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The Week Ahead – Geopolitics, the FED, Economic Data, and COVID-19 in Focus

On the Macro

It’s a busier week ahead on the economic calendar, with 57 stats in focus in the week ending 31st July. In the week prior, just 41 stats had been in focus.

For the Dollar:

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

In the 1st half of the week, June’s durable and core durable goods orders are due out along with July consumer confidence figures.

Expect consumer confidence to be the key driver, however. The figures will indicate sentiment towards the spike in new COVID-19 cases and unemployment.

The focus will then shift to 2nd quarter GDP numbers and the weekly initial jobless claims figures on Thursday.

With the markets expecting the worst on the GDP front, the weekly jobless claims will need to drop to sub-1.3m levels.

At the end of the week, inflation, personal spending, and finalized consumer sentiment figures will also draw attention.

On the monetary policy front, the FED delivers its July monetary policy decision on Wednesday. While no rate cut is expected, the markets will want the assurance of more support and perhaps some adjustments to its asset purchasing program. The press conference will garner plenty of attention.

The Dollar Spot Index ended the week down by 1.57% to 94.435.

For the EUR:

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

At the start of the week, July’s IFO Business Climate Index figures are due out of Germany.

We may see some resilience in the EUR and the European majors, however, as progress is made with the EU Recovery Fund.

The focus will then shift to the 2nd half of the week.

On Thursday, 2nd quarter GDP and July unemployment figures are due out of Germany.

At the end of the week, French 2nd quarter GDP numbers and June consumer spending figures are in focus.

Expect prelim July inflation figures from member states and the Eurozone to have a muted impact.

Following the agreement on the mechanics of the EU Recovery Fund. Progress will need to be made in the coming weeks to support the EUR at its current levels.

The EUR/USD ended the week up by 2.00% to $1.1656.

For the Pound:

It’s a particularly quiet week ahead on the economic calendar. There are no material stats due out of the UK to provide the Pound with direction.

A lack of stats will leave the Pound firmly in the hand of Brexit and trade talks.

The GBP/USD ended the week up by 1.80% to $1.2794.

For the Loonie:

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

The markets will need to wait until Friday for May GDP and June RMPI figures.

While we expect some sensitivity to the numbers, U.S fiscal policy measures and COVID-19 updates will remain a key driver.

One curveball continues to be the ongoing spat between the U.S and China…

The Loonie ended the week up by 1.22% to C$1.3415 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a relatively busy week ahead for the Aussie Dollar.

2nd quarter inflation and wholesale inflation figures are due out on Wednesday and Friday.

We don’t expect the numbers to have a lasting impact on the Aussie Dollar, however.

June’s private sector credit figures, also due out on Friday, will likely be brushed aside.

2nd quarter GDP figures from key economies, COVID-19 news, and geopolitics will remain the key drivers. A jump in new COVID-19 cases and deteriorating relations with China would likely test support for the Aussie Dollar.

The Aussie Dollar ended the week up by 1.56% to $0.7105.

For the Kiwi Dollar:

It’s another quiet week ahead on the economic calendar.

After a quiet start to the week, building consent and business confidence figures are due out on Thursday.

Expect the ANZ Business Confidence figures to have a greater influence on the Kiwi.

Away from the numbers, private sector PMIs from China, COVID-19, and geopolitics will remain in focus.

The Kiwi Dollar ended the week up by 1.28% to $0.6641.

For the Japanese Yen:

It is a quiet week ahead on the economic calendar.

June retail sales figures, due out on Thursday, and industrial production numbers on Friday are the key stats for the week.

We would expect the Yen to brush aside the stats, however, with the market focus elsewhere.

Progress towards a COVID-19 vaccine would pin back any upside in the Yen. Support could come from the U.S administration, however.

There’s the spat with China and the U.S fiscal stimulus package to track.

The Japanese Yen ended the week up by 0.82% to ¥106.14 against the U.S Dollar.

Out of China

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

July’s private sector PMIs are due out on Friday. Expect the figures to influence risk appetite at the end of the week.

Away from the economic calendar, any chatter from Beijing will also need consideration.

The Chinese Yuan ended the week down 0.37% to CNY7.0184 against the U.S Dollar.

Geo-Politics

UK Politics:

Brexit will remain in focus in the week. Both sides agreed to continue negotiations through to September, which has bought Boris and the Pound some time.

With Germany having made it clear that they will focus on talks in September and October, however, it might be a slow summer.

U.S Politics:

It was quite a week for Trump and the Republicans last week. Expect more of the same in the week ahead.

First on the agenda will be to get the next fiscal stimulus package wrapped up. With benefits expiring at the end of the month, failure to deliver the next phase would be a blow to Trump’s hopes of a 2nd term.

Then we have the spat with China to consider and there’s the continued rise in new COVID-19 cases.

Corporate Earnings

Out of Germany, Deutsche Bank (Wed) is the marquee name delivering earnings results.

From France, LVMH (Mon), Peugeot (Tues), Total (Thurs), Airbus Grp (Thurs), Renault (Thurs), BNP Paribas (Fri), and Air France KLM (Fri) are key names delivering results.

The Coronavirus:

It was another bad week, with the number of new COVID-19 cases continuing to rise at a marked pace.

From the market’s perspective, the 3 key considerations have been:

  1. Progress is made with COVID-19 treatment drugs and vaccines.
  2. No spikes in new cases as a result of the easing of lockdown measures.
  3. Governments continue to progress towards fully opening economies and borders.

Last week, we saw positive news of progress towards a vaccine deliver support to riskier assets early in the week. This will need to continue in the week ahead to offset the negative impacts of points ii) and iii).

At the time of writing, the total number of coronavirus cases stood at 16,199,447. Monday to Saturday, the total number of new cases increased by 1,531,149. Over the same period in the previous week, the total number had risen by 1,385,504.

Monday through Saturday, the U.S reported 417,070 new cases to take the total to 4,315,709. This was down marginally from the previous week’s 419,276.

For Germany, Italy, and Spain, there were 17,083 new cases Monday through Saturday. This took the total to 771,697. In the previous week, there had been 10,124 cases over the same period. Spain accounted for 12,166 of the total new cases… With EU member states reopening borders, the chances of a 2nd wave across the EU will be on the rise.

Over the weekend, Reuters had reported a record rise in new COVID-19 cases in almost 40 countries last week.