Themes for the Week and Potential Opportunities
The first thing to note is that the Monday post-NFP is usually quite a dull day. So don’t be eager to jump in. Equities are buoyant after NFP failed to show any decent wage inflation (lower for longer sentiment). Metals are still bid as a safe haven. Crude still weak.
EUR: There are no major Eurozone economic reports scheduled for release in the coming week leaving the focus on the EU Finance Ministers meeting in Brussels (Mon), Italian bank stocks and risk appetite. Overall, the tone is slightly negative.
GBP: BoE (Thur) expected to be dovish but not cut rates until the Inflation Report in August. The market is pricing in a 0.25% rate cut already, but from what Carney has said, it’s more logical to see an August cut. So we should also look at the voting stance and evaluate the unanimity or lack thereof. Carney will appear in Parliament (Tue) as well. As far as data goes, BRC (Tue) and RICS House Price Survey (Thur) might attract some attention as they are now reflecting post-Brexit sentiment. Construction output (Fri) instead is still pre-Brexit data.
USD: Retail Sales (Fri) expected strong and CPI (Fri) expected positive but weaker than previous. We have a good amount of Fedspeak this week: Fed’s George (Mon), Mester-Tarullo-Bullard-Kashkari (Tue), Mester-Kaplan-Harker (Wed), Lockhart & George (Thur), Kashkari & Bullard (Fri). The market will pay attention to the Fedspeak after the recent employment data, to understand how likely a rate hike is and when it is most likely to happen. Tone seems positive overall.
Comm–Dolls: Aussie & Kiwi remain strong on quest for Yield & Quality. On Monday & Thursday RBA’s Ellis will be giving speeches on Financial Stability – which might be influential post-Brexit; on Thursday we have Australia unemployment data expected positive but not as good as last month’s as the unemployment rate is expected to rise to 5.8% from 5.7%. For Cad, BoC meets on Wednesday and will be of interest after the recent poor jobs report, WildFires in Alberta and the market is expecting dovish remarks from Poloz but no rate cut. Nzd has a light calendar but we will hear from RBNZ’s McDermott on Wednesday.
CHN: Sunday we will see CPI and PPI which will have to be incorporated into Monday’s sentiment. Wednesday we see the Trade Balance; Friday we see Industrial Production, Retail Sales, GDP and Fixed Asset Investments. All the Chinese data will likely influence risk appetite and also Aud and Nzd.
Going into the week, it could be a potentially busy week with US indices clearly bullish, Crude weak, Bullion bid. Aud, Nzd & Jpy strength can be matched with Gbp, Eur and Cad weakness. So risk will likely be well diversified this week.