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Bob Mason
Euro Gripped by Political Uncertainty

On the Macro

For the Dollar, Key stats out of the U.S include June’s JOLT’s job openings on Tuesday and July’s inflation figures due out on Thursday and Friday. Focus will be on the inflation numbers, with any pickup in inflation a positive for the Dollar, though much will depend upon trade war chatter through the week. The Dollar Spot Index ended the week up 0.52% at $95.161.

For the EUR, it’s a quiet week ahead, with key stats through the week limited to Germany’s June factory orders on Monday and industrial production and trade figures out of Germany on Tuesday. In the 2nd half of the week, there may be some focus on the ECB Economic Bulletin, though much will depend upon market risk sentiment on the day. The EUR/USD ended the week down 0.76% to $1.1568.

For the Pound, it’s a busy second half of the week, with 2nd quarter GDP, June trade and industrial and manufacturing production figures due out on Friday. Earlier in the week, Tuesday’s BRC Retail Sales monitor and Thursday’s NIESR GDP Estimate will garner some attention, though Friday will be the main event for the Pound. The GBP/USD ended the week down 0.79% to $1.3001 last week.

For the Loonie, Tuesday’s Ivey PMI for June and Friday’s July employment numbers will be the main area of focus, with housing sector stats due out mid-week unlikely to have a material impact. The Loonie ended the week up 0.49% to C$1.2991 against the U.S Dollar.

Out of Asia, it’s particularly hectic week ahead.

For the Aussie Dollar, stats through the week are limited to June home loan figures on Wednesday, leaving the Aussie Dollar exposed to trade and new loan figures out of China due out on Wednesday and Thursday respectively, with trade war chatter expected to be of significant influence. The RBA will also be making its August interest rate decision on Tuesday, though no surprises expected. The AUD/USD ended the week up 0.05% to $0.7404.

For the Japanese yen, it’s a busy week ahead, with key stats including June household spending figures due out on Tuesday and 2nd quarter GDP numbers on Friday. Of less significance and likely to be ignored will be current account figures on Wednesday and the tertiary industry activity index due out on Friday. The Japanese Yen ended the week down 0.18% to ¥111.25 against the U.S Dollar.

For the Kiwi Dollar, stats are limited to inflation expectation figures on Wednesday, which will provide direction ahead of the RBNZ August interest rate decision, with July business PMI and electronic card retail sales on Friday also likely to influence. The Kiwi Dollar ended the week down 0.68% to $0.6744.

Out of China, stats are limited to July trade figures due out on Wednesday and new loan and July inflation numbers on Thursday, with the markets likely to be particularly sensitive to any disappointing trade data following the softer July private sector PMI numbers released last week, which were attributed to the ongoing trade war with the U.S.

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Geo-Politics

On the political front, the markets are far from free from geo-political risk…

Loonie Woes: Will Canadian negotiators be invited to the table to wrap up the NAFTA agreement once and for all?

U.S – China Trade War:  It’s heating up and China has yet to yield to the U.S administration. Trump is unlikely to be willing to materially soften his stance and it could spell more pain for the market bulls in the week ahead.

Iran: Sanctions kick in on Monday. Has Iran managed to woo China and Russia into supporting the Iranian economy? How will the U.S and Arab states respond and will tension rise in the Gulf?

Brexit: Another week to go before Brexit talks resume. It could be make or break for the Pound, which slumped following last week’s Carney press conference.

The Rest

On the monetary policy front, it’s a particularly busy week ahead…

  • For the Aussie Dollar: The RBA interest rate decision and release of the rate statement on Tuesday gets things underway. With Friday’s monetary policy meeting minutes unlikely to deliver too many surprises. July’s record trade surplus may give the RBA reason to celebrate, but with the U.S – China trade war heating up and China’s economic indicators showing some weakness, there may well be some caution.
  • For the Kiwi Dollar, the RBNZ is scheduled to deliver its interest rate decision on Thursday and, while there are no expectations of a move, the rate statement, monetary policy statement and press conference will certainly provide some direction, recent data out of New Zealand having been skewed to the downside.
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