The Week Ahead – It’s All About the Lockdowns and the Hope of an Economic U-Turn

On the Macro

It’s a busier week ahead on the economic calendar, with 56 stats to monitor in the week ending 24^th April. In the week prior, 41 stats had been in focus.

For the Dollar:

It’s a relatively busy week ahead for the greenback. Following last week’s IMF forecasts, economic data is back in the spotlight.

Expect prelim private sector PMI numbers for April to have the greatest impact, with PMIs due out on Thursday.

Private sector activity had continued to expand in March, April figures will likely tell a very different story…

The weekly jobless claims figures on Thursday will also influence.

From the housing sector, existing home and new home sales figures for March are unlikely to reflect the impact of COVID-19.

Mortgage applications began to fall late in March, which suggests that April numbers will be of greater relevance…

We also anticipate that the markets will brush aside March durable goods orders on Friday.

Outside of the numbers, the downward trend in new coronavirus cases will need to continue to support an easing in lockdown measures.

The Dollar Spot Index ended the week up by 0.30% to 99.782.

For the EUR:

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

In the first half of the week, the focus will be on April economic sentiment figures for Germany and the Eurozone. The ZEW numbers will reflect economist and analyst sentiment following the March dive in optimism.

The Eurozone’s consumer confidence figure for April, on Wednesday, will also garner plenty of attention.

In the 2^nd half of the week, the focus will then shift to prelim April private sector PMI numbers.

The French, German and Eurozone numbers will likely reflect a quicker pace of contraction. We could see the EUR come under immense pressure should the EU and ECB fail to talk of more support.

From Germany, consumer and business confidence figures for May and April will also be in focus. We would expect the PMI numbers to be the key driver, however.

The EUR/USD ended the week down by 0.57% to $1.0875.

For the Pound:

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

Through the 1^st half of the week, employment and inflation figures are in focus.

We would expect March inflation and claimant count figures to have the greatest influence. It’s unlikely, however, that the full impact of the coronavirus will be reflected in the numbers. That should limit any upside in the event that the numbers come in better than expected.

In the 2^nd half of the week, the focus will shift to March retail sales and April private sector PMI numbers.

Expect the April PMIs to have a greater impact on the day. A slide in retail sales in March would also pressure the Pound, however. There would be little support from any positive retail sales figures…

Outside of the numbers, any chatter on Brexit and fiscal policy will also need consideration. The markets will be wanting to know when the British PM will be back behind the desk. There is also the issue of Britain’s transition period to consider.

The GBP/USD ended the week up by 0.35% to $1.2499.

For the Loonie:

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

February retail sales and March inflation figures are due out on Tuesday and Wednesday.

We would expect the inflation figures to have a greater impact, though weak retail sales numbers could test support. March and April numbers will likely be far worse, so weak numbers in February would point to dire numbers ahead.

February wholesale sales and March new house price figures should have a muted impact on the Loonie.

Outside of the numbers, expect market risk sentiment and outlook towards crude oil supply and demand to also influence.

The Loonie ended the week down by 0.32% to C$1.4001 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a particularly quiet week ahead, with no material stats for the markets to consider. A lack of stats leaves the focus on the RBA minutes due out on Tuesday.

The RBA minutes have tended to be on the more dovish side of late. There’s certainly little reason for the RBA to be anything but dovish for now…

Private sector PMIs from key economies and commodity prices will also influence in the week.

The Aussie Dollar ended the week up by 0.27% to $0.6366.

For the Kiwi Dollar:

It’s also a quiet week ahead on the economic data front. Economic data is limited to 1^st quarter inflation figures.

While any softer inflation numbers are Kiwi negative, market risk appetite will remain the key driver.

The RBNZ has already spoken of a willingness to provide further support. Following the IMF forecasts, the RBNZ may well be back in the spotlight in the early summer, which should limit any major upside.

The Kiwi Dollar ended the week down by 0.69% to $0.6035.

For the Japanese Yen:

It’s a busier week ahead.

March trade data due out on Monday and prelim April private sector PMIs on Thursday will be in focus.

The stats are unlikely to have a material impact on the Yen, however. We have seen the Dollar retain its crown amidst the risk aversion. Continued improvement in risk appetite would likely limit any downside for the Yen.

The Japanese Yen ended the week up by 0.86% to ¥107.54 against the U.S Dollar.

Out of China

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

There are no material stats due out of China in the week. A lack of stats leaves monetary and fiscal policy moves in focus.

On Monday, the PBoC will deliver the 1-year and 5-year loan prime rates. A cut in line with forecasts would provide riskier assets with support on the day. Much will depend, however, on Beijing’s plans to reignite the economy amid the ongoing lockdown in the West.

The Chinese Yuan ended the week down by 0.54% to CNY7.0737 against the U.S Dollar.

Geo-Politics

OPEC

More cuts needed to address that supply glut and Trump certainly failed to restore price stability. We could see efforts to return oil prices to $30 in the week, though much will depend on COVID-19. One positive is the plan to ease lockdown measures. As we have seen before, however, it will take some time for the supply glut to reverse.

UK Politics:

When is PM Johnson back and will there be an extension to the transition period?

Members of Parliament return this week. Those that plan to physically attend will need to follow social distancing rules.

Not much is expected in the week ahead, which will leave any updates on Brexit and fiscal policy in focus.

U.S Politics:

Trump isn’t making any friends and blaming the WHO for America’s slow response to the coronavirus is not going to fool too many…

Navigating through the economic meltdown will have to be the President’s first priority. It’s far too early to begin the blame game.

With the U.S President looking to begin easing confinement measures, we will likely hear more chatter from Trump’s 2020 rival… In the week, it will boil down to whether governors will agree to ease lockdown measures. Trump was tweeting over the weekend and rubbed a number of governors up the wrong way…

The Coronavirus:

A continued downtrend in new cases going into the week will support a phased easing of containment measures.

We will expect the details to be the key driver in the week.

Countries that trail the front runners in easing lockdown measures could see their currencies take a hit.

The markets have accepted the economic fallout and are now looking for that recovery. Last week, we saw the IMF throw cold water on a V-shaped rebound. With the U.S Presidential election in November, Trump will be looking to do just that…

Expect EU member states to also be looking to further easing restrictions. We will also be looking for attempts by Brussels to deliver a 2^nd COVID-19 aid package.

The IMF forecasts certainly suggest that a number of economies need to deliver more. One that springs to mind is the EU. Surely the EU project is at risk should ministers fail to stump up more than a measly EUR500bn…

This is dwarfed by the efforts of the U.S administration and FED and even their support is not guaranteed to deliver an economic rebound…

Corporate Earnings

Following the IMF forecasts, this quarter’s earnings season is likely to be a non-event…

Key earnings releases from the U.S include:

Coca-Cola (Tues), Netflix (Tues), Delta Airlines (Wed), Intel (Thurs), Southwestern Airlines (Thurs), American Express (Fri), and Verizon (Fri).