Trading Week Ahead: 17th – 22nd August 2020
Key Events and Data Releases This Week
OPEC-JMMC Meetings All Day
USD FOMC Meeting Minutes, Philly Fed Manufacturing Index, Unemployment Claims
EUR French Flash Services PMI, German Flash Manufacturing PMI, German Flash Services PMI
GBP Flash Manufacturing PMI, Flash Services PMI
USD Flash Manufacturing PMI
(Times adapted to AEST timezone)
Last Week’s Key Moments
The US Dollar was once again in focus as its fightback came to an end and sellers pushed lower closes to the CHF, CAD and risk currencies. While risk currencies closed higher, they failed to hit new successive week highs. The EURUSD achieved the best gains of the three, adding 0.49%. The Yen was the weakest currency last week as it lost ground to both the risk majors and USD. All of the majors hit new weekly highs, but only the EUR, GBP and USD closed above them. The EUR again led the gains, adding 1.21%.
Data was mixed last week. The RBNZ advised asset purchasing of 100 billion after they held rates, hinting that negative rates are not being ruled out and credit ratings don’t mean too much in a pandemic! They also advised that a lower AUD could help job growth. Australian employment data beat expectations, but doubt was instantly cast on the figures as they didn’t include the current lockdown in Victoria and that is tipped to take some shine off the reported data.
US CPI surprised everyone by beating expectations, but Friday’s US retail sales data did miss the mark. US unemployment claims dropped to 963K, while German ZEW economic sentiment grew to 71.5. Are we starting to see signs of a recovery which may be driving money out of the safe-haven JPY? There was news of a possible developed COVID-19 vaccine, which could also be a factor, as Russia announced its “Sputnik V”, had apparently passed regulatory requirements, even though it skipped phase 3 trials.
Developed by the Gamaleya research institute in coordination with the Russian military, Sputnik V has now become the world’s first COVID vaccine that has been approved. The vaccine is administered in two doses and contains two stereotypes of human adenovirus, each carrying an S-antigen of COVID-19. These then enter human cells to produce an immune response. Transparency and testing results are being questioned globally, but for now, the WHO is looking forward to reviewing the results.
The vaccine developments look to have had an impact on gold as we saw the price tank Tuesday last week. Gold had been weak starting the week, but the selling seen Tuesday and Wednesday was a little bit more than profit-taking! Sellers cut 6.09% of the current value in Tuesday’s session. This could be an ongoing factor for gold, but we did see over 4% pulled to end the weekly candle. If gold is running on instability, there could be worries that any further positive developments on the vaccine could continue to put doubts in the minds of gold traders. In another case, the volatility we saw last week was inevitable due to the sharp rise we had seen in the previous three weeks.
Oil saw further gains for the week, but issues remain surrounding buyer momentum. The IEA advised it sees lower demand in 2020/21 as COVID-19 numbers continue to increase stalling mobility. This week’s OPEC meetings could offer some further insight into future production cuts. Could this be the kicker to put some momentum back into oil?
It’s far from a busy week on the data front this week, with this Friday being the principal day for traders as we will see Manufacturing and Services PMI data from the EU, France, Germany and the UK. Could any bad surprises take some shine off the EUR rally? The S&P500 came very close to hitting new record highs last week, and traders will be watching this week’s important retail earnings data to see if there’s further good news around the corner. The stimulus saga is another ongoing factor and still remains undecided. President Trump threatened to hold off funding to the postal service due to voter mail fraud. Could an agreement on the next round of Covid-19 stimulus lead to a further boost for U.S. equities?