HOW THE FOREX MARKET IN 2020 WILL SHAPE ACCORDING TO THE BIG BANKS
2019 is the year that many central banks participate in the interest rate cutting game to cope with the slowdown of the global economy in the context of prolonged trade war and stagnant production activities.
Some central banks, such as the US Federal Reserve (Fed), have at least proceeded to raise interest rates before 2019, creating opportunities for planners to relax policies amid economic slowdown. the strongest since the 2008 financial crisis.
However, some other central banks such as the European Central Bank (ECB) are in a difficult position and are forced to lower the benchmark interest rate to below zero, creating skepticism about the negative interest rate policy.
2020 seems to be a more peaceful year for monetary policy. Fiscal policy may begin to support the economy and the outlook for growth looks a bit brighter.
Despite this, most economic data broadcast mixed signals rather than positive. After considering many aspects, Bloomberg said that monetary policy is still in favor of a peaceful direction.
U.S. Federal Reserve Bank
The Fed Chairman, Mr. Jerome Powell, left the market without a doubt that the interest rates of the world's most powerful central bank will remain unchanged for a long time.
Specifically, on December 11, Powell said that the Fed's current policy stance is appropriate to support sustainable economic growth, maintain a strong labor market and inflation near target 2%.
President Powell made the above statement after policy makers decided to keep interest rates stable within the target range of 1.5 - 1.75% after three consecutive interest rate cuts and published forecasts. showed that 13 out of 17 officials of the Federal Open Market Committee (FOMC) said there would be no change in interest rates by 2020.
According to Bloomberg, the above statement will help the Fed stand on the sidelines of the US Presidential election next year.
However, the Central Bank of America did not completely back down. Tensions in the money market have prompted the Fed to buy US Treasury bills to restore abundant reserves in the banking system.
Some investors argue that the Fed will need to expand the scope of these transactions to short-term coupon stocks. Powell said they are not ready to take such a step, but will take action if needed.
European Central Bank
The ECB has pledged to increase the stimulus again if necessary, but officials have publicly signaled that they support a "breather" after former President Mario Draghi accelerated the stimulus. controversial in September to support the eurozone economy is slowing down.
Policymakers are increasingly pointing to the many adverse side effects of negative interest rates, such as profitability of the banking system and risks to financial stability.
At the inauguration of ECB President, Ms. Christine Lagarde - Draghi's successor, promised to re-evaluate the above stimulus packages as part of the Bank's first strategic monetary policy assessment. This central bank since 2003.
Economists and markets predict the ECB's interest rates will stay the same and quantitative easing will continue throughout 2020.
However, the European Central Bank could be challenged again if the European economy continues to decline in the face of trade instability and the weakening of manufacturing and service sectors.
Bank of Japan
BoJ's prospects for 2020 look a bit brighter after the Japanese government announced a budget package to support growth and some signs of recovery in the global economy.
Bloomberg said that could help BoJ maintain interest rates at the moment. Since the benchmark interest rate is already in the negative area and the assets on the balance sheet are more valuable than the Japanese economy, BoJ is unlikely to be able to make a new adjustment despite this central bank. said they are inclined to ease policy.
However, Governor Haruhiko Kuroda will carefully monitor the new developments in US-China trade negotiations and the economic impact of increasing sales taxes in the fall.
Some economists are beginning to doubt whether the impact of the tax hike is smaller than previous times as expected by policymakers. However, only when the Japanese yen is damaged can BoJ move.
Bank of England
The Bank of England (BoE) will have a new governor in 2020, ending the search for Mark Carney’s successor.
Boris Johnson's decisive victory in the December 12 general election paved the way for his government to bring Britain out of the European Union (EU) on January 31 and simultaneously call Mr. Andre's name. Bailey is successor to BoE Governor Mark Carney.
Expected to take office on March 16 next year, Mr. Bailey will have to deal with the slowdown of the global economy and the weak investment situation. Most worrying, the Brexit deadline is approaching and the UK needs to reach a trade agreement with the EU by the end of next year, unless Mr. Johnson requests an extension of time.
Currently, concerns surrounding the gloomy economic outlook have caused two of BoE's nine policy makers to lower interest rates. All eyes will be on whether Mr. Johnson's victory and Brexit's situation can change the overall picture of England.
People’s Bank of China
Analysts who have predicted that the People’s Bank of China (PBOC) will begin to ease monetary policy at large scale by 2019 are disappointed. Gov. Zhou Xiaochuan also said he intends to take the path of easing modest policy, targeting economic stimulus by 2020.
Thus, if the world's second-largest economy continues to weaken, economists predict the PBoC will continue to inject money into the financial system through a reduction in the required reserve ratio.
The direction to relax the cautious policy of the PBOC comes from the Chinese government's fight against stagflation, when consumer prices have exceeded the 3% target of the PBoC. and ex-factory prices fall sharply.
Current economists predict China's economic growth will fall below the 6% threshold next year. The revised GDP figures for 2018 show that China's goal of doubling the size of the economy in this decade is easily within reach.