The Week Ahead: Market Reaction to the G20 Summit and Iran to Influence

On the Macro

For the Dollar:

It’s another busy while shortened week ahead for the Greenback.

June’s finalized Markit manufacturing PMI is due out ahead of the market’s preferred ISM manufacturing PMI.

A lack of stats on Tuesday shifts the focus to the more influential ISM non-manufacturing PMI and June’s ADP nonfarm employment change numbers, due out on Wednesday.

In a shortened session, factory orders and finalized Markit service sector numbers will also provide direction.

With the U.S on holiday on Thursday, the focus will then shift to June nonfarm payroll and wage growth figures. Another dire set of numbers could sink the Dollar…

Progress with China on trade could ease pressure on the FED to make a move, which would be Dollar positive.

The Dollar Spot Index ended the week down by 0.09% to $96.130.

For the EUR:

It’s a relatively busy week ahead.

The week kicks off with finalized French, German and Eurozone manufacturing PMI numbers. Ahead of the finalized figures, Spain and Italy’s manufacturing PMIs will also provide direction.

German employment numbers will also be in focus on the day. The markets will be looking for better numbers following recently disappointing consumer sentiment surveys.

German retail sales figures will also provide direction on Tuesday ahead of service sector PMIs due out on Wednesday.

At the end of the week, German factory orders and industrial production figures will also influence.

Of less influence is the Eurozone’s retail sales figures due out on Thursday.

The EUR/USD ended the week up 0.04% to $1.1373.

For the Pound:

It’s also a relatively quiet week ahead.

June manufacturing, construction and service sector PMI numbers are due out on Monday, Tuesday and Wednesday.

From the economic calendar, the service sector PMI will likely have the greatest influence.

Outside of the numbers, the leadership race continues and will provide further direction to the Pound.

The GBP/USD ended the week down 0.32% at $1.2696.

For the Loonie:

It’s a relatively busy and shorted week ahead.

The markets will need to wait until Wednesday for May trade figures that are due out ahead of employment and Ivey PMI numbers on Friday.

We can expect the Loonie to be sensitive to the numbers and risk sentiment in general in the wake of the G20 Summit.

Chatter from OPEC will also need to be considered in the week.

The Loonie ended the week up 0.96% to C$1.3095 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a relatively quiet week ahead. Key stats include manufacturing figures on Monday, building approvals on Wednesday and retail sales figures on Thursday.

On the data front, manufacturing and retail sales will be the key drivers.

Monetary policy will also be in focus, however, with the RBA delivering its July interest rate decision. The RBA talked of the need for further support at the last meet. Progress alone on the U.S – China trade talks may not be enough to see the RBA reverse its outlook.

Expect some influence from the G20 Summit, however…

The Aussie Dollar ended the week up 1.36% to $0.7020.

For the Japanese Yen:

It’s a busy week ahead.

Key stats due out of Japan include 2^nd quarter Tankan numbers on Monday. Household spending figures will provide direction at the end of the week.

While we would expect the figures to have some influence, there’s very little that will likely shift the BoJ’s mood near-term.

The outcome of the G20 Summit will likely be the key driver in the first half of the week.

The Japanese Yen ended the week down 0.49% to ¥107.85 against the U.S Dollar.

For the Kiwi Dollar:

It’s a particularly quiet week ahead.

Economic data is limited to building consent figures due out on Tuesday.

The lack of stats will leave the Kiwi Dollar exposed to the market reaction to the G20 Summit that concluded on Saturday.

We have heard from the RBNZ who has talked of more rate cuts to come.

The Kiwi Dollar ended the week up 1.96% to $0.6718.

Out of China:

While trade talks from the G20 Summit will be the key driver, manufacturing and service sector PMI numbers will also be of influence on Monday and Wednesday.

The markets will get a sense of how resilient has the Chinese economy been as the 2^nd quarter comes to an end?

Geo-Politics

Trade Wars:  The G20 Summit delivered some good news ahead of the market open tomorrow. President Trump and China Premier Xi agreed to get trade negotiations moving again. While there were some mixed messages, talk of China agreeing to beef up its imports of Agri goods was positive. Huawei is now also allowed to purchase from U.S companies. While talks are now back on track, it will come down to how much progress is made in the weeks ahead.

UK Politics: The Leadership Race has been heating up as Johnson and Hunt battle it out for the top spot. Expect more chatter to influence the Pound.

Iran: While news from the G20 Summit in Japan was positive, rising tension in the Middle East is not. News hit the wires over the weekend that the U.S has deployed stealth fighters to the Middle East. With the U.S armed and ready and Iran unlikely to back down, the prospect of another conflict in the region would not be good for the financial markets.

The Rest

Monetary Policy:

For the Aussie Dollar: The RBA delivers its July monetary policy decision on Tuesday. As the first central bank to have an opportunity to respond to updates from the G20 Summit, the RBA could set the tone for the month…