The Week Ahead – Central Banks, Economic Data, COVID-19, and Brexit in Focus
On the Macro
It’s a busier week ahead on the economic calendar, with 60 stats in focus in the week ending 19th June. In the week prior, 48 stats had also been in focus.
For the Dollar:
It’s a relatively busy week ahead on the economic data front. We are also beginning to receive May and June economic indicators.
These are beyond the April lockdown and, with lockdown measures easing in May, an uptick is expected across the indicators.
As an absolute certainty, the markets are not expecting May figures to reflect a worsening economic environment.
Consumer confidence and spending are key, as are labor market conditions.
Expect May retail sales figures (Tue) and the weekly jobless claims (Thurs) to garner the greatest interest.
From the manufacturing sector, however, June’s NY Empire State Manufacturing Index (Mon) and the Philly FED (Thurs) will also be in focus.
Housing sector and industrial production and business inventory numbers should have a muted impact this time around…
Following last week’s FED Chair Powell press conference, the FED Chair is back in action this week. The FED Chair will be giving testimony to Congress on Tuesday and Wednesday. Will we see another dose of reality as the number of new coronavirus cases see a pickup?
Away from the stats, there’s always Trump and foreign policy that could spur demand for a struggling Dollar.
The Dollar Spot Index ended the week up by 0.39% to 97.319.
For the EUR:
It’s another quiet week ahead on the economic data front.
Expect the markets to brush aside May inflation figures and 1st quarter wage growth and any April numbers.
The focus will be on June’s ZEW Economic Sentiment figures for Germany and the Eurozone.
A surprise fall in optimism would be a test for a EUR that has been on a tear.
The ECB’s Economic Bulletin on Thursday will also draw attention.
Outside of the numbers, any chatter from member states on fiscal policy and geopolitical risk will also influence.
The EUR/USD ended the week down by 0.32% to $1.1256.
For the Pound:
It’s a particularly busy week ahead on the economic calendar.
In the 1st half of the week, we’ve got May claimant count and April unemployment figures and May inflation figures in focus.
Expect claimant counts to be the key driver.
In the 2nd half of the week, we’ve got the BoE’s MPC monetary policy decision… Last week, BoE governor Bailey talked of a willingness to support. If this week’s stats are anything like last week’s, there may even be the talk of negative rates…
Brexit will also be in focus as British PM Johnson gets involved…
The GBP/USD ended the week down by 1.01% to $1.2540.
For the Loonie:
It’s a relatively busy week ahead on the economic calendar.
With the markets brushing aside April numbers, expect very little influence from the stats, however.
Inflation figures for May will have an impact as the markets look towards consumption…
Market sentiment towards the economic outlook and demand for crude remains key near-term. Further cuts in output are likely to be needed following the recent string of economic projections…
The Loonie ended the week down by 1.24% to C$1.3589 against the U.S Dollar.
Out of Asia
For the Aussie Dollar:
It’s a relatively quiet week ahead for the Aussie Dollar.
The markets will need to wait until Thursday, however. May employment figures are due out and will garner plenty of attention. Another sharp slide in employment and expect the Aussie Dollar to come under pressure.
We have seen the RBA continue to rely on consumers to prop up the economy. Another tumble could test the RBA’s optimism from the previous meeting…
Housing sector data due out mid-week should have a muted impact on the Aussie.
On the monetary policy front, the RBA meeting minutes are due out on Tuesday.
From elsewhere, expect China’s industrial production figures for May and geopolitics to also influence. There’s also the threat of a 2nd wave COVID-19 pandemic to consider…
The Aussie Dollar ended the week down by 1.48% to $0.6866.
For the Kiwi Dollar:
It’s also a relatively quiet week ahead on the economic data front.
Key stats include consumer sentiment figures for the 2nd quarter and 1st quarter GDP numbers.
While 1st quarter GDP figures will draw attention, expect consumer sentiment to also have an impact. We continue to look towards consumer and business confidence as an indicator.
Weak consumer sentiment would test a more optimistic outlook on the economy and its recovery.
From elsewhere, industrial production figures from China, COVID-19 updates, and geopolitics will also provide direction.
The Kiwi Dollar ended the week down by 0.95% to $0.6445.
For the Japanese Yen:
It’s a relatively busy week for the Japanese Yen.
On Tuesday, the Bank of Japan is in action. Amidst the economic doom and gloom, is there more in the tank, or will the BoJ stand pat? Central banks may well need to sit back for now. There are too many uncertainties to make a move late in the 2nd quarter…
The focus will then shift to May trade figures due out on Wednesday. With the markets looking for a pickup in trade activity in May, the figures will garner plenty of attention. Exports to the U.S and China will be of particular interest…
At the end of the week, we aren’t expecting too much influence from the inflation figures, however.
Any risk aversion in the week should provide the Yen with support. Particularly if the U.S continues to see an upward trend in new coronavirus cases.
The Japanese Yen ended the week up by 2.02% to ¥107.38 against the U.S Dollar.
Out of China
It’s a relatively busy week ahead on the economic data front. Key stats include May industrial production and fixed asset investment figures due out on Monday.
With lockdown measures easing across developed economies in May, a 2nd consecutive monthly rise in production will be a must. May’s Manufacturing PMI survey had suggested weak overseas demand…
Away from the numbers, however, it will be chatter from Beijing and Washington in the week. We have not seen the end to the friction just yet…
The Chinese Yuan ended the week flat at CNY7.0835 against the U.S Dollar.
Geo-Politics
UK Politics:
Brexit will be in focus, with Boris Johnson and EU Commission President Ursula von der Leyen due to meet in the coming week. With the UK government having stated that there will be no extension, the outcome of talks will be key.
Intensive talks are due to take place to make progress, which will leave the Pound particularly sensitive to the news wires in the coming weeks.
U.S Politics:
Tensions between the U.S and China continue to linger and could escalate into more than a war of words.
News of a pickup in new COVID-19 cases following Trump’s call for states to reopen may keep him busy in the week, however.
The Coronavirus:
Over the weekend, news of Beijing taking measures to control a 2nd wave will be a cause for concern. The news follows reports from recently opened U.S states of a jump in new cases.
A pickup in the number of new cases would question plans to remove lockdown measures and spell more economic doom and gloom.
From the market’s perspective, there are 3 key considerations that remain:
Progress is made with COVID-19 treatment drugs and vaccines.
There are no spikes in new cases as a result of the easing of lockdown measures.
Governments continue to progress towards fully opening economies and borders.
The latest news will put much greater emphasis on progress towards a vaccine. Expect any talk of reintroducing more stringent lockdown measures to spook the markets and the eternal optimists.
At the time of writing, the total number of coronavirus cases stood at 7,859,593.
Monday through Saturday, the U.S reported 134,775 new cases to take the total to 2,142,224. While this was down from the previous week’s 150,005, there was an upward trend in the week.
For Germany, Italy, and Spain, there were 5,262 new cases Monday through Saturday. This took the total to 714,759. In the previous week, there had been 5,887 new cases over the same period.
This article was originally posted on FX Empire
