RedFX The Week ahead: GBP faltering, USD falling back
Lots of movement last week brings us into a busy data-week……
GBP: Suffered last week, and is under pressure with GBP/EUR at 1.1000 and GBP/USD under 1.2400. A solid break under these levels, and the market will target previous low levels of 1.0600 and 1.2075. Pm Johnson added to the worry with comments this weekend, that Covid-19 had been a “disaster” for the UK, and a 2nd wave (along with growing civil unrest & Brexit headlines) might all serve to cap GBP.
Today sees the EU and UK start Brexit talks again (named “the intensive phase”), and the market will be searching for an optimistic tone. All eyes on Barnier’s speech on Friday which should contain some solid facts about progress.
EURO: Boosted by the actions of the ECB (continued monetary stimulus packages), alongside encouraging results from fundamentals in the region (current account numbers), EUR/USD has been pushing higher around 1.1300.
Macron of France has suffered in local elections, which weakens his position as the main voice for the EU fund, but solid progress has been made and it is unlikely to falter as a result.
USD: With China announcing advances with a vaccine candidate named Ad5-nCoV, there are encouraging signs of a vaccine, but this is countered by the huge increase in numbers as the feared ‘Second Wave’ seems to be inevitable. The USD will be driven by speculation of more lockdowns and restricted economic activity, suggesting the damage to the US economy is not yet over.
The USD is trading with global sentiment, but if the economy fails to pull-back, sellers will dominate trading.
AUD: Positive comments from PM Morrison indicated a reopening of state borders and continued support for jobs growth – the PM ignored the recent rise in Covid-19 cases in Victoria, and AUD gained ground this morning. AUD was also helped by Chinese data showing an increase in Industrial profits (6% year on year).
With Independence Day in the US cutting short the trading week, it is a full calendar with plenty of risk events.
The week ahead:
Monday:
UK: speeches from Bank of England members Bailey and Vlieghe
Germany: Inflation data
Tuesday:
China: PMI data
UK: Final GDP numbers for Q2 (2% contraction expected)
EUR: Inflation data
USA: Federal Reserve Chairman Powell testifying / Treasury Sec Mnuchin speech
AUD: Bank of Aus speeches
NZD: Construction data
Wednesday:
China: Manufacturing data
Germany: Employment data
USA: JOBS data and Federal Reserve minutes released
Thursday:
AUD: Import data
USA: Employment Data (10% unemployment expected, but also a big number is expected as the economy is re-opening and businesses re-hire staff)oliday, most markets will take a breather