U.S. Markets closed

The Week Ahead – Stats, Geopolitics, and Central Banks to Test the Markets

Bob Mason

On the Macro

It’s a busy week ahead on the economic calendar, with 60 stats in focus in the week ending 5th June. In the week prior, 58 stats had also been in focus.

For the Dollar:

While it’s another busy week ahead on the economic data front. Some data will garner more attention than others, however.

In the first half of the week, we have May’s ISM Manufacturing and Non-Manufacturing PMIs.

Expect the Non-Manufacturing PMI to have a greater impact. Lockdown measures have eased throughout the month, what has this meant for the services sector and consumption?

At a minimum, a slower decline in output, and a pickup in hiring will be needed.

On Wednesday, ADP nonfarm employment change figures for May will also draw attention.

The continued surge in jobless claims, however, should numb the effects of another slump…

In the 2nd half of the week, the weekly jobless claims and nonfarm payroll figures will be in focus. A marked decline in the number of weekly claims would ease the shock factor that Friday’s labor market numbers will likely deliver.

The big question is whether the markets can swallow an unemployment rate of 20%?

Expect market risk sentiment toalso play a hand in the Dollar’s week ahead…

The Dollar Spot Index ended the week down by 1.52% to 98.344.

For the EUR:

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

May’s private sector PMIs are in focus through the 1st half of the week. Service sector activity in Spain and Italy will need to see a marked slowdown in the pace of contraction.

Upward revisions to French, German, and Eurozone sector PMIs will also be needed.

Weak numbers would raise questions over the market’s optimistic view that the economy bottomed in April.

On Wednesday, German employment figures for May will also have some influence.

The focus then shifts to the ECB monetary policy decision on Thursday. Will the ECB stand pat in spite of the dire economic outlook?

Expect the press conference to have the greatest impact. That is assuming, of course, that there is no surprise move…

On Friday, the markets will likely brush aside April factory order figures out of Germany.

We’ve moved beyond the doom and gloom of April and are now in search of a steadying in May and pick up in June…

The EUR/USD ended the week up by 1.84% to $1.1102.

For the Pound:

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

Finalized private sector PMIs for May are due out on Monday and Wednesday. Upward revisions would provide the Pound with some support though much will depend on the news wires.

On Thursday, May’s construction PMI should also garner some interest.

Away from the economic calendar, however, we are now in June. That’s 30-days before Johnson’s deadline for a Brexit blueprint to be in place…

Expect plenty of chatter. The markets will also be wanting to see a more significant easing of lockdown measures… We could also get some firm dates on a Johnson – Trump trade summit…

The GBP/USD ended the week up by 1.40% to $1.2343.

For the Loonie:

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

In the 1st half of the week, the BoC interest rate decision will be the main event. A gloomy economic outlook suggests that BoC will need to maintain its dovish stance.

They’re unlikely to deliver further easing, however. Members will want to assess the impact of both fiscal and monetary policy support before making any further moves.

Crude oil prices have also been on the rise as lockdown measures ease, which should give the BoC some breathing space.

In the 2nd half of the week, the focus will then shift to April trade figures on Thursday. Don’t expect too much from the numbers, however, with May’s employment and Ivey PMIs on Friday far more significant.

Any risk aversion from Trump’s moves against China on Friday will be Loonie negative.

The Loonie ended the week up by 1.54% to C$1.3780 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a busy week ahead for the Aussie Dollar.

Key stats include 1st quarter GDP numbers on Wednesday and April retail sales and trade figures on Thursday.

We don’t expect too much downside in response to the numbers, however. The RBA is expecting a marked contraction through to the end of Q2 before an economic recovery begins.

The figures will give the markets an idea of how bad things are, however, which should put some pressure on the Aussie Dollar.

On the monetary policy front, the RBA is in action on Tuesday, which is the main event of the week.

While there is a willingness to provide further easing, there’s unlikely to be a move this month.

From elsewhere, PMI numbers out of China, COVID-19 news, and geopolitics will also have a material influence.

The Aussie Dollar ended the week up by 1.99% to $0.6667.

For the Kiwi Dollar:

It’s a particularly quiet week ahead on the economic data front.  April building consent figures are due out on Tuesday that will have a muted impact on the Kiwi.

In the week ahead, market sentiment towards the economic outlook and geopolitics will have the greatest impact.

Expect PMIs from key economies, COVID-19 news, and chatter from Beijing and Washington to be the main areas of focus.

The Kiwi Dollar ended the week up by 1.82% to $0.6205.

For the Japanese Yen:

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

In the 1st half of the week, May’s finalized private sector PMIs are due out. Any downward revisions would test support for the Yen ahead of April household spending figures on Friday.

We’re not expecting anything other than more decline in spending. Japan was under a state of emergency in April.

The Japanese Yen ended the week down by 0.18% to ¥107.83 against the U.S Dollar.

Out of China

It’s a relatively quiet week ahead on the economic data front. Key stats include the market’s preferred Caixin private sector PMIs for May.

Expect the numbers to influence risk sentiment, though much will depend on U.S – China tensions. China’s response to Trump’s moves from Friday will be key.

Any pickup in private sector activity could be considered short-term as the U.S imposes greater restrictions on Chinse firms. There are also sanctions and a marked shift in the U.S relationship with HK to consider.

The Chinese Yuan ended the week down by 0.10% to CNY7.1364 against the U.S Dollar.

Geo-Politics

UK Politics:

Talks of a Brexit Summit are not going to ease jitters over a hard Brexit. A U.S – UK trade agreement would ease the pain but even that looks unlikely to happen near-term.

Updates from the UK government’s intentions, vis-à-vis negotiations will be key. Johnson had been clear of his intent to walk away should a Brexit blueprint not be in place by the end of June. There are just 30 days remaining. Will Johnson call for an extension for the transition period? He has yet to back down on any promises…

U.S Politics:

It’s getting ever more precarious for the U.S President who continues to distract the American voter.

Last week, the U.S ended its relationship with the WHO and responded to China’s security law for HK.

Trump did retain the phase 1 trade agreement, however, which will be an attempt to push China into a breach.

With protests rocking the U.S over the weekend, the U.S President will have his hands full in the week ahead.

Beijing is unlikely to sit back, which would put U.S tech companies and farmers in China’s sights… That may even test the willingness of firms to begin rehiring…

All in all, we may begin to hear a build-up of election chatter that may question Trump’s chances of a 2nd term.

The Coronavirus:

As easing measures continue across the EU and the U.S, we now need to keep an eye on the new coronavirus cases.

If a 2nd wave of the pandemic is to hit the respective economies and uptick in new cases would begin to show.

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

  1. Progress is made with COVID-19 treatment drugs and vaccines.
  2. The downward trend in new coronavirus cases continues.
  3. Governments continue to progress with the easing of lockdown measures.

At the time of writing, the total number of coronavirus cases stood at 6,150,262.

Monday through Saturday, the U.S reported 130,165 new cases to take the total to 1,816,601. This was down from the previous week’s 138,592.

For France, Germany, Italy, and Spain, there were 15,269 new cases Monday through Saturday. This took the total to 890,891. In the previous week, there had been 14,778 new cases over the same period.

This article was originally posted on FX Empire

More From FXEMPIRE: