and Germany’s growth data for the first quarter will also be released, which will give the market an initial insight into the impact of the closure on these economies as they prepare to re-open.
The British economy is expected to shrink by 2.5% in the first quarter. Last week the Bank of England said that it expected the economy to shrink by 14% during the year 2020 and that unemployment rates would reach 8%. On the other hand, Europe's largest economy, Germany, is expected to shrink by 2,1% in the first quarter with an annual contraction of 6.3%, the worst since World War II.
Optimism prevailed last week as tensions between China and the United States eased, but we may see tensions intensify again this week with Trump threatening to cancel the agreement if China does not meet its purchase obligations.