Trading Week Ahead: 25th-29th May 2020
Key Events and Data Releases This Week
UK Bank Holiday
US Bank Holiday
CAD BOC Gov Poloz Speaks
CAD BOC Gov Poloz Speaks
NZD RBNZ Financial Stability Report
AUD Private Capital Expenditure
USD Prelim GDP
USD Fed Chair Powell Speaks
(Times adapted to AEST timezone)
Risk markets were mainly higher last week, but gains were trimmed at the end with new worries hitting the market mostly from trade and Chinese policy directions. For most of the week, gains continued with AUDUSD reaching 0.66, oil touching $34 and the NDX100 (Nasdaq) hitting 9,500. That level on the NDX100 marked a 30% point in the recovery rally. Gold was another commodity that had an interesting week breaking to new monthly highs after testing 1,764. That’s a price point not seen since 2012! The gains were short-lived, however, as the USD and Japanese Yen staged a late-week fightback.
More Trade Deal Tensions
Risk markets lost momentum last week as existing influences intensified and new influences hit the markets. Trade tensions remain in play between the U.S. and China with both parties firing shots. President Trump made it quite clear the U.S. could walk away from phase one of the bilateral trade deal agreed at the start of this year. China didn’t flinch, but late in the week, both parties looked a touch more stable, as news came in on Friday that China pledged to implement their end of the deal.
This could and will continue to have some influence on safe-havens as it ebbs and flows. Traders keep an eye on developments in the coming week, as anything drastic on both sides positive or negative could have an influence on the USD and to a degree, equities.
Chinese Security Policy Woes
We also saw the Chinese national security policy hit the markets which caused some nerves in Asian markets after it sent a lot of uncertainty through Hong Kong. As a result, the HK50 (Hang Seng) was heavily affected. The Index fell as much as 7.61% in two sessions. While this did contribute to some overall negative sentiment late last week, and unless it blows up again (due to mass protests), this may be localized and not have too much of an influence on other Asian markets.
China announced a 430B stimulus while also abandoning its growth target. The economy was reported to have contracted by 6.8% in the first quarter. With unemployment still at very high levels, some believe this is temporary until they can see a clear picture in this uncertain situation. Analysts believe there was some recovery in April.
US GDP in the Spotlight
U.S. preliminary GDP is to be released this week, markets are looking for a -4.8% figure. While the advance figure typically sees the most attention, a shock drop in this figure could add to worries around the U.S. economy concerning COVID-19, could this also set up further ideas around further stimulus?