The Week Ahead: Geopolitics and the Economic Calendar in Focus

Geopolitics, the Yuan and a string of key stats may test risk sentiment further in the week ahead, which would support the central bank doves…
Bob Mason
Economic Uncertainty

On the Macro

For the Dollar:

It’s a busy week ahead on the economic calendar, following a relatively quiet week last week.

After a quiet Monday, July inflation figures due out on Tuesday will provide direction. Any softening in the annual rate of core inflation would weigh on the Dollar.

The focus will then shift to a particularly busy Thursday. July retail sales figures, NY Empire State and Philly FED manufacturing figures will provide direction.

To wrap up the week, prelim August consumer sentiment figures will provide direction on Friday.

Of lesser influence on the week will be industrial and business inventory numbers and weekly jobless claims figures on Thursday. Housing sector data on Friday will also likely have a muted impact on the Dollar.

The Dollar Spot Index ended the week down by 0.62% to $97.491.

For the EUR:

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

With no material stats due out on Monday, August ZEW economic sentiment figures out of Germany and the Eurozone will provide direction.

The focus will then shift to German and Eurozone 2nd quarter GDP figures. Forecasts are for a contraction in the Germany economy. Expect a EUR slide if the numbers are worse than forecast. 2nd  estimate Eurozone GDP numbers would need to be in line with 1st estimate to provide EUR support.

Alongside the Eurozone GDP numbers, we would expect June industrial production figures out of the Eurozone to also have an impact.

Eurozone trade data for June due out on Friday wraps up a relatively busy week.

Of less influence through the week will be finalized July inflation figures out of Germany, Spain, and France.

The EUR/USD ended the week up by 0.84% to $1.1201.

For the Pound:

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

Employment and wage growth figures kick things off the Pound on Tuesday.

The focus will then shift to July inflation numbers due out on Wednesday and July retail sales figures due out on Thursday.

Following last week’s stats, we can expect the data suite to have a material influence on sentiment towards BoE monetary policy.

On the Brexit front, the summer recess will likely continue to leave the Pound in limbo, unless there is a surprise decision to resume talks.

The GBP/USD ended the week down 1.06% at $1.2033.

For the Loonie:

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

June foreign securities purchases are due out on Friday that will have a muted impact on the Loonie.

We expect sentiment towards the global economy and crude oil prices to provide direction on the week.

The Loonie ended the week down 0.11% to C$1.3222 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a relatively busy week ahead.

Economic data includes business and consumer confidence figures due out on Tuesday and Wednesday respectively.

Of greater significance, however, will be 2nd quarter wage growth numbers due out on Wednesday and July employment numbers due out on Thursday.

With the RBA focused on labor market conditions and household spending, this week’s figures will influence near-term policy.

Out of China, July industrial production figures due out on Wednesday will also have an impact on the Aussie.

On the geopolitical front, expect the U.S – China trade war and the PBoC setting of the Yuan to also influence.

The Aussie Dollar ended the week down by 0.22% to $0.6786.

For the Japanese Yen:

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

Economic data due out of Japan is limited to June industrial production numbers. Forecasts are for production to slide by 3.6%, which would question whether the BoJ can continue to leave policy unchanged.

Outside of the numbers, expect chatter on trade from the U.S and Beijing to remain the key driver. There’s also Italy, Brexit, and Iran to monitor.

The Japanese Yen ended the week up 0.84% to ¥105.69 against the U.S Dollar.

For the Kiwi Dollar:

It’s a quiet week ahead following last week’s RBNZ surprise move.

Key stats are limited to July electronic card retail sales figures due out on Monday and July’s Business PMI on Friday.

Expect both sets of numbers to have an influence, though, with the RBNZ’s focus on consumption, Monday’s numbers will be key.

The RBNZ has talked of more rate cuts to come. Weak consumer spending would support another rate cut near-term.

The Kiwi Dollar ended the week down 1.04% to $0.6468.

Out of China:

It’s a relatively busy week ahead on the economic data front. July fixed asset investment, industrial production and unemployment numbers are due out on Wednesday.

We would expect the industrial production and unemployment figures to be the key driver on the day.

Outside of the stats, updates from the U.S – China trade talks will also continue to drive the markets.

Barring any chatter from Beijing, it will ultimately boil down to the PBoC’s setting of the Yuan throughout the week.

The Hang Seng slid by 3.64% in the week, with the CSI300 ending the week down by 3.04%.

For the Yuan, last Monday’s slide left the Yuan down by 1.75% to CNY7.0623 against the Greenback for the week.

Geo-Politics

Italy Snap General Election: What’s next for Italian politics? Salvini called for a snap general election last week, citing irreconcilable differences. The coalition parties are expected to set the date for a debate over the call for a snap election on Monday.

Trade Wars:  Trade war chatter will continue to be the key driver throughout the week. Throw in the newly started currency war and the setting of the Yuan will also impact risk sentiment.

UK Politics: With the UK Parliament in summer recess, there may be little chatter on a deal or no-deal Brexit. The prospects of a no-deal departure continue to pin back the Pound, however. With the EU and Britain in deadlock, one side will need to soften their stance and that looks unlikely at best for now.

Iran: No news continues to be good news for now. The situation does need continued monitoring, however.

The Rest

OPEC:

Following the downward trend in crude prices, talk of Saudi intervention eased the pain late last week. This month’s report may have more influence than usual as concerns over demand continue to pin back crude oil prices.

Earnings: It’s a quieter week ahead… Earnings releases and outlooks will not just influence the U.S majors, but risk appetite across the global financial markets.

Corporate America:

Wednesday, 14th August

  • Macy’s Inc.

Thursday, 15th August

  • Walmart Inc.

Friday, 16th August

  • Deere & Co.

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