The Friday Forex Takeaway – Episode 28

<h2>Key Points From This Week</h2>
<p><strong>Chinese Manufacturing Recovers</strong></p>
<p>Following a plunge to record lows of 35.7 in February, the Chinese manufacturing sector rebounded firmly in March to post highs of 52.3 on the Caixin PMI index. The market had been forecasting a recovery to just 44.9 and was pleasantly surprised by the news. With lockdown restrictions in China beginning to ease now, there is a hope that China can continue to recover though some analysts are warning not to place too much focus on this reading and instead to wait for other key economic indicators to give a broader picture of the Chinese economy.</p>
<p><strong>COVID-19 Crisis Worsens</strong></p>
<p>The spiralling COIVD-19 crisis intensified this week with the number of global infections topping 1 million cases with a death toll of over 50,000. With the death toll still ballooning higher in the US, UK, Italy and Spain, the global economy is still heavily impaired as shutdowns and travel restrictions cause massive disruption. US intelligence chiefs reported this week that they have evidence that China is covering up the true scale of the virus there in terms of both the number of infections and death toll, to create the perception that it has handled the virus’ outbreak.</p>
<p><strong>US Manufacturing Slips</strong></p>
<p>US Manufacturing slipped back into contractionary territory in March falling to 49.1 from the prior month’s 50.1 reading. However, there were some positives as the reading was far stronger than the 44.1 reading forecast and shows resilience in the US factory sector. The key now will be how long the current lockdowns go on for which could determine whether we see a deeper drop over April.</p>
<h2>Key Events Next Week</h2>
<p><strong>OPEC Meetings</strong></p>
<p>With WTI prices continuing to slide this week, Saudi Arabia has called an emergency meeting between OPEC and non-OPEC members next week. The talks will aim to establish an agreement around new production restrictions in order to curb the losses in the oil market. The OPEC+ agreement fell apart last month when Russia refused to sign up to new production restrictions. However, the market Is hopeful that Russia will now comply given the sell-off in oil prices.</p>
<p><strong>UK GDP</strong></p>
<p>UK GDP data next week will be closely watched. The last reading was able to barely avoid a negative reading at 0%. However, in light of the lockdowns and travel restrictions in place over the UK over March, there is a high risk that GDP will have turned negative over the month, which will put further pressure on the BOE.</p>
<p><strong>US CPI</strong></p>
<p>US inflation data will also be closely watched next week. With oil prices having tanked and with a massive amount of workers at home and retail districts closed, there are firm downside risks. An severe downside will put further pressure on the Fed which has already announced unlimited QE in order to support the economy.</p>
<h2>Keep An Eye On</h2>
<p><strong>COVID-19 Headlines</strong></p>
<p>The UK is due to review its 3-week lockdown next week. If an extension is announced, this will create further economic uncertainty and weigh on UK assets. Keep an eye on announcement regarding other lockdowns around the world also as extensions will create further headwinds for global asset markets.</p>
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