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The Week Ahead: Brexit, Central Banks, Trade and Stats in Focus

Bob Mason

On the Macro

For the Dollar:

It’s a relatively quiet week ahead on the economic calendar, following a particularly busy week last week.

The market’s preferred ISM non-manufacturing PMI numbers for July gets the week going on Monday. Barring any material deviations, finalized the Markit’s service sector PMI will likely be ignored.

June JOLTs job opening and weekly jobless claims figures due out on Tuesday and Thursday respectively will also provide direction.

Wholesale inflation figures due out on Friday will also influence, as the markets look for softer inflationary pressures to support further FED rate cuts.

Outside of the numbers, expect geopolitics to continue to drive the majors. The markets will need to continue to monitor trade war chatter, Iran, and Brexit.

The Dollar Spot Index ended the week up by 0.09% to $98.096.

For the EUR:

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

Spanish and Italian service sector PMI numbers for July get the week going on Monday. Barring any major deviations, France and Germany’s finalized numbers will likely have a muted impact on the EUR.

With the Eurozone’s manufacturing sector in contraction, the service PMIs will need to be in line with or better than forecast. We can expect the Eurozone’s service sector PMI and composite to also influence.

Through the rest of the week, Germany’s factory orders (Tues), industrial production (Wed) and trade data (Fri) will also provide direction.

Outside of the stats, the ECB will release its economic bulletin on Thursday. With stats on the lighter side, we can expect the EUR to be sensitive to the content.

The EUR/USD ended the week down by 0.18% to $1.1108

For the Pound:

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

July’s service sector PMI will provide direction at the start of the week, as will July’s BRC retail sales monitor due out on Tuesday.

The markets will then shift focus to 2nd quarter GDP and manufacturing production numbers due on Thursday.

Of less influence on the day will be 2nd quarter business investment, trade, and industrial production numbers. We also expect house price data due out on Wednesday and Thursday to also be brushed aside.

Outside of the numbers, any Brexit chatter will need close monitoring, with Brexit continuing to be the key driver near-term

The GBP/USD ended the week down 1.79% at $1.2162.

For the Loonie:

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

July’s Ivey PMI due out on Wednesday and employment figures due out on Friday will provide direction in the week.

We expect housing sector numbers due out on Thursday and Friday to have a muted impact on the Loonie.

Outside of the stats, the IEA’s monthly report and sentiment towards the U.S – China trade war will also influence.

The Loonie ended the week down 0.31% to C$1.3207 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a relatively quiet but influential week ahead.

Economic data is limited June trade figures due out on Tuesday and June home loan numbers due out on Wednesday.

Trade data will provide direction on the data front.

Of greater significance will be the RBA’s interest rate decision and rate statement on Tuesday.

In the wake of the FED’s rate cut, the RBA is expected to keep rates steady at 1%. The big question will be on whether there is any hint of a rate cut in the months ahead.

The RBA is also scheduled to release its monetary policy statement on Friday. With a lack of stats, we can expect the Aussie Dollar to be responsive on the day.

From elsewhere, China’s July service sector PMI and trade data to also impact in the week.

On the geopolitical front, the U.S – China trade war will continue to influence.

The Aussie Dollar ended the week down by 1.59% to $0.6801.

For the Japanese Yen:

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

July service sector PMI gets the week going on Monday. As the manufacturing sector activity continues to struggle, service sector numbers will need to provide support.

Household spending numbers due out on Tuesday will also be key ahead of 2nd quarter GDP numbers due out on Friday.

We expect current account data, due out on Thursday, to have a muted impact on sentiment towards BoJ monetary policy.

Outside of the numbers, expect chatter on trade from the U.S and Beijing to remain the key driver.

The Japanese Yen ended the week up 1.92% to ¥106.59 against the U.S Dollar.

For the Kiwi Dollar:

It’s a busy week ahead.

Key stats include 2nd quarter employment and inflation figures due out on Tuesday will have a material impact on the Kiwi.

The main event, however, is the RBNZ interest rate decision on Wednesday. The RBNZ is expected to cut rates to 1.25% this week. With the rate cut priced in, it’s all about the forward guidance.

Will the rate statement and press conference signal further action ahead or will it be a hold through to next year?

Outside of the numbers, we expect the Kiwi Dollar to continue to be sensitive to geopolitical risk.

Risk aversion and a dovish RBNZ rate cut would see the Kiwi Dollar visit $0.64 levels, last visited in June.

The Kiwi Dollar ended the week down 1.51% to $0.6536.

Out of China:

It’s a relatively busy week ahead on the economic data front. July service sector PMI figures will influence market risk appetite ahead of July trade data due out on Thursday.

Of less influence in the week are July inflation figures that are due out on Friday.

Outside of the stats, updates from the U.S – China trade talks will also continue to drive the markets.

Following Trump’s latest threat of fresh tariffs, China’s response and any U.S reaction will need consideration.

The Hang Seng slid by 5.21% in the week, with the CSI300 ending the week down by 2.88%.

Geo-Politics

Trade Wars:  No further face to face meetings are expected until next month. That leaves Trump’s Twitter account and Beijing to influence in the week ahead. Judging by Trump’s tweets from last week, there’s a long way to go before any resolution. That’s not good for anyone, particularly a U.S president in search of a 2nd term in office…

UK Politics: It’s all about Brexit as new British Prime Minister Boris Johnson looks to set his mark. The British PM issued an ultimatum to the EU early on, stating that there would be no discussions until the Irish backstop is removed. Unsurprisingly, there have been no talks as the EU continues to stand its ground. Expect more chatter in the week ahead…

Iran: No news may be good news for now, but with the U.S in a trade war with China and withdrawing from a nuclear agreement with Russia, things could get messy…

The Rest

The RBA: While the RBA is expected to leave rates unchanged on Tuesday, the RBA rate statement will be key. Any hint of further rate cuts and expect the Aussie Dollar to take a tumble, particularly after the FED’s hawkish rate cut last week.

The RBNZ: The RBNZ is expected to cut rates on Wednesday. With a 25 basis point cut priced in, will the RBNZ signal further cuts on the horizon or signal a near-term end to the easing cycle. With the U.S – China trade war showing no signs of an end, it’s hard to foresee a hawkish cut.

Earnings: It’s another big week ahead… Earnings releases and outlooks will not just influence the U.S majors, but risk appetite across the global financial markets.

Corporate America:

Tuesday, 6th August

  • Walt Disney Co.

 

Corporate Germany

Monday, 5th August

  • Continental AG

Wednesday, 7th August

  • Commerzbank AG
  • Wirecard AG

Thursday, 8th August

  • ThyssenKrupp AG

This article was originally posted on FX Empire

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