The Week Ahead – COVID-19 and Geopolitics Are in Focus along with Stats and the RBA

On the Macro

It’s a quiet week ahead on the economic calendar, with just 30 stats in focus in the week ending 10^th July. In the week prior, 74 stats had also been in focus.

For the Dollar:

It’s a particularly quiet week ahead on the economic data front though not without some key stats to consider.

On Monday, the markets preferred and highly influential ISM Non-Manufacturing PMI for June is due out.

As the markets monitor labor market conditions, May’s JOLTs job openings on Tuesday will also draw attention.

The focus will then shift to the weekly jobless claims on Thursday. A pause in reopening across the most populous states of the U.S will not help bring the numbers back down to palatable levels…

At the end of the week, wholesale inflation figures for June will likely have a muted impact on the markets…

The Dollar Spot Index ended the week down by 0.27% to 97.172.

For the EUR:

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

Germany is in focus throughout the week. Key stats include May’s factory orders, industrial production, and trade figures.

We would expect factory orders and industrial production to have the greatest influence. These are figures from May, however, that should limit any material impact on the EUR.

From the Eurozone, retail sales figures on Monday will likely have a muted impact on the EUR.

Consumer spending and a bounce back in service sector activity remain key to a swift economic recovery. Following last week’s member state numbers, however, there shouldn’t be too many surprises.

From the EU, economic forecasts are due out on Wednesday that will garner plenty of attention. With the recent uptick in private sector activity and bounce back in consumption, the markets will want some better forecasts…

The EUR/USD ended the week up by 0.26% to $1.1248.

For the Pound:

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

Key stats include June’s construction PMI, 1^st quarter labor productivity numbers, and house price figures.

Don’t expect the stats to have any material influence on the Pound, however.

Brexit chatter will likely be the key driver in the week. The EU and Britain continue to fail to find common ground.

Market risk sentiment will also be key, with any jump in COVID-19 numbers Pound negative.

The GBP/USD ended the week up by 1.19% to $1.2483.

For the Loonie:

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

On Monday, June’s Ivey PMI is due out on Monday, with June employment figures due out on Friday.

While the Ivey PMI will influence, expect the employment figures to have the final say in the week.

Mid-week, housing starts, and building permit numbers will have a muted impact on the Loonie.

At the start of the week, the BoC will release its Business Outlook Survey that will influence the Loonie. Sentiment will need to materially improve to support a more optimistic economic outlook.

Away from the calendar, COVID-19 updates and any chatter about trade tariffs will also provide direction.

The Loonie ended the week up by 1.03% to C$1.3547 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 with direction in the week. While there are no stats, however, the RBA will deliver its monetary policy decision on Tuesday.

We don’t expect any moves, which puts the focus on the RBA rate statement.

A lack of stats and the lack of an RBA move would ultimately leave the Aussie Dollar in the hands of COVID-19 and trade chatter…

The Aussie Dollar ended the week up by 1.08% to $0.6939.

For the Kiwi Dollar:

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

On Tuesday, 2^nd quarter business confidence figures are due, with electronic card retail sales due out on Friday.

Expect both sets of numbers to influence, though electronic card retail sales should garner more interest.

From elsewhere, updates from the U.S and the EU on COVID-19 and any chatter on trade will also influence. The last thing that the Kiwi Dollar needs is a 2^nd wave…

The Kiwi Dollar ended the week up by 1.68% to $0.6531.

For the Japanese Yen:

It is a quiet week ahead on the economic calendar.

Economic data is limited to May’s household spending figures and current account numbers. In a normal world, we would expect some influence from household spending figures.

At present, however, the Yen remains wedged between the Greenback and riskier assets.

Expect market risk sentiment to remain the key driver in the week.

The Japanese Yen ended the week down by 0.27% to ¥107.51 against the U.S Dollar.

Out of China

It’s a quiet week ahead on the economic data front. Key stats include June’s inflation figures. Don’t expect too much influence from the numbers, as the global markets grapple with COVID-19 and Trump…

The Chinese Yuan ended the week up 0.17% to CNY7.0663 against the U.S Dollar.

Geo-Politics

UK Politics:

There’s still no good news on the Brexit front, which continues to leave the Pound languishing at sub-$1.30 levels.

Following the lack of progress from last week, British PM Johnson began to talk positively about a no-deal Brexit.

Talks ended 1-day early on Thursday, with significant differences remaining and scuppering any hopes of progress.

The markets are not expecting Boris Johnson to compromise, which will leave the markets and the Pound in limbo until the talks resume.

There was some gamesmanship from the EU. Angela Merkel had reportedly requested that negotiators should prepare to leave trade talks without a deal.

We expect the news wires to be active on Brexit in the week ahead. It had been on the quieter side as the markets focused on economic data.

U.S Politics:

Foreign policy with China will be in the spotlight in the week as tensions between the U.S and China spike.

News from the weekend should certainly leave the markets in a cautious mood going into the week.

Reports of the U.S sending aircraft carriers to the South China Sea as China holds drills in the region is alarming.

Last week, the U.S moved forward on legislation to hit banks doing business with China. The move came in response to China’s national security law on Hong Kong. China has warned of taking every countermeasure available should the U.S President sign the Hong Kong Autonomy Act that the Senate approved last week.

The Coronavirus:

Over the weekend, news updates of a fresh spike in new COVID-19 cases will give the markets little comfort.

China, Germany, Italy, and South Korea all reported localized clusters. From the U.S, 12 states are reportedly pausing reopening. There was a new record high number of new cases reported on Saturday.

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.

• Governments continue to progress towards fully opening economies and borders.

Based on the figures last week and from the weekend, points ii) and iii) in particular have been market negative.

As the threat of a 2^nd wave rises, it is also unlikely to have a vaccine in the coming weeks.

This is also market negative should the number of new cases continue to rise, as it would require the need for another total lockdown in affected economies.

At the time of writing, the total number of coronavirus cases stood at 11,378,918. Monday to Saturday, the total number of new cases increased by 1,339,869. Over the same period in the previous week, the total number had risen by 1,048,069.

Monday through Saturday, the U.S reported 361,275 new cases to take the total to 2,935,770. This was up from the previous week’s 239,880. On Saturday 4^th July, there were 107,457 new cases.

For Germany, Italy, and Spain, there were 6,397 new cases Monday through Saturday. This took the total to 736,462. In the previous week, there had been 6,948 cases over the same period.