The Week Ahead – COVID-19, Economic Data and US Politics in FocusIt’s a busy week ahead for the markets. Economic data, COVID-19 updates, and political wrangling on Capitol Hill are just a few of the things to consider.
On the Macro
It’s a busier week ahead on the economic calendar, with 59 stats in focus in the week ending 7th August. In the week prior, just 57 stats had been in focus.
For the Dollar:
It’s another busy week ahead on the economic data front.
In the 1st half, the ISM’s July private sector PMIs, ADP nonfarm employment change figures, and June factory orders are in focus.
We would expect Wednesday’s ISM Non-Manufacturing PMI and ADP Nonfarm Employment Change to have the greatest impact.
The focus will then to Thursday’s initial jobless claims and Friday’s nonfarm payroll numbers and unemployment rate.
Following some disappointing weekly jobless claims figures and the rise in COVID-19 cases, the labor market figures will be key.
For the service sector, any contraction in July, following a jump in productivity in June, would also weigh on riskier assets.
The Dollar Spot Index ended the week down by 1.15% to 93.349.
For the EUR:
It’s also another busy week ahead on the economic data front.
On Monday and Wednesday, July’s manufacturing and services PMIs are due out of Italy and Spain.
Finalized PMIs are also due out of France, Germany, and the Eurozone.
With Spain seeing a spike in new COVID-19 cases, expect some attention to the PMIs. Ultimately, however, the Eurozone’s services and composite will likely have the greatest impact.
The focus will then shift German factory orders for June, due out on Thursday.
At the end of the week, Germany remains in focus, with June’s industrial production and trade figures due out.
Barring disappointing numbers, June retail sales figures for the Eurozone should have a muted impact on Thursday.
The EUR/USD ended the week up by 1.05% to $1.1778.
For the Pound:
It’s a relatively busy week ahead on the economic calendar. July’s finalized private sector PMIs are due out and will garner plenty of interest.
Expect any downward revision to the Services PMI on Wednesday to have the greatest impact.
On Thursday, the focus will then shift to the BoE. More action is expected and the Bank may consider an extension to the suspension of banks paying dividends and buybacks.
While the BoE is in action, we can also expect any further updates on Brexit to also influence in the week.
The GBP/USD ended the week up by 2.27% to $1.3085.
For the Loonie:
It’s a relatively busy week ahead on the economic calendar.
On Wednesday, June’s trade figures are due out ahead of July employment numbers on Friday.
Expect the employment figures to have the greatest impact, however.
Barring dire numbers, the Ivey PMI for July should have a muted impact on the Loonie on Friday.
Away from the stats, COVID-19 and geopolitics will continue to influence crude oil prices and risk sentiment.
The Loonie ended the week up by 0.02% to C$1.3412 against the U.S Dollar.
Out of Asia
For the Aussie Dollar:
It’s a relatively busy week ahead for the Aussie Dollar.
At the start of the week, the Manufacturing Index figures are due out ahead of a busy Tuesday.
We would expect manufacturing PMIs from China, the EU, and the U.S to have a greater impact, however, on Monday.
The focus will then shift June trade and retail sales figures due out on Tuesday. Expect the retail sales figures to have the greatest impact. The RBA continues to rely on consumer spending to support the economy. Weak numbers will be a test for the Aussie Dollar.
For the week, however, the main event is the RBA monetary policy decision on Tuesday.
Following the spike in new COVID-19 cases, will the RBA remain optimistic about the economic recovery?\
Any dovish chatter and the Aussie Dollar could eye sub-$0.70 levels. At the end of the week, the RBA’s statement on monetary policy will also draw interest.
The Aussie Dollar ended the week up by 0.53% to $0.7143.
For the Kiwi Dollar:
It’s another quiet week ahead on the economic calendar.
2nd quarter employment figures are due out on Wednesday. The markets will likely be forgiving to an extent, with COVID-19 expected to have an impact on employment.
With economic data on the lighter side, private sector PMIs from China, the EU, and the U.S will influence.
Expect geopolitics and COVID-19 news to also have an impact in the week. Any signs of a slowdown in new cases globally and expect support to kick in.
The Kiwi Dollar ended the week down by 0.18% to $0.6629.
For the Japanese Yen:
It is a busy week ahead on the economic calendar.
Finalized 2nd quarter GDP and July’s manufacturing PMI numbers are due out on Monday.
The focus will then shift to July’s service PMI on Wednesday and June household spending figures on Friday.
While the stats will influence sentiment towards BoJ monetary policy, the Yen will remain at the mercy of COVID-19 and geopolitics.
The Japanese Yen ended the week up by 0.29% to ¥105.83 against the U.S Dollar.
Out of China
It’s a relatively busy week ahead on the economic data front.
July’s private sector PMIs are due out on Monday and Wednesday. Expect the figures to influence risk appetite in the week.
On Friday, July trade figures will also garner plenty of attention. While exports remain the main area of focus, any sizeable fall in imports would test risk appetite on the day.
Away from the economic calendar, any chatter from Beijing will also need monitoring.
The Chinese Yuan ended the week up 0.62% to CNY6.9752 against the U.S Dollar.
Brexit will remain in focus. Talks are set to continue through August and September ahead of an EU Summit in October.
60 days may sound like a lot but when considering the lack of progress over 4-years…
A light economic calendar and Brexit chatter have provided the Pound with support. We may even see the markets brush off the chances of a hard Brexit.
Getting on with it seems to be the key desire now rather than dragging it out any longer. Either way, we’re not expecting Johnson and the team to give too much away…
Last week, the Republicans showed signs of fragmentation. As Presidential Election stress builds, we could see more fractures as Trump attempts to distract voters.
The immediate issue at hand, however, is the COVID-19 stimulus package. Any failure to deliver will weigh on the Dollar. Labor market conditions have not improved and the 2nd wave has shown little sign of slowing. A lack of benefits for the unemployed will raise more issues than a fall in household spending. We have already seen social unrest…
It was yet another bad week, with the number of new COVID-19 cases continuing to rise at a marked pace.
From the market’s perspective, the 3 key considerations have been:
- Progress is made with COVID-19 treatment drugs and vaccines.
- No spikes in new cases as a result of the easing of lockdown measures.
- Governments continue to progress towards fully opening economies and borders.
Last week, we saw a number of countries including Hong Kong and the UK reintroduce containment measures. Hopes of progress towards a vaccine had limited the damage last week. In the week ahead, however, the numbers will need to ease off to avoid spooking the markets.
At the time of writing, the total number of coronavirus cases stood at 17,981,937. Monday to Saturday, the total number of new cases increased by 1,782,490. Over the same period in the previous week, the total number had risen by 1,531,149.
Monday through Saturday, the U.S reported 447,236 new cases to take the total to 4,762,945. This was up marginally from the previous week’s 417,070
For Germany, Italy, and Spain, there were 22,814 new cases Monday through Saturday. This took the total to 793,804. In the previous week, there had been 17,083 cases over the same period. Spain accounted for 16,101 of the total new cases in the week.