The Week Ahead – Geopolitics, COVID-19 and Economic Data to Drive the Markets

On the Macro

It’s a busy week ahead on the economic calendar, with 59 stats in focus in the week ending 15^th May. In the week prior, 57 stats had been in focus.

For the Dollar:

It’s a relatively busy week ahead for the greenback.

In the 1^st half of the week, April inflation figures are due out on Tuesday and Wednesday.

Falling commodity prices and a slump in consumer spending is expected to deliver deflationary pressures.

Barring particularly dire numbers, expect the stats to have a muted impact on the Dollar and risk sentiment.

It gets more interesting in the 2^nd half of the week, however.

Weekly initial jobless claims figures on Thursday, April retail sales, and May consumer sentiment figures on Friday will provide direction.

While we expect the numbers to be negative once more, consumer sentiment figures will need to see a pickup. Jobless claims will also need to see a marked decline…

A continued surged in jobless claims will weigh on risk sentiment late in the week.

Outside of the numbers, it’s going to be chatter from the Oval office and COVID-19.

Trump’s looking to rally support from voters the best way he knows how. It may not be as successful this time around. The U.S has paid a high price for the administration’s shortcomings early on in the pandemic…

The Dollar Spot Index ended the week up by 0.66% to 99.734.

For the EUR:

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

It’s a quiet start to the week, however, with stats limited to March industrial production figures on Wednesday. We expect the markets to brush aside the numbers, leaving risk sentiment as the key driver.

In the 2^nd half of the week, 1^st estimate German GDP numbers for the 1^st quarter will influence on Friday.

Expect finalized April inflation figures in the 2^nd half of the week and Eurozone trade data to have a muted impact.

On Thursday, the ECB’s Economic Bulletin will also garner plenty of interest. Does the ECB see April as the bottom of the economic abyss?

While risk sentiment will be key in the week, lockdown measures will need to ease further to provide support.

The EUR/USD ended the week down by 1.29% to $1.0839.

For the Pound:

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

The markets will need to wait until Wednesday, however, for a data deluge.

Key stats include 1^st estimate GDP numbers for the 1^st quarter and March manufacturing production figures.

Retail sales, industrial production, and trade data will likely have a muted impact on the day.

On Friday, house price figures for April will also be brushed aside.

Outside of the numbers, updates from trade talks between the UK and the U.S, Brexit, and COVID-19 updates will also be key.

Risk sentiment will need to improve, however, for the Pound to get any early bids…

The GBP/USD ended the week down by 0.77% to $1.2410.

For the Loonie:

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

March’s manufacturing sales figures on Thursday will likely have a muted impact on the Loonie.

The lack of stats will leave the Loonie in the hands of market risk sentiment.

From a Loonie perspective, the focus will remain on the near-term economic outlook and demand for crude.

The U.S administration’s renewed focus on China will also be a factor in the week…

Crude oil inventory numbers and OPEC’s monthly report will provide direction mid-week.

The Loonie ended the week up by 1.15% to C$1.3927 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s another relatively busy week ahead.

In the 1^st half of the week, key stats include business and consumer confidence figures on Tuesday and Wednesday.

April’s business confidence and May consumer confidence figures will likely reflect sentiment towards COVID-19. In the past, both have been on the slide in response to monetary policy easing. We should see a similar outcome this time around.

Later in the week, April employment figures are also due out and will influence. Following better than expected March numbers, April figures are likely to be quite dire…

At the end of the week, industrial production figures out of China could deliver further support, however.

The Aussie Dollar ended the week up by 1.78% to $0.6532.

For the Kiwi Dollar:

It’s another quiet week ahead on the economic data front.  On the economic data front, April electronic card retail sales and Business PMI figures are due out on Monday and Friday.

Expect the Kiwi to be relatively resilient to any weaker numbers. Lockdown measures were in place through April…

The main event of the week is the RBNZ monetary policy decision on Wednesday.

We had heard of negative rates in recent weeks. New Zealand is COVID-19 free now, however, and economic data has not been as bad as had been expected…

Could there be a more upbeat outlook, which would certainly give the Kiwi Dollar a boost in the week?

The Kiwi Dollar ended the week up by 1.20% to $0.6136.

For the Japanese Yen:

It’s a particularly quiet week ahead on the economic data front. March’s current account figures, due out on Wednesday, will have a muted impact on the Yen.

A lack of stats leaves the Yen in the hands of market risk sentiment. While the Yen has not found too much support from COVID-19, rising tensions between the U.S and China and Iran and the U.S could deliver support.

The Japanese Yen ended the week up by 0.24% to ¥106.65 against the U.S Dollar.

Out of China

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

In the first half of the week, April inflation figures are due out on Tuesday, which should have limited influence on market risk sentiment.

April’s industrial production, fixed-asset investment, and retail sales figures on Friday will be of interest, however.

Outside of the numbers, chatter from Beijing on Trump’s latest accusations will need monitoring… There are also updates on trade talks to consider.

The Chinese Yuan ended the week down by 0.16% to CNY7.0742 against the U.S Dollar.

Geo-Politics

OPEC

OPEC + will need to continue to toe the line on production to support crude oil prices.

Economic data suggests that production will need to be reined in further. Expect any chatter in the week to influence.

OPEC’s monthly report on Wednesday and inventory numbers for the week will have an impact…

For the Saudis, April production was at an all-time high, so cutting production will be optics and could test the oil price recovery…

Lockdown measures are easing but does that deliver the upswing in demand to deliver the needed rebalancing?

UK Politics:

Brexit, U.S – UK trade talks, and lockdown measures are the key areas of focus in the week ahead.

Last week, we saw the Pound under pressure as a result of negative feedback on Brexit alone…

From the weekend, there was nothing positive on the Brexit front to support the Pound. In fact, if Johnson sticks to his guns and refuses to extend the transition period, a hard Brexit looks likelier than not.

When considering the UK COVID-19 numbers, Brexit woes, and a likely drawn-out U.S – UK trade deal negotiation, upside for the Pound looks limited.

U.S Politics:

A sense of unpredictability has returned. There are China and Iran to consider in the week ahead…

Trump will certainly be looking to deflect the attention away from COVID-19 and the blame for that matter. The impact on the U.S economy and labor market conditions has been catastrophic. His 2^nd term as president depends on how well he manages to pass the buck…

Kicking off another trade war and rolling out sanctions on China may not be the answer.

The Coronavirus:

Easing measures continued in the week and Trump spoke of the need to continue easing, irrespective of the impact on the COVID-19 numbers. It could be a disastrous outcome and bring an end to any hopes of a 2^nd term for Trump and the Republicans.

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

1. Progress is made with COVID-19 treatment drug remdesivir.
2. The downward trend in new coronavirus cases continues.
3. Governments progress with easing lockdown measures.

All of this will need to translate into a marked decline in jobless claims and a pickup in consumer confidence…

At the time of writing, the total number of coronavirus cases stood at 4,101,641, with the U.S reporting 1,347,309 cases to-date.