Citi
- The USD was strongly bid early on in the Asia session, seeing USDJPY trade as high as 106.43 before retracing to now trade flat on the day at 105.81. It was a similar story in EURUSD, with the pair trading as low as 1.1740 before making it back to 1.1780 at the time of writing. Some players put the chop down to a short squeeze given the extended USD decline last week, while M&A news was also cited in USDJPY. AUD has underperformed on renewed lockdown news which we cover below. In EMFX, the market has traded in a marginally more ordered fashion, with most of the complex flat to better bid vs the USD. MYR leads the way along with TWD, while KRW and THB lag marginally.
- USD: ISM Manufacturing at 15:00 BST for July. The market forecasts a print of 53.6 vs 52.6 prior. Leading indicators will be important to watch to guide expectations on future activity, as this could reflect the potential damage of paused reopenings. We also have some Fedspeak in the form of Bullard at 17:30 and Evans at 19:00 BST. After the FOMCs latest guidance, there is limited scope for headline risk here. Finally, we have Construction Spending at 15:00 BST for June. The market forecasts a print of 1.0% vs -2.1% prior.
RBC Capital Market
Week ahead: Twin employment reports in the US and Canada are the main releases this week (both Friday). In the US, continuing claims came in at 16.9 million NSA for the week ending July 18 (the nonfarm payroll survey week), down about 800k from the June survey week. This alone implies an advance in jobs of nearly one million. Our economists’ model using the data from Homebase suggests an NSA advance of about 1.5 million on the month and their forecast of 2.3mn is well above consensus. After tonight’s RBA announcement, the BoE (Thursday) is the only remaining G10 central bank announcement this week. BCB (Wednesday) is the main announcement in EM.
AUD: The renewed lockdown in Victoria and the risk that it extends beyond six weeks coupled with further border closures have been the key developments since the RBA last met. Accordingly, we expect a more cautious tone. There are likely to be three key themes: 1) a recovery under way but set back by Victoria, and uncertainty high; 2) ongoing support for fiscal measures and further stimulus if needed; and 3) a preparedness from the RBA to step up should activity/labour market underwhelm. We expect little change to the preliminary estimate of June retail sales of 2.4% (RBC +2.5%), which builds on a nearly 17% rise in May. Retail sales are above pre COVID‐19 levels.
GBP: Our economists do not expect any policy changes
from the BoE at its August meeting and look for unanimous votes to leave both Bank rate and asset purchase target unchanged at 0.1% and GBP754bn. The focus will therefore be on the Quarterly Monetary Policy Report. In a speech last month, Chief Economist Haldane suggested that the MPC’s current assessment was that the fall in Q2 GDP would be less than thought at the time of the May MPR. The MPC may revise down its forecast for the fall in 2020 GDP as a whole from the 14% that it projected in May.
JPY: Q1 GDP was revised to ‐0.6% q/q from ‐0.7%. Q2 data will be released on August 17.
CAD: RBC economists pencil in a 400K rise in employment in July (Friday) after 1.24mn in combined job gains in May and June. Activity in general appears to have risen further in the month and we expect this to be reflected in the job numbers.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 76% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!