Next week promises to be a busy one. Another Brexit deadline approaches but investors also gear up for the start of US earnings season and Indian elections. On the monetary policy front, all eyes are on the Federal Reserve and the European Central Bank.
Here’s what to watch in the coming days.
EU leaders will hold an emergency Brexit summit on Wednesday, even as the April 12 deadline for Britain to exit the UK approaches. Prime Minister Theresa May has requested a further three month delay to Brexit to June 12, while the EU weighs up whether to postpone Britain’s departure by another year.
The Federal Reserve on Wednesday releases the minutes of its March meeting, when it performed a U-turn on policy, ditching plans for interest rates this year and signalling just one increase in 2020. “After the sharp drop in the dots, markets will be looking at just how dovish the FOMC has become,” strategists at TD Securities said. “The minutes are likely to show peak dovishness in terms of nervousness about the outlook. Balance sheet details are unlikely.”
Meanwhile, Fed vice-chair Richard Clarida has two speaking engagements next week. On Tuesday, he speaks about the central bank’s review of the monetary policy framework in Minneapolis and on Thursday he delivers remarks on the US economic outlook and monetary policy in Washington DC.
Strategists at TD Securities argue that Mr Clarida, who has “represented the more dovish side of the FOMC over the past several months” could suggest allowing an overshoot in inflation before hiking again. “If asked, he is likely to concede there are rate cut scenarios, but not that likely in his view.”
European Central Bank
The European Central Bank is due to unveil its latest policy decision on Thursday and economists expect the meeting to be uneventful.
“After announcing new targeted longer-term refinancing operations (TLTROs) in March, we expect the ECB to defer announcing details until June,” said strategists at TD Securities. “The Governing Council likely wants time to observe any potential rebound in euro area growth before committing to the details ahead of the September launch. They have time on their side, and on that front, we remain cautiously optimistic.”
The first phase of polling in India’s general elections gets under way on Thursday and more than 900m people are eligible to vote in what is slated to be the largest democratic exercise in the world. The counting of votes for India’s 545 seat parliament will begin on May 23 and be completed within three days.
In the run-up to the elections concerns about central bank independence and credibility of the government’s economic data have surfaced, after India’s Central Statistics Office sharply raised its estimates of GDP growth for the past two years. The opposition Congress party and election activists have also spoken out against a new television channel, NaMo TV, that is dedicated to nonstop broadcasts about India’s prime minister Narendra Modi and began broadcasting last week.
Investors will watch the elections play out as they watch to see if Mr Modi and his Bharatiya Janata Party retain power for another five years.
First-quarter earnings season unofficially gets under way next week when JPMorgan and Wells Fargo report results on Friday. Wall Street expects earnings to fall for the first time since 2016 amid concerns about an economic slowdown, the ongoing US-China trade war and as rising wages and freight and raw materials costs are expected to eat into profit margins.
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