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The Week Ahead – COVID-19 Numbers, Geopolitics and June PMIs in Focus

Bob Mason

On the Macro

It’s a quieter week ahead on the economic calendar, with just 43 stats in focus in the week ending 26th June. In the week prior, 60 stats had also been in focus.

For the Dollar:

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

We are now moving beyond April and May and getting end of 2nd quarter numbers that will influence risk sentiment. The numbers will also give the markets a view of what the economic recovery will look like.

Prelim June private sector PMIs are due out on Tuesday and expect the services PMI to have the greatest influence.

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

On Thursday, the weekly jobless claims and May’s core durable goods orders will have the greatest influence.

At the end of the week, we don’t expect too much direction from inflation and finalized consumer sentiment figures.

Personal spending numbers for May will draw interest, however… A pickup in consumption is key to the economic recovery that can only be fueled by a jump in hiring.

Other stats in the week include finalized 1st quarter GDP numbers and housing data. We expect these along with May inflation figures to have a muted impact on the Dollar and risk sentiment.

The Dollar Spot Index ended the week up by 0.31% to 97.623.

For the EUR:

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

In the 1st half of the week, prelim June private sector PMIs for France, Germany, and the Eurozone will be in focus.

Expect the stats to have a material influence, with service sector PMIs likely to have a greater impact.

On Wednesday and Thursday, the focus will then shift to Germany. June’s IFO Business Climate Index and July’s GfK Consumer Climate figures are due out.

A pickup in both business and consumer confidence is needed to support the economic recovery.

Will there be fear of a 2nd pandemic or will both monetary and fiscal support be good enough…

If the U.S sees last week’s upward trend in new COVID-19 cases continue, expect risk aversion to return.

The EUR/USD ended the week down by 0.69% to $1.1178.

For the Pound:

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

Key stats are limited to June CBI Industrial Trends and prelim June private sector PMIs.

Expect the services PMI to garner the greatest interest on Tuesday. The UK economy has continued to struggle following a particularly dire April.

Last week’s BoE move failed to ease the pain so more will have to come from the British government.

Away from the economic calendar, expect Brexit negotiations to intensify, which should deliver a more volatile Pound.

The GBP/USD ended the week down by 1.52% to $1.2350.

For the Loonie:

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

There are no material stats due out of Canada to provide the Loonie with direction. That leaves the Loonie in the hands of COVID-19 news and updates and chatter from Beijing and Washington…

We will also expect June’s PMI numbers from the EU and the U.S to give the markets an indication of demand for goods and services. This will have also have an influence on crude oil prices and the Loonie.

The Loonie ended the week down by 0.13% to C$1.3607 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a particularly quiet week ahead for the Aussie Dollar.

There are no material stats due out of Australia to provide the Aussie Dollar with direction.

A lack of stats will leave the Aussie in the hands of market risk sentiment throughout the week.

On the monetary policy front, RBA Governor Lowe speaks early on Monday. The PBoC is also scheduled to deliver its Loan Prime Rates on Monday. A surprise cut would provide some support.

While we will expect influence, it will ultimately come down to COVID-19. There remains a serious downside risk to the Aussie Dollar and riskier assets.

Private sector PMIs from the EU and the U.S will also have a material impact in the week.

The Aussie Dollar ended the week down by 0.45% to $0.6835.

For the Kiwi Dollar:

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

On Wednesday, the RBNZ is in action. While there is unlikely to be further easing, the promise of support will likely be there.

Much will depend on the news and views on the recent uptick in new COVID-19 numbers.

Over the weekend, New Zealand reported new coronavirus cases after having been free from the virus.

Prelim June PMI’s will also need consideration in the week. Central banks will likely consider the June numbers to get an idea of demand and likely activity in the summer months.

On Thursday, the focus will then shift to May’s trade data. We’ve seen resilience through the pandemic. Will this continue?

The Kiwi Dollar ended the week down by 0.59% to $0.6407.

For the Japanese Yen:

June’s Prelim private sector PMIs are due out in the 1st half of the week. We don’t expect too much influence from the numbers.

In the 2nd half of the week, June inflation figures will draw some interest.

For the Japanese Yen, however, expect support to continue should new COVID-19 cases continue to rise. Disappointing PMIs from the Eurozone and the U.S would also be Yen positive in the week.

The Japanese Yen ended the week up by 0.47% to ¥106.87 against the U.S Dollar.

Out of China

It’s a particularly quiet week ahead on the economic data front. There were no material stats due out of China to provide direction for the global financial markets.

That leaves updates from Beijing and beyond on COVID-19 cases and talk of trade wars in focus.

On the monetary policy front, the PBoC will set the loan prime rates on Monday. A surprise rate cut would be welcome.

The Chinese Yuan ended the week up 0.18% to CNY7.0710 against the U.S Dollar.

Geo-Politics

UK Politics:

Brexit remains a key driver for the Pound. Britain and the EU agreed that they would not extend the transition period. Negotiations are set to intensify and that means plenty of volatility for the Pound…

U.S Politics:

It’s going to be a tough week ahead for the U.S President, who hits the campaign trail.

Recently reopened U.S states are reporting spikes in new COVID-19 cases that risk a 2nd wave in the U.S.

Coupled with the recent riots, Trump needs to find solid ground to catch up with Joe Biden.

Expect plenty of distraction tactics from Trump, who continues to blunder his way through the 1st term.

The Coronavirus:

Over the weekend, the WHO delivered another warning, stating that the pandemic is accelerating… Of greater concern will be the upward trend of new cases seen in the U.S.

Germany and South Korea have also reportedly joined a list of countries reporting fresh outbreaks, raising the change of a 2nd wave.

From the market’s perspective, there are 3 key considerations that remain:

  1. Progress is made with COVID-19 treatment drugs and vaccines.
  2. There are 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.

With a rise in new cases being reported in a number of countries, the big question will be whether governments will reintroduce lockdown measures… The 2nd consideration is certainly causing market angst.

At the time of writing, the total number of coronavirus cases stood at 8,913,524. Monday to Saturday, the total number of new cases increased by 929,092. Over the same period in the previous week, the total number had risen by 773,853.

Monday through Saturday, the U.S reported 168,434 new cases to take the total to 2,330,578. This was up from the previous week’s 134,775, supporting concerns over a 2nd wave.

For Germany, Italy, and Spain, there were 6,841 new cases Monday through Saturday. This took the total to 722,509. In the previous week, there had been 5,262 new cases over the same period.

This article was originally posted on FX Empire

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