The Week Ahead – COVID-19, Geopolitics and Private Sector PMIs in Focus

On the Macro

It’s a particularly quiet week ahead on the economic calendar, with just 39 stats in focus in the week ending 24^th July. In the week prior, just 74 stats had been in focus.

For the Dollar:

It’s a quiet week ahead on the economic data front, giving the markets little to consider.

While the stats are on the quieter side, 2 data sets will have a material impact on market risk sentiment.

On Thursday, the weekly jobless claims are in focus, with the markets wanting a continuation of the downward trend. Sub-1.3m would be needed to ease any jitters over the 2^nd wave.

The focus will then shift to prelim July private sector PMIs due out on Friday. Again, the services sector will need to return to expansion to support the market optimism over the economic outlook.

A deeper contraction and expect risk sentiment to be tested.

The Dollar Spot Index ended the week down by 0.73% to 95.942.

For the EUR:

It’s a busy week ahead on the economic calendar.

After a quiet start to the week, the Eurozone and Germany’s consumer confidence figures are in focus on Thursday.

In support of a speedier economic recovery, consumer confidence will need to continue improving. The ECB and governments are looking for a consumer-led recovery. A pullback in confidence will question the optimistic outlook.

The focus will then shift to Friday, with July’s prelim private sector PMIs due out of France, Germany, and the Eurozone.

While we do expect manufacturing PMIs to influence, expect plenty of interest in the service sector PMIs. New orders and employment will likely be two key areas of focus.

The EUR/USD ended the week up by 1.13% to $1.1428.

For the Pound:

It’s another busy week ahead on the economic calendar.

The markets will need to wait until Friday for the stats, however.

Key stats include June retail sales and July’s prelim private sector PMIs.

Expect both sets of numbers to drive the Pound.

Outside of the numbers, Brexit chatter and updates on trade negotiations will continue to influence.

The GBP/USD ended the week down by 0.43% to $1.2568.

For the Loonie:

It’s a relatively busy week ahead on the economic calendar.

On Tuesday, May’s retail sales figures are due out ahead of June inflation figures on Wednesday.

While the stats are somewhat dated, the figures will provide some guidance on what lies ahead.

Outside of the numbers, COVID-19 and geopolitics will likely remain key drivers. Any material deterioration in the economic outlook and expect crude oil prices and the Loonie to suffer.

The Loonie ended the week down by 0.03% to C$1.3580 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a particularly quiet week ahead for the Aussie Dollar.

There are no material stats due out to provide the Aussie Dollar with direction.

A lack of material stats will give July’s prelim private sector PMIs some influence on Friday.

From elsewhere, expect private sector PMIs from the EU and the U.S and COVID-19 numbers to drive risk sentiment.

For the Aussie Dollar’s perspective, any further spread of the coronavirus would weigh in the week.

On the monetary policy front, the RBA’s monetary policy meeting minutes are due out on Tuesday. There are unlikely to be too many surprises, however. There may be some chatter over the recent border close down between New South Wales and Victoria, however…

The Aussie Dollar ended the week up by 0.66% to $0.6996.

For the Kiwi Dollar:

It’s a quiet week ahead on the economic calendar.

June trade figures are due out on Friday. With little else for the markets to consider earlier in the week, the Kiwi will be in the hands of COVID-19 and geopolitics…

The Kiwi Dollar ended the week down by 0.26% to $0.6557.

For the Japanese Yen:

It is a relatively busy week ahead on the economic calendar.

Economic data includes June trade data on Monday and inflation figures on Tuesday.

While we don’t expect too much impact on the Yen. The Yen will likely remain in the hands of COVID-19 and geopolitics in the week ahead and there’s plenty to consider…

The Japanese Yen ended the week down by 0.08% to ¥107.02 against the U.S Dollar.

Out of China

It’s a quiet week ahead on the economic data front.

Following last week’s data deluge, there are no material stats for the markets to consider.

That leaves chatter from Beijing and the state-owned media to drive risk sentiment in the week.

We had heard reports of the PBoC coming to an end of its easing cycle.

On the monetary policy front, the PBoC is in action on Monday. The markets are expecting the PBoC to leave loan prime rates unchanged following the recent forward guidance.

The Chinese Yuan ended the week up 0.10% to CNY6.9924 against the U.S Dollar.

Geo-Politics

UK Politics:

There’s still a long way to go before any agreement is in place. Johnson and the team are looking to get things wrapped up by the end of the month. That gives both sides just 2-weeks…

Will we see EU member states begin to break rank? Those reliant on the UK for tourism or imports may begin to get a little itchy. Such an outcome wouldn’t be a bad thing for the Pound.

U.S Politics:

Trump will be looking to change the narrative and draw attention away from the coronavirus pandemic.

China remains Trump’s target, so we can expect plenty of rhetoric in the week ahead. Don’t expect China to sit back, however…

For the Democrats, Biden will need to announce his running mate, which will have a material impact on the polls.

The EU Recovery Fund

Last week, EU member states were in action, discussing the mechanics of the EU Recovery Fund.

It was a stalemate as the Netherlands came up against Italy and Spain over the handling of the Recovery Fund.

Talks resumed on Saturday, and are due to extend into Sunday, with the deadlock unbroken at the time of writing.

Corporate Earnings

From the U.S, IBM (Mon), Coca-Cola (Tues), United Airlines (Tues), Microsoft (Wed), Tesla (Wed), Amazon.com (Thurs), Intel (Thurs), Twitter (Thurs), Chevron (Fri), and American Express (Fri) are amongst the big names.

Out of Germany, Daimler (Thurs) is the marquee name delivering earnings results.

The Coronavirus:

There was nothing positive from the first half of the weekend to ease concerns over the pandemic.

From the market’s perspective, the 3 key considerations have been:

1. Progress is made with COVID-19 treatment drugs and vaccines.
2. No spikes in new cases as a result of the easing of lockdown measures.
3. Governments continue to progress towards fully opening economies and borders.

For now, the first scenario is the only one that could offset the worst-case scenarios that continue to be reported.

We are now seeing scenarios ii) and iii) unfold, which has led to a reported slowdown in the U.S economic recovery.

At the time of writing, the total number of coronavirus cases stood at 14,422,091. Monday to Saturday, the total number of new cases increased by 1,385,504. Over the same period in the previous week, the total number had risen by 1,306,584.

Monday through Saturday, the U.S reported 419,276 new cases to take the total to 3,833,271. This was up from the previous week’s 372,491.

For Germany, Italy, and Spain, there were 10,124 new cases Monday through Saturday. This took the total to 754,123. In the previous week, there had been 6,758 cases over the same period.