With Turkey on holiday for most of the coming week, and no other developments over the weekend, it might be a quiet start to the week. As traders wait for Jackson Hole, the WSJ article from Friday might keep stocks buoyant into the week as US & China appear to be planning meetings to resolve the trade dispute. This may also ease the tension in USDCNH.
Themes for the week:
US/CHINA trade dispute seems to be easing a tad, with talks planned for later this month between lower-level officials from Beijing and Washington. This should keep equities buoyant, and might ease the pressure on Copper as well, which is a gauge for global growth trends. This, in turn, might help AUD and NZD but it all hinges on what happens.
Jackson Hole (Friday) will be the highlight of the week, as Central Bankers gather and the market pays attention. Nothing substantial is expected – so be aware for surprises.
Watch how strong the USD gets. The Bank for International Settlements said last month:“When the dollar is weak, there tends to be greater appetite for risk, but a stronger dollar often goes hand in hand with the reversal of risk attitudes.” The combination of a strong USD, plus emerging market issues emphasized by Turkey, plus a cauldron of political issues simmering in the EU are a very real threat to the global economy, because when the USD gets too strong, FX pressures creep up across the globe. In 1985 this is what led to the Plaza Accord, the subsequent devaluation of the USD by 40% and the creation of the EURO, which was supposed to rival the USD.
Chart: https://www.tradingview.com/chart/DXY/Tu1hGIfv-DXY-Profit-Taking-in-play-but-uptrend-still-intact/
Brexit Talks: GBP is still under pressure as Brexit talks continue. The Conservative party in the UK is even more fractured now, and there really doesn’t seem like a resolution is anywhere to be seen.
Data in the week ahead:
- RBA Minutes
- FOMC Minutes
- NZD Retail Sales
- Cad Retail Sales
On the Radar:
Stocks look promising going into the week with Dow leading the way. Depending on what happens with Brexit, GBP shorts (vs Cad and AUD) look viable. Just remember that the markets are still on “holiday mode” until September, so don’t be eager to get into positions.
About the Author
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