The Week Ahead – COVID-19, Earnings and Economic Data in Focus

On the Macro

It’s another relatively quiet week ahead on the economic calendar, with just 46 stats to monitor in the week ending 17^th April. In the week prior, 41 stats had been in focus.

For the Dollar:

It’s a busy week ahead for the greenback, with U.S data accounting for half of the week’s data.

The focus shifts to March and April figures in the week ahead. These will give the markets an indication of what impact the coronavirus had on the economy in the early stages.

March retail sales figures and industrial production figures due on Wednesday will garner plenty of interest.

From the manufacturing sector, expect April’s NY Empire State and Philly FED Manufacturing PMI on Wednesday and Thursday to also garner plenty of attention.

Unsurprisingly, there will also be plenty of interest in the weekly jobless claims figures on Thursday.

From the housing sector, any material slide in building permits and housing starts in March would also test risk appetite. Applications began to fall in late March, so we may need to wait on April and May figures to assess the impact on constructor sentiment, however.

Outside of the stats, expect the coronavirus numbers to have the greatest impact in the week. A continued downtrend in new cases is a must.

The Dollar Spot Index ended the week down by 1.09% to 99.482.

For the EUR:

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

Finalized March inflation figures are due out of France, Germany, Italy, Spain, and the Eurozone.

While we don’t expect too much influence from the numbers, there will be some interest in the Eurozone numbers on Friday.

Expect the markets to brush aside the Eurozone’s February industrial production figures due out on Thursday, however.

With the stats likely to have a muted impact, expect the coronavirus numbers to continue to influence.

As the number of new cases and deaths ease further, the markets will begin to assess the damage. More importantly, the EU’s action plan will need to restore confidence and support the region’s economy.

Last week’s €500bn package to tackle the economic impact of the virus paled in comparison to that of the U.S administration. When considering the extent of the economic fallout across the EU, there may be concerns that it just isn’t enough.

An inability for EU Finance Ministers to agree on a significant stimulus package also continues to raise question markets over the EU project. The EUR recovery could come undone should the broader market have similar concerns. Priority, however, is to bring the spread of the virus under control.

The EUR/USD ended the week up by 1.26% to $1.0937.

For the Pound:

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

Economic data is limited to March retail sales figures due out on Thursday. We can expect some sensitivity to the numbers, with the UK confinement measures likely to have some impact. April numbers will provide a greater indication of the effects of the coronavirus, however.

In March, hoarding may well have skewed the numbers to the upside.

On the coronavirus, as EU member states reported fewer cases, the markets will look for a similar trend in the UK. A slower pace of infection in early April would suggest a quicker recovery in the UK economy that should support the Pound.

British Prime Minister Boris Johnson’s health will also be an area of focus.

The GBP/USD ended the week up by 1.52% to $1.2455.

For the Loonie:

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

The stats will likely have a muted impact on the Loonie in the week, however. February Manufacturing Sales figures and Foreign Security Purchases are due out on Thursday and Friday.

Monetary policy will influence, with the Bank of Canada set to deliver on Wednesday.

Following 2 emergency rate cuts, the markets are expecting that the BoC will stand pat on policy. Any forward guidance will garner plenty of interest, however.

We saw the FED make another move last week, which does open the door for the BoC to make a move. March employment numbers from last week certainly suggest that more support is needed.

Expect more positive updates on the coronavirus numbers to provide support.

The Loonie ended the week up by 1.75% to C$1.3956 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

While it’s a shortened week, there’s enough to give the markets something to think about.

March and April business and consumer sentiment figures are due out on Tuesday and Wednesday.

Both will reflect sentiment towards the impact of the coronavirus on the domestic and global economy.

Historically, we have seen moves by the RBA spook both businesses and consumers. While the RBA stood pat last week, rates sit at 0.25%, with the neighboring RBNZ talking of negative rates down the road.

Any upward movement in confidence would certainly be a surprise. It should ultimately boil down to how badly sentiment has been hit…

On Thursday, expect March employment figures to also provide direction…

We’re not going to see a similar jump in the unemployment rate as seen in the U.S, but any rise will be Aussie Dollar negative. With COVID-19 wreaking havoc, the RBA’s reliance on consumer spending has come undone. Particularly dire numbers will question the RBA’s current stance on monetary policy…

With so much economic uncertainty ahead, some reversal of last week’s 5.87% is likely, barring something spectacular.

The Aussie Dollar ended the week up by 5.87% to $0.6349.

For the Kiwi Dollar:

It’s a quiet week ahead on the economic data front. April’s Business PMI, due out on Friday, is the only major stat for the week.

The numbers will have a material impact on the Kiwi, with dire numbers likely to support another near-term move by the RBNZ.

The Kiwi Dollar ended the week up by 3.39% to $0.6077.

For the Japanese Yen:

It’s another quiet week ahead.

Finalized February industrial production figures are due out on Friday. We don’t expect the numbers to have any impact on the Yen, however.

Market sentiment towards the global economy, COVID-19 updates, and geopolitics will remain key drivers.

The Japanese Yen ended the week up by 0.07% to ¥108.47 against the U.S Dollar.

Out of China

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

On Tuesday, March trade figures will garner plenty of interest. The EU and other economies went into shutdown mode in March. Expect plenty of attention to the export figures to the EU and the U.S, in particular. That’s before even worrying about demand. Large parts of China had been in shutdown mode throughout the month.

China is in search of an economic rebound. A lack of demand, however, will raise more red flags…

On Friday, 1^st quarter GDP numbers are due out along with retail sales, industrial production and fixed asset investment numbers for March.

While GDP numbers will undoubtedly send shivers through the global financial markets, retail sales and industrial production numbers could soften the blow, or …

We saw March private sector PMIs bounce back in March, a similar trend would ease the impact of a 1^st quarter economic meltdown.

Expect commodity currencies and the global equity markets to also be particularly sensitive to the numbers…

The Chinese Yuan ended the week up by 0.78% to CNY7.0360 against the U.S Dollar.

Geo-Politics

OPEC

The U.S President saved face last week, with a Mexican stand-off failing to end progress to an agreement.

In spite of the agreement, however, there will be questions over compliance and whether it will be enough.

When considering the slump in private sector activity and consumption as a result of COVID-19 containment measures, a 20m bpd cut may have been more effective in supporting prices.

As a result, expect plenty of sensitivity to inventory numbers and the monthly IEA and OPEC reports. A continued slowdown in the number of new coronavirus cases could mitigate any marked slide from current levels, however

UK Politics:

COVID-19 and fiscal policy will remain the key driver. As the numbers ease off, a similar trend will need to be seen in the UK.

A slowdown in the number of new cases, an improvement in the PM’s health and talk of easing containment measures in a few weeks would support the Pound.

On the Brexit front, any concession to extend beyond the current transition period should also support the Pound.

Ironically, the inability of EU finance ministers to consider the entire project and not their electorate further justifies Britain’s decision to jump ship. And, just in time…

U.S Politics:

Bernie Sands is out, handing Joe Biden the mantle to take on Trump on in November, assuming there is no delay to the Presidential Election.

As things stand, the chances of a delay to the election look slim. Under the current rules, Trump is permitted to remain President until January after which the Speaker of the House takes over…

While the markets grapple with the coronavirus and its effects at some point this could become an issue. Let’s face it though, if the lockdown and social distancing are still in place in November, few will even care about the election…

The Coronavirus:

The global financial markets considered last week’s daily coronavirus numbers as positive, supporting the upside in riskier assets.

Over the weekend, the numbers were on the lighter side, when compared with the previous weekend. This supported optimism across the global financial markets. While it does continue to raise questions on testing numbers, the markets can only respond to the information available.

An unknown, however, is for how long the virus will continue to spread at numbers that require the lockdown to continue.

Governments may be hopeful of easing containment measures in the coming weeks. This could all change, however, in the event of another spike that could come from an increase in testing, or worse yet, a cluster in a U.S or EU member state yet to be materially impacted to date.

Amidst the optimism, some caution is advised in the coming week…

Corporate Earnings

It’s that time of the year again as earnings season comes upon us once more. This time around, while actual results will garner some interest, it will be forward guidance that is key.

Over the last few quarters, it was the U.S – China trade war that was in focus, this time it is the coronavirus.

Expect few positives from companies on outlook… The S&P500 had its best week since 1974 last week. Anything similar must question current market dynamics…

There is a desensitized market, however, which has taken more punches than Rocky Balboa…

There are some big names scheduled to deliver, including banking giant JPMorgan Chase.