Trading Week Ahead: 31st – 4th September 2020
Key Events and Data Releases This Week
AUD RBA Cash Rate, Rates Statement
USD ISM Manufacturing PMI
USD ADP Non-Farm Employment Change
GBP BOE Gov Bailey Speaks
USD ISM Non-Manufacturing PMI
CAD Employment Change, Unemployment Rate
USD Average Hourly Earnings, Non-Farm Employment Change, Unemployment Rate
(Times adapted to AEST timezone)
Last Week’s Wrap
In another eventful week on the markets, risk currencies closed with a bang to the USD, while we saw a choppy end to the Yen. U.S. stocks continued their rich vein of form with the S&P 500 joining the Nasdaq at fresh 2020 levels.
The U.S. dollar continued to be a talking point as it was bashed once again, with the latest statement from the FED proving to be the main influence for its latest move lower. The Fed outlined a shift in its inflation policy with a move towards an average inflation rate. This will allow the rate to drift higher above the previously set 2% rate, meaning a moderate overshoot of 2.25% or 2.5% wouldn’t be a concern demanding possible interest rate action. The decision puts in place the idea of very low-interest rates moving forward, which could see rates held at 0 for several years.
The USD reacted very badly to this news and finished the week sharply lower. AUDUSD soared adding 2.78%, closing back above .7350 while EURUSD gained close to 1% after a choppy week. GBPUSD surged adding just over 2% to stand at 1.3348, with price testing levels that have not been seen since December 2019. The EUR, AUD, and now GBP have pulled back all of their Covid-19 declines (and more).
U.S. stocks jumped this weekend guided by FED policy, but rallies kicked off on Monday and never really looked back. It’s now only the Dow that hasn’t hit new records. The S&P 500 added 3.26% in the last five days, while the Nasdaq added another 3.39%. The SPX hit new records on Monday and never looked back, seeing higher closes in a row last week. The NDX100 surpassed the 12,000 point, with U.S. tech stocks now worth more than the entire European stock market! The amount of money that has moved into U.S. tech companies is staggering because in 2007 the European stock market was four times larger than U.S. tech stocks.
Oil faltered again last week, as buyers teased another breakout but price finished back in its ongoing range, while Gold remains choppy. Price is holding from 1909 but buyers finished the week on a strong note as the USD dived, adding 1.81%.
Japan’s Prime Minister Shinzo Abe resigned late last week due to ongoing health concerns. He has been known for Abe economics, will this usher in a new policy? The Yen had an eventful end to the week’s trade, with sellers in firm control until Friday’s NY session when buyers staged a solid fightback to risk currencies. The Euro saw an 85 pip rally turn into a 55 pip drop, while USDJPY was battered on Friday. The pair did see a brief rally but focus was on the sellers’ side as it tanked 1.12% lower testing August lows, with price closing at 105.36.
The U.S. dollar remains a primary focus this week as will stocks. With indexes at extended short-term rallies, could we see a round of profit-taking happen? AUDUSD could see some action with both the RBA rates statement cash rate and GDP due. The highlight of the week will undoubtedly be Friday’s U.S. employment data with the market looking for a further read of better unemployment numbers. The expectation for the Non Farm payroll is 1518K with average earnings to come in at 0.0%. To date, I’ve been looking for a bad surprise in the NFP data but so far, it’s failed to materialize. Are we in for more of the same this week, with better than expected bad figures?