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Bob Mason
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On the Macro

For the Dollar, key stats include May’s JOLT job openings on Tuesday, June wholesale price index figures on Wednesday, June inflation figures and weekly jobless claims numbers on Thursday and prelim consumer sentiment figures for July and June import and export price index numbers on Friday. Following Friday’s nonfarm payroll numbers, job openings and the weekly jobless claims figures will likely have a muted impact on the Dollar, while inflation and consumer sentiment figures will impact, though trade war noise and FOMC member commentary will likely overshadow all but the inflation numbers. The Dollar Spot Index ended the week down 0.50% to $93.998.

For the EUR, following some impressive stats out of Germany last week, German trade data for May kicks off the week on Monday, with Germany and the Eurozone’s ZEW economic sentiment figures for July also likely to influence the EUR on Tuesday. With no material stats due for release on Wednesday, focus will then shift to the ECB monetary policy meeting minutes due out on Thursday, with finalized June inflation figures out of France and Germany and the Eurozone’s industrial production figures due out ahead of the release of the minutes. The week is capped off with Spain’s finalized inflation numbers on Friday. Stats out of Germany along with the ECB monetary policy meeting minutes will be the key drivers through the week, along with central bank commentary. The EUR/USD ended the week up 0.53% to $1.1746.

For the Pound, key stats through the week include May’s industrial and manufacturing production and, trade and June NIESR GDP estimate figures on Tuesday, which are due out after the release of the June BRC Retail Sales Monitor in the early hours. With June’s UK RICS House Price Balance due out on Thursday, Tuesday’s stats could provide further support to an August rate hike and the Pound’s recovery to $1.33 levels and beyond. Central banker commentary could raise the prospects of a rate hike further, following BoE Governor Carney’s hawkish comments last week. The GBP/USD ended the week up 0.57% to $1.3283 last week.

For the Loonie, economic data through the week is on the lighter side and concentrated on housing sector data, with housing start and building permit figures due out on Tuesday and May house price figures on Friday the key stats due out through the week. With stats on the lighter side and unlikely to influence sentiment towards monetary policy, the focus will be on Wednesday’s BoC interest rate decision, with recent economic data and comments from BoC Governor Poloz seeing the markets price in a 25bp rate hike. While a hike has been largely priced in, the press conference, rate statement and monetary policy report, released at the time of the announcement, will have the final say on direction for the Loonie, assuming the BoC makes a move, any suggestions of a hold through the remainder of the year likely to pin back any Loonie rally. The Loonie ended the week up 0.37% to C$1.3084 against the U.S Dollar.

Out of Asia, it’s a particularly busy week ahead.

For the Aussie Dollar, stats are on the quieter side, though far from irrelevant, with June business confidence figures due out on Tuesday, ahead of July consumer sentiment and May home loan figures on Wednesday, with business confidence and consume sentiment numbers likely to have the most significant impact on the Aussie Dollar. Elsewhere, June trade figures out of China will also influence on Friday, another solid set of import and export numbers a positive, though concerns over even more punitive tariffs may soften the effect of any positive numbers on the day. The AUD/USD ended the week up 0.34% to $0.7430.

For the Japanese yen, it’s a relatively quiet week on the data front, with key stats limited to May current account figures due out on Monday, tertiary industry activity numbers on Wednesday and finalized industrial production figure for May on Friday. We will expect the stats to have a relatively muted impact on the Yen, with market risk sentiment through the week likely to be the key driver, as the markets respond to threats of more punitive trade tariffs from the U.S and retaliatory tariffs by the more heavily affected economies including Canada, China and the  EU. The Japanese Yen ended the week up 0.26% to ¥110.47 against the U.S Dollar.

For the Kiwi Dollar, stats are limited to June electronic card retail sales figures due out on Tuesday and June’s business PMI numbers on Friday, both sets of numbers expected to provide direction for the Kiwi which is in need of support following a dovish RBNZ and the disappointing 2nd quarter business confidence figures released last week. Outside of New Zealand’s stats, China’s trade figures on Friday will also provide some direction on the day. The Kiwi Dollar ended the week up 0.89% to $0.6828.

Out of China, key stats through the week include June’s inflation figures on Tuesday, new loans due out on Thursday and June trade figures that are scheduled for release on Friday. New loan and trade figures will have some influence on market risk appetite, as concerns of a 2nd half of the year slowdown in the Chinese economy linger, though for the week, it’s going to boil down to trade war noise and how the PBoC manages Renminbi weakness should trade tensions worsen.

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Geo-Politics

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

Loonie Woes: On the political front, it’s all about trade following Canada’s retaliatory roll out of tariffs last weekend. An extended trade war is expected to have quite an impact on the Canadian economy and, while Canada is currently facing tariffs on steel and aluminum exports into the U.S, things could go from bad to worse. Perhaps Obrador’s presidential election victory in Mexico will rustle the NAFTA negotiators back into action to limit the damage. While Wednesday’s BoC interest rate decision is the main event of the week, more punitive tariffs imposed by the U.S could complicate Wednesday’s decision and railroad the Loonie’s current rebound.

U.S – China Trade War: It’s all go in the U.S – China trade war, with the U.S having rolled out 25% tariffs on $34bn worth of Chinese goods on Friday, with another $16bn worth of goods to be tariffs upon completion of a pending review. China’s response to match the fresh tariffs also kicked in and that’s now left the U.S president to consider the additional $200bn worth of Chinese goods to be tariffed, which will likely face a similar retaliatory response from Beijing. Neither side will likely back down raising the question of how far can both sides go before the negotiating table looks alluring enough to bring an end to the tit for tat. On Friday, the U.S President talked of tariffs on $500bn of goods from China….

U.S – North Korea Summit: News of North Korea building a nuclear submarine won’t be considered a positive, though updates from Mike Pompeo’s visit to North Korea to iron out an agreement on complete denuclearization will be the main area of focus. The U.S administration may also look to raise the topic of crude oil imports from Iran and how any plans to befriend Iran could hit relations with the U.S.

Iran: Trade war noise has continued to grab the headlines, but with India’s crude oil imports from Iran garnering some attention, Trump may need to emphasize further the ramifications for those unwilling to cut imports from Iran to zero.

Brexit: Following Theresa May’s soft Brexit plan that gained support of her cabinet, we can expect hard Brexiteers to begin responding to the plan, with attention likely to be focused on how Britain may end up having to follow EU laws, while not actually being a member of the EU and therefore not being in a position to influence any changes to EU laws down the road. The EU Establishment may also suggest that such a plan is hopeful at best that could further rile the Pound that has been on the move off the back of some positive stats and a hawkish BoE Governor.

NATO Summit: The NATO Summit on 11th and 12th July could throw some curveballs, with the U.S President having continued to raise issue over the cost to the U.S. Following the G7 Summit that saw Trump derail the usual cohesiveness of the collective, Trump could derail the plans of other members to demonstrate a cohesive group that is a must from a joint military perspective. With Trump scheduled to meet Putin on 16th July, it could be yet another reason for the safe havens to be the place to hide through the week.

The Rest

On the monetary policy front,

  • For the Loonie, focus shifts to Wednesday’s Bank of Canada interest rate decision, with the BoC expected to lift rates to 1.5%. While a rate hike would support a boost for the Loonie, the Bank’s outlook on policy over the near-term will likely decide the fate of the Loonie, with the BoC press conference, rate statement, monetary policy report expected to provide the markets with the Bank’s rate path for the remainder of this year and early next.
  • For the EUR, the release of the ECB monetary policy meeting minutes on Thursday will be in focus, with the markets likely to be reminded of the ECB’s dovish sentiment, with scheduled Draghi speeches on Monday and Wednesday also there to consider.
  • For the Greenback, members Kashkari, Williams, Harker and Bostic are scheduled to speak through the week, though focus will likely be on the effect of trade tariffs on policy rather than policy itself.
  • For the Pound, BoE Governor Carney and MPC member Cunliffe are slated to speak on Wednesday and Friday respectively, which could fuel further expectation of a rate hike by the BoE next month.
  • For the Japanese Yen, a scheduled speech by BoJ Governor Kuroda on Monday is unlikely to deliver too many surprises following the Japan economies contraction in the 1st quarter, with central bankers likely to have one common concern, the possible impact of an extended trade war on policy.

Crude Oil: Following last week’s pullback, focus in the week ahead will shift to the release of the monthly reports by OPEC on Wednesday and by the IEA on Thursday. On top of general views relating to the balance of supply and demand, any action by the Iranian Revolutionary Guards in the Strait of Hormuz could see prices rally on concerns over supply disruption that would offset the negative effects of any commentary from the Saudis on planned production increases in response to Trump’s request to boost output. The contradictory effect on prices stemming from fresh sanctions on Iran and the call for OPEC to boost output currently supports a further upside in crude oil prices, as tension in the Middle East rises.

Corporate Earnings: Its earnings season again and, with the markets now zoomed in on the possible impact of a multi-national trade war, it’s not just the actual results that will matter, but also the earnings outlook that may include a number of trade tariff related caveats. The tech and financial sectors have bled the most, but with more targeted retaliatory responses by the likes of the EU, Canada, and China, the net may widen.

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