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The Week Ahead: Geopolitics and Powell Put the Dollar in the Spotlight

Bob Mason
It’s a busy week ahead on the economic calendar, but it all may come down to FED Chair Powell’s testimony and updates from trade talks…

On the Macro

For the Dollar:

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

The markets will need to wait until Tuesday for May JOLTs job opening figures.

After another quiet day on Wednesday, June inflation figures will have a material impact on the Dollar on Thursday.

Barring a sizeable increase, the initial jobless claims figures will likely have a muted impacted on Thursday.

The market focus will then shift to a wholesale inflation number due out on Friday. The key driver will be the producer price index figures on the day.

On the monetary policy front, FED Chair Powell will give testimony to Congress on Wednesday and Thursday. Following June’s solid nonfarm payroll figures, the timing couldn’t be better. Expect the Dollar and the global equity markets to respond.

The FOMC meeting minutes are also due out on Wednesday, but will likely have a muted impact following Powell’s first day of testimony.

Progress on the U.S – China trade talks and FOMC member chatter will also be of influence.

There’s also Iran to consider in the week ahead…

The Dollar Spot Index ended the week up by 1.2% to $97.286.

For the EUR:

It’s also a relatively quiet week ahead.

German industrial production and trade data for May kick the week off on Monday. We can expect the numbers to have a material impact on the EUR on the day.

The markets will then need to wait until Friday for the Eurozone’s May industrial production figures.

Finalized French, German and Spanish inflation figures on Thursday and Friday are unlikely to have a material impact on the week.

On the monetary policy front, the ECB Monetary Policy Meeting Minutes are due out on Thursday. Will there be any talk of further easing or will the minutes be aligned with Draghi’s press conference?

Outside of the numbers, geopolitical risk will continue to influence.  There’s Iran, China, and Brexit to factor in.

The EUR/USD ended the week down by 1.30% to $1.1225.

For the Pound:

It’s a relatively busy week ahead for the Pound

BRC Retail Sales Monitor figures due out on Tuesday will provide direction on Tuesday ahead of a busy Wednesday.

GDP numbers, May industrial production, manufacturing production and trade data are due out on Wednesday. GDP and manufacturing production will be the key drivers on the day.

House price figures due out in the early hours of Thursday will likely be brushed aside by the markets on Thursday.

Outside of the numbers, the leadership race gets more interesting.

The scheduled televised TV debate on Tuesday will garner plenty of attention. A Boris Johnson win has been considered negative for the Pound.

On the monetary policy front, the BoE will release its financial stability report on Thursday, which will garner plenty of attention. The report could further reinforce the need for a rate cut down the road.

The GBP/USD ended the week down 1.38% at $1.2521.

For the Loonie:

It’s a quiet but significant week ahead for the Loonie.

On the economic data front, stats are limited to housing sector numbers through the week. Housing starts and building permits are due out on Tuesday, with new house price figures due out on Thursday.

The BoC monetary policy decision on Wednesday will be the key driver. While the BoC is expected to hold rates steady, the rate statement, monetary policy report and press conference will be the key drivers.

Progress on the U.S – China trade talks and rising tension in the Middle East could be supportive of oil prices and the Loonie on the week.

For the Loonie, OPEC and the IEA’s monthly reports and trade data out of China will also be a factor.

The Loonie ended the week up 0.11% to C$1.3081 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a quiet week ahead.

Key stats out of Australia are limited to business and consumer confidence figures due out on Tuesday and Wednesday respectively.

May home loan figures due out on Thursday will also provide direction. The RBA continues to have concerns over the property market that has a material influence on consumer consumption.

From China, trade data due out on Friday will also provide direction.

Outside of the stats, the U.S – China trade war and any news on Iran will likely overshadow the numbers in the week.

The Aussie Dollar ended the week down by 0.57% to $0.6980.

For the Japanese Yen:

It’s a quiet week ahead.

Economic data is limited to May current account and core machinery orders due out on Monday and tertiary industry activity numbers on Thursday. Finalized Industrial production figures due out on Friday will likely be brushed aside.

We can expect the stats to have a limited impact on the Yen, with geopolitical risk the key driver on the week.

From China, trade data due out on Friday will also need to be considered.

The Japanese Yen ended the week down 0.57% to ¥108.47 against the U.S Dollar.

For the Kiwi Dollar:

It’s also a particularly quiet week ahead.

Economic data is limited to June electronic card retail sales figures due out on Thursday and Business PMI numbers due out on Friday.

We can expect the numbers to provide the Kiwi with direction late on in the week.

Outside of the stats, sentiment towards the U.S economy and monetary policy could weigh on the Kiwi, assuming that there is progress in the U.S – China trade talks.

The Kiwi Dollar ended the week down 1.34% to $0.6628.

Out of China:

June inflation figures due out of China on Wednesday will have a limited impact on market risk sentiment on the week. On the data front, trade data due out on Friday will provide the majors with direction.

The focus will remain on updates from the U.S – China trade talks. The U.S and China will need to make progress to support market risk sentiment and limit the effects of any weak stats.

Geo-Politics

Trade Wars:  With trade talks in focus, the markets will be looking for positive updates in the week. Anything negative will test market resilience and appetite for riskier assets.

UK Politics: The scheduled Tuesday live televised debate will be in focus, as the leadership race reaches its final stages. Conservative Party members have already received their postal ballots and will be deciding on who drags Britain out of the EU…

Iran: While the markets will be sensitive to any rhetoric, the markets will need to look out for any escalation in the week ahead. Iran has already threatened to seize a British tanker that would likely lead to a military response.

The Rest

Monetary Policy:

The EUR: The ECB’s monetary policy meeting minutes are due out on Thursday. The EUR strengthened in response to the June statement and press conference. Will the minutes contain any talk of further easing?

The Loonie: The BoC delivers its July monetary policy decision. While the BoC is expected to leave rates unchanged, will the BoC talk of a rate cut?

The Greenback: FED Chair Powell will need to clear up the FED’s intentions at the end of the month FOMC meeting. Nonfarm payroll numbers suggest a hold on rates, with the FED needing to have some buffer should trade talks fail to make progress. While the FOMC meeting minutes are due out on Wednesday, the focus will be on FED Chair Powell’s testimony to Congress on Wednesday.

This article was originally posted on FX Empire

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