The Week Ahead 13th – 17th July 2020

Market Recap

After downbeat European trade, the equity complex caught a tailwind into the US open as cyclicals lead the way, for once, while the VIX trundled further to the downside. Energy was also buoyed from the vaccine in addition to the IEA that has boosted its demand outlook for 2020 but cut its 2021 outlook due to the improved view on a 2020 recovery.  

Ford (F) faces plant closures in the US as its Mexico plant working at half capacity is not producing enough engines. Gilead (GILD) released a ‘Remdesivir’(sold under the name Veklury, broad-spectrum antiviral medication) update, which was associated with an improvement in clinical recovery and a 62% reduction in risk of mortality; 74.4% of treated patients recovered by day 14 (vs 59% of patients receiving standard of care). American Airlines (AAL) is reportedly threatening to cancel some Boeing (BA) 737 MAX orders, according to WSJ sources. SPX +1.07% at 3186, NDX +0.76% at 10,836, DJI +1.44% at 26,075.  

Yields were ultimately higher on Friday, with the 10- year failing to hold/extend its gains beneath the 60bps figure at 15.5%, 10s +4bps at 64bps, and 30s +3bps at 134bps. The duration was bid into Europe alongside losses in the equity complex. However, the tide turned heading into the US session as the risk aversion pared. There were a few positive vaccine/treatment updates on the COVID front, as well as mean reversion being cited for the positive risk tone following Thursday’s risk sell-off. 

Market Outlook for Today

The risk tone began the week on a positive footing with Asia-Pacific indices residing in positive territory across the board, alongside mostly positive yields and lower levels of volatility. Leading indices to the upside is the Topix at +2.46%, followed by the Nikkei 225 at 2.22%, the CSI 300 at +1.92% and the ASX 200 and Hang Seng at +0.98% and +0.94% respectively.  

The risk tone began the week on a positive traction with Asia-Pacific indices resided with gains across the board, alongside mostly positive yields and lower levels of volatility.  

Within the FX arena, given the overall positive risk tone, it’s the AUD that leads the majors; although GBP has also remained well supported as the currency benefits from reports that Chancellor Sunak is planning post-Brexit cuts on taxes and red tape to support the economy. In contrast, JPY is the session’s slacker, followed by USD with DXY breaking below last Friday’s lows while GBPJPY advances back above 135.00 and Friday’s highs. 

Overview for the Week Ahead

In the sessions ahead today and for the week, we will be looking to comments from Fed’s Williams and BoE Governor Bailey, which will be influential to USD and GBP respectively. However, all-in-all, the risk tone will likely remain the dominant driver throughout the FX complex with an ongoing risk-on tone supporting high-beta and pressuring safe-havens. Of course, if the risk tone sours and turns risk-off, expect safe havens to pare their recent weakness and high-beta to pare their recent gains. 

Today’s High Impact Events

The times below are GMT+3

Monday 13th July

  • 18.30 – UK BOE Governor Bailey Speech 

Potential instruments to Trade: GBP crosses especially GBP/JPY on Daily Chart & Gold.

Tuesday 14th July

  • 9.00 – UK Gross Domestic Product (GDP) 

Potential instruments to Trade: GBP crosses especially GBP/JPY on Daily Chart & Gold.

  • 9.00 – Germany Harmonised Index of Consumer Prices  

Potential instruments to Trade: EUR crosses.  

  • 11.00 – ECB Bank Lending Survey 

Potential instruments to Trade: EUR crosses.  

  • 12.00 – Germany ZEW Survey 

Potential instruments to Trade: EUR crosses.  

  • 15.30 – US Consumer Price Index (CPI) 

Potential instruments to Trade: USD crosses.  

  • 16.30 – Swiss National Bank (SNB) Chairman Jordan’s Speech 

Potential instruments to Trade: CHF crosses.

Wednesday 15th July

  • 06.00 – Japan Monetary Policy & Interests Rate Decision 

Potential instruments to Trade: JPY Crosse.s 

  • 09.00 – UK Consumer Prices Index (CPI) 

Potential instruments to Trade: GBP crosses.  

  • 09.00 – Bank Of Japan Press Conference 

Potential instruments to Trade: JPY crosses.  

  • 17.00 – Canada BOC Statement and Rate Decision 

Potential instruments to Trade: CAD crosses.  

  • 18.00 – Canada BOC Monetary Policy Report & Press Conference 

Potential instruments to Trade: CAD crosses.  

Thursday 16th July

  • 01.45 – New Zealand Consumer Price Index (CPI) 

Potential instruments to Trade: NZD Crosses. 

  • 04.30 – Australia Unemployment/Employment Related Data 

Potential instruments to Trade: AUD & NZD crosses.  

  • 09.00 – Bank of Japan Press Conference 

Potential instruments to Trade: JPY crosses.  

  • 9.00 – UK ILO Unemployment Rate 

Potential instruments to Trade: GBP crosses.  

  • 14.45 – ECB Interest & Deposit Rate Decision 

Potential instruments to Trade: EUR crosses.  

  • 15.30 – US Retail Sales Control 

Potential instruments to Trade: USD crosses.

Friday 17th July

  • 03.00 – EU Leaders Special Summit 

Potential instruments to Trade: EUR Crosses. 

  • 17.00 – Michigan Consumer Sentiment Index 

Potential instruments to Trade: USD Crosses. 

Coronavirus Update

World Health Organization reported a record daily increase in coronavirus cases which rose by more than 230k in 24 hours. (Newswires) US CDC reported new coronavirus cases rose 62,918 to a total of over 3.2mln, while the death toll rose by 906 to a total of 134,572. (Newswires) Florida coronavirus cases rose by 15,300 to a total of 269,811 which was the largest increase since the pandemic began although there was a substantial rise in testing and the percentage of positive cases fell to 11.25% from 12.59%. Texas coronavirus cases rose by 8,196 to a total of 258,658 and its hospitalizations rose by 327 to a 14th consecutive record high of 10,410, while Arizona cases increased by 2,537 which was the first day in more than a week in which cases increased by less than 3,000.  

(Newswires) UK coronavirus death toll rose by 21 to 44,819. (Newswires) UK PM Johnson said the UK is leading the hunt for a COVID vaccine although there is no certainty there will be a vaccine, while he added that a national lockdown option needs to be kept in reserve and that a local approach is more effective at tackling the virus (Newswires).

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