15/ 11/ 2020

Week Ahead | U.S Politics, COVID-19, and Brexit Likely to Overshadow Data

It was a quieter week following the U.S Presidential Election week. Solid progress was made towards a COVID-19 vaccine. Further spikes in new COVID-19 cases weighed on market risk sentiment, however. The anticipated economic impact of further COVID-19 containment measures supported the Greenback.

The euro had gained against the dollar on Friday as it was trading at 1.1812, up 0.06% on the day as news on a COVID-19 vaccine will not stop central banks from delivering more stimulus to prop up growth. News of a vaccine against the novel coronavirus is positive but it will take some time before this has a positive impact on economic activity. That echoed comments from the heads of the Federal Reserve and the ECB on Thursday that stressed the economic outlook which remained uncertain. The news of a vaccine breakthrough by Pfizer earlier in the week sent the stock markets higher, as investors cheered the news 
finally, there is light at the end of the dark Covid-19 tunnel. 

Looking ahead into the coming week, the series of Employment Change and the Unemployment Rate meeting, along with minutes of the RBA Monetary Policy Meeting and the G20 Meetings, could drive plenty of headlines to keep the markets on the move. The geopolitical tensions Brexit, U.S politics, and coronavirus headlines will also be closely followed, as they could play a key role in determining risk levels in the market. 

11/ 08/ 2020

Markets Back in Risk-On Mode While U.S – China Tension Lingers

It was a relatively bullish start to the week for the European majors on Monday.  While there were no major stats to provide the majors with direction, there was plenty for the markets to consider. Ahead of the European open, better than expected wholesale inflation figures from China supported riskier assets. While the stats were positive, rising tension between the U.S and China pinned the majors back on the day.

Following Trump’s moves against China last week, China reacted by imposing sanctions of its own on 11 U.S lawmakers. The good news, however, was that Beijing held back from targeting members of the U.S administration. Trade talks are reportedly scheduled for the end of the week.

With economic data, corporate earnings, and monetary policy and fiscal stimulus all supportive, today’s stats will need to be dire to sink the majors.

10/ 08/ 2020

The U.S Stimulus Package and U.S – China Tension Puts the Dollar in the Spotlight

The U.S. dollar was struggling to keep a rare rally together earlier today as its longest losing streak in a decade left much of the market structurally short of the currency and vulnerable to a squeeze on any upbeat news Bears were caught out by a better payrolls report on Friday, which pushed Treasury yields higher into this week’s massive $112 billion debt sale. Yet the dollar still ended lower for the seventh week in a row.

Our portfolio has been positioned for a number of weeks now for a narrowly weaker USD as a consequence of the independent surge in COVID-19 infections in the U.S. that has opened up a decent gap in near-term economic performance, especially against Europe,” said by a senior analyst.

On the data front, the United States has consumer prices on Wednesday and retail sales on Friday, which is expected to show a solid bounce in spending albeit before the latest round of social restrictions took some steam out of the economy. A raft of Chinese figures is due this week, which is forecast to show a continued recovery, while EU production data is also expected to please. Data showed China’s factory deflation eased in July, driven by a rise in global oil prices and as industrial activity climbed towards pre-coronavirus levels.

06/ 08/ 2020

All Eyes are Now on BoE and its Economic Forecasts

The U.S Dollar traded lower against all of the major currencies yesterday, a sign that FX traders are worried about Friday’s nonfarm payrolls report. With ADP reporting significantly weaker-than-expected private payroll growth in July (167,000 vs. 2.3 million forecast) and the employment component of non-manufacturing ISM dropping to 42.1 from 43.1, all signs point to a slowdown in labor market recovery last month.  However, based on the strong rally in stocks and more than 7% increase in 10-year Yield, not everyone is convinced that the data will be terrible or that the outlook is grim. Investors should be worried about the possibility of NFP miss, but the argument can be made that new virus cases in the U.S. are coming down and stimulus talk is finally moving in the right direction. 

More positive headlines are expected from Congress in the coming weeks and when a deal is reached, as long as it's semi-decent, we expect a relief rally that should drive equities, Treasury yields and the dollar higher. Investors won’t be able to ignore a weak NFP report on Friday but, like today, the impact on the financial markets may be short-lived.

The Bank of England will influence the Pound later as the markets look ahead to the next set of jobless claims from the U.S.