Trading Week Ahead: 22nd June – 26th June 2020
Key Events and Data Releases This Week
AUD RBA Gov Lowe Speaks
CAD BOC Gov Macklem Speaks
EUR French Flash Services PMI, German Flash Manufacturing PMI, German Flash Services PMI
NZD Official Cash Rate, RBNZ Rate Statement
Chinese Bank Holiday
USD Core Durable Goods Orders, Durable Goods Orders
Chinese Bank Holiday
(Times adapted to AEST timezone)
There was a strong start to last week, with risk markets finding plenty of demand before midweek nerves came back into some of the risk markets, causing falls mainly on the EUR and GBP to the USD and JPY. Increasing worries over growing COVID-19 cases and the continued economic situation in the US are just some of the issues giving investors pause for thought. The IMF recently warned that it thinks the US economy could contract further than expected in the 2nd quarter. The Bank of England met and held rates at 0.10% as expected, and also ruled out 0% rates at this point. This didn’t help the GBP as it gave back gains set earlier in the week to move into the red. The EUR also followed a similar path as it ended the week on the sell, after starting it with just over 1% gains to the USD. Meanwhile, a fairytale jobs data like what we have seen in the US failed to materialise for Australia as both employment change, and unemployment came in worse than expected. However, this didn’t sink the AUD, even though it spent a deal of the week treading water.
Last week, FED chairman Jerome Powell maintained a cautious tone on the US economy and its recovery from the current COVID-19 downturn, but US retail sales shined, surging 17.7% in the biggest monthly jump ever and coming in way above expectations. The USD saw quite a mixed week and failed to set an actual direction across the boards. It pushed to the EUR and GBP but lost ground to the AUD and CAD. The NZD was rather shellshocked as GDP fell well below expectations.
Gold found demand late on in the week, coming back from a 1.66% decline. Oil was one of the standouts and after a soft start, buyers returned. Price was trading over 11% higher as OPEC continued to hit the market with news of production cuts. We can’t forget the other asset class that continues to show very little but are also resilient. Yep, stocks! After the previous week, we could have started to think maybe the party was over, but it’s not. Last week equities returned to buy mode as traders continue to see the central bank’s intervention as maintaining safety. The usual suspects were hitting the gains. The Nasdaq over 4%, the Dow over 3% and the German DAX over 3%.
Although we have a relatively quiet economic calendar this week, there are still a few points to watch out for. With Europe moving further out of lockdown and new German and French flash PMI data on the horizon, we will be looking for any signs of recovery in the EU, and any knock-on effect for the EUR. And with New Zealand suffering a 1.6 per cent shock drop in GDP in the last quarter, will the Reserve Bank of New Zealand act to steady the ship with a rate cut in its next interest rates decision on Wednesday? We’ll be certainly keeping a lookout.