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Bob Mason
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On the Macro

It’s a busy week ahead on the economic calendar, with 57 stats in focus in the week ending 22nd May. In the week prior, 57 stats had also been in focus.

For the Dollar:

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

A quiet 1st half of the week leaves May consumer confidence figures in focus on Tuesday. The markets will be looking for a pickup in confidence as the government eases lockdown measures. A continued rise in jobless claims, however, may lead to softer than anticipated numbers.

In the 2nd half of the week, April durable goods orders and weekly jobless claims will be in focus on Thursday.

While the markets may be able to stomach a slide in durable goods order, the weekly jobless claims will need to slide back considerably.

At the end of the week, April inflation figures, personal spending, and May’s Chicago PMI will also be in focus.

Barring any downward revision, we would expect 2nd estimate GDP numbers to have a muted impact on Thursday.

Other stats in the week include the April housing sector and trade data and finalized Michigan consumer sentiment figures. Expect the markets to also brush these numbers aside in the week.

Outside of the numbers, we will expect chatter from Capitol Hill and COVID-19 numbers to remain key drivers. On the monetary policy front, FOMC members will also draw more attention. At the end of the week, FED Chair Powell delivers a speech to wrap things up.

The Dollar Spot Index ended the week down by 0.54% to 99.863.

For the EUR:

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

In the 1st half of the week, key stats include German business and consumer confidence figures and 2nd estimate GDP numbers on Monday.

Barring a downward revision from 1st estimates, expect the consumer and business confidence figures to have a greater impact.

The markets will then need to look ahead to a relatively busy Friday.

Key stats include German and French retail sales figures for April and 2nd estimate GDP numbers from France.

The data is unlikely to have a material impact on the EUR, however. With the Eurozone in lockdown throughout April, the markets should be able to look beyond any dire numbers.

Over the course of the week, prelim May inflation figures are also due out but will have little influence.

For the EUR, a continued easing in lockdown measures and a downward trend in new COVID-19 cases is a must.

From the ECB, ECB President Lagarde is due to speak on Wednesday ahead of the ECB Financial stability review. Expect EUR sensitivity.

The EUR/USD ended the week up by 0.75% to $1.0901.

For the Pound:

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

There are no material stats due out of the UK to provide the Pound with direction.

A lack of stats will leave the Pound in the hands of Brexit and COVID-19 news updates.

We’ve seen the Pound under tremendous pressure as a result of the lack of progress on Brexit.

Boris Johnson has stated that, in spite of the lockdown, there would be no extension to the transition period. Based on progress to date, the chances of a hard Brexit have increased as a result. A change in stance by the British PM and the Pound would find support, else expect a reversal of last week’s gains.

Brexit news from the weekend was Pound negative…

The GBP/USD ended the week up by 0.47% to $1.2173.

For the Loonie:

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

For the Loonie, however, the markets will need to wait until Friday for economic data.

Key stats include 1st quarter GDP numbers and April’s RMPI.

We’ve seen GDP numbers from elsewhere. Will Canada see a similar contraction? Economists think so. It may be for that very reason that BoC Governor Poloz is scheduled to speak on Tuesday and Wednesday…

Away from the calendar, the upward trend in crude oil prices and a continued easing in lockdown measures remain Loonie positives. It remains to be seen whether crude can continue on the road to recovery, however.

Downside risks do remain. These include any signs of a 2nd wave pandemic and the U.S and China moving beyond words…

The Loonie ended the week up by 0.80% to C$1.3996 against the U.S Dollar.

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Out of Asia

For the Aussie Dollar:

It’s another quiet week ahead for the Aussie Dollar.

Key stats include 1st quarter construction work done and private new CAPEX on Wednesday and Thursday.

On Friday, April private sector credit figures will also be in focus.

With the economy in meltdown going into April, however, we would expect the numbers to have a muted impact.

The RBA has talked of material contraction in the 2nd quarter, so don’t expect 1st quarter and April stats to do too much damage.

Expect COVID-19 updates and any U.S or China move to influence, however.

The Aussie Dollar ended the week up by 1.93% to $0.6537.

For the Kiwi Dollar:

It’s another relatively quiet week ahead on the economic data front.  Key stats include April trade figures on Tuesday and May business confidence figures on Thursday.

The RBNZ downplayed the market optimism in its last policy statement. That should limit any material upside for the Kiwi Dollar from the stats.

While trade data has stood up well considering the economic lockdown, will business confidence see some improvement?

Concerns over global trade terms and tourism will certainly be two major issues that businesses will continue to face.

Outside of the numbers, the RBNZ Financial Stability Report Wednesday will draw attention. The Kiwi will also be sensitive to any chatter or action from Beijing and Capitol Hill.

The Kiwi Dollar ended the week up by 2.68% to $0.6094.

For the Japanese Yen:

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

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

Key stats include May inflation figures and April industrial production and retail sales numbers.

With the Japanese government only just lifting the COVID-19 state of emergency, April figures are likely to be dire… There shouldn’t be too many surprises, however.

May inflation figures will also have little influence on the Yen. A pickup in crude oil prices will provide support but unlikely to be material, with consumption having tanked…

Outside of the numbers, risk sentiment will continue to influence, though it may be too soon for the Dollar to give up the safe-haven mantle…

The Japanese Yen ended the week down by 0.54% to ¥107.64 against the U.S Dollar.

Out of China

It’s another quiet week ahead on the economic data front. Economic data is limited to April’s industrial profits. No one is expecting any major rebound, which leaves the markets exposed to any accelerated decline…

Ultimately, the market focus will remain on COVID-19 news and moves by Beijing and Washington amidst the latest spat.

Beijing’s plans to impose a security law on HK will also need close monitoring… U.S President Trump has promised a strong U.S response to any such move.

The Chinese Yuan ended the week down by 0.39% to CNY7.1294 against the U.S Dollar.

Geo-Politics

UK Politics:

Brexit and lockdown measures remain the key areas of focus in the week ahead.

While the Pound found much-needed support last week, a lack of progress on Brexit will be an issue.

News hit the wires over the weekend of the EU beginning to prepare for a hard Brexit. This may price out the element of hope that has continued to support the Pound.

COVID-19 news will also be of influence, as the UK government struggles to contain the spread of the virus.

U.S Politics:

Rising tensions between the U.S and China will likely be a key driver in the week ahead.

If Trump signs the Bill to target Chinese companies, expect China to target U.S companies with heavy reliance on China…

The markets will also be watching to see how the U.S responds should China formally introduce the security law for HK.

The Coronavirus:

Easing measures will continue in the week.

We’ve yet to see a marked increase in the number of COVID-19 numbers across the EU or the U.S, though concerns will linger over what lies ahead. Some comfort will be taken from the fact that China reported zero new cases on Saturday.

From the market’s perspective, there are 3 key considerations that remain:

  1. Progress is made with COVID-19 treatment drugs and vaccines.
  2. The downward trend in new coronavirus cases continues.
  3. Governments continue to progress with the easing of lockdown measures.

All of this will need to translate into a marked decline in jobless claims and a pickup in consumer confidence and consumption… U.S Jobless claims figures released last week were disappointing, raising some doubt over how quickly the job markets will recover.

At the time of writing, the total number of coronavirus cases stood at 5,396,972, with the U.S reporting 1,666,246 cases to-date.

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