News & Analysis

Week Ahead – COVID-19, Central Banks and Nonfarm Payrolls 

March 2, 2020

By Deepta Bolaky

Week Ahead

 COVID-19, Central Banks and Nonfarm Payrolls 

February was a volatile month with new highs, yet big plunges in the financial markets. The wider spread of the coronavirus, more and more warnings from companies, profits downgrade, and the expected dovish actions from central banks to stem the economic impact have resulted into a breakdown in the stock markets.

Global stocks were in a sea of red with equity benchmarks falling more than 10% into correction territory. Investors rushed to safety with traditional haven assets. Despite record low yields in the US Treasuries, investors have shown their willingness to protect their capital in the bond markets due to its low correlation to equities.

Investors are no longer cautiously seeking higher capital returns but are mostly in a state of panic. Coronavirus is an evolving risk which is acting as the tip of the iceberg triggering a massive sell-off in an overheated market. Risk sentiment remains fragile and the virus is probably the excuse for the long-awaited pullback.

Stepping into a new month, we expect the markets to remain volatile driven mostly by the developments of the virus. Market participants will be looking for signs of bottoming, and the interventions of central banks and governments to contain the fallout.


The World Health Organisation has raised the global risk assessment of the coronavirus to “Very High”. The number of new cases abroad is increasing – Italy reported a 50% surge over the weekend. More countries are issuing travel warnings for affected regions to contain the spread.

We expect investors to remain focus on any developments of the virus:

  • The rate of new cases and deaths inside and outside of China
  • The quarantine measures undertaken by affected countries
  • The WHO’s stance of the spread 

Central Banks 

How and when will central banks react to the meltdown in the markets? Central bankers in Australia and Canada will be among the first to hold policy meetings this week and investors will look for clues to see how central banks are pricing the virus risks on the global economy.

Reserve Bank of Australia 

It will be a crucial week for the RBA. The central banker is already concerned that the interest rate is at a record low of 0.75% and there is little room for intervention. The global economy is facing its biggest hit and Australia is among the major economies to probably be hit the hardest.

Will it be too early for the RBA to act this Tuesday? There are heightened expectations that the RBA will cut interest rate this week given the financial stress from the virus in an already sluggish economy.

However, the cuts alone have not been very effective for the Australian economy so far and the strong upswing in the housing market might force the RBA to remain on hold. Battled by an additional risk, unconventional policies and fiscal boost will likely be sought rather than just rate cuts.

The Aussie dollar is buying at 0.65 US cents, the lowest level in eleven years. The local currency is poised for a volatile run amid a packed economic calendar.   

Bank of Canada

There are higher expectations for a rate cut, but it might create more panic in the market if the BoC slashes rate this Wednesday. It might be too early to evaluate the impact of the virus on the economy as generally, the impact of such a pandemic is expected to be temporary.

Market participants needed a reason to sell and the virus acted as a catalyst in an overheated stock market. Immediate rate cuts might not be effective but cuts should come once the central bankers evaluate the economic disruptions. A strong fiscal boost will also be warranted as monetary policies intervention might not be enough.

As commodities markets bleed out, the Canadian dollar will struggle to find buyers compared to its peers despite being the highest yielding currency among the G10. We also do not expect the BoC to tilt towards more hawkish tones. 

Economic Data

PMI figures will be eyed as investors will be monitoring data to gauge any signs of growth and anticipate central banks’ actions. The week will kick start with Chinese PMI figures on Monday.


Caixin Manufacturing PMI (China)
Markit Manufacturing PMI (Germany)
Markit Manufacturing PMI (UK)
Markit Manufacturing PMI and ISM Manufacturing PMI (US)


Markit PMI Composite (Germany)
Markit PMI Composite (Eurozone)
Markit Services PMI (UK)
Markit Services & Composite PMI, ISM Non-Manufacturing PMI (US)

Nonfarm Payrolls

The US dollar has been on the rise given its haven status and its advantage over its global peers. However, over the past few days, expectations of Fed rate cuts have dented its bid momentum. We expect the employment sector to remain the strongest part of the US economy.

By Deepta Bolaky

Disclaimer: Articles and videos from GO Markets analysts are based on their independent analysis. Views expressed are of their own and of a ‘general’ nature. Advice (if any) are not based on the reader’s personal objectives, financial situation or needs.  Readers should, therefore, consider how appropriate the advice (if any) is to their objectives, financial situation and needs, before acting on the advice. For more information of trading, check out our forex trading courses.


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