Double – Dip Recession

The market mood is mixed as a new week begins as coronavirus cases continue rising in the US while hopes for a COVID-19 vaccine remain high. Hopes for a breakthrough in the EU Summit are keeping the euro bid.

Below are thumbnail sketches of the events and data that shape the macro picture.

Country

US

• COVID-19 cases have topped 3.7 million and deaths surpassed 140,000. Los Angeles is reportedly to announce a lockdown and cases in Florida are described as “out of control.” New figures are set to move markets later in the day, but the chances of new records are lower due to the “weekend effect.”
• President Donald Trump continued dismissing the issue, saying most cases are asymptomatic and only the “sniffles.” His handling or lack thereof of coronavirus is weighing on his standing in the polls. Trump trails rival Biden by around 9% and the Economist’s model given him only an 8% chance of being re-elected.
• The President will reportedly meet Republican leaders later on Monday to discuss the next steps of fiscal stimulus. Some of the emergency assistance such as unemployment benefits expires at the end of the month.

UK

• Brexit negotiations are resuming in the shadow of the EU Summit with low expectations for progress. The EU says its concession by the UK offers have not been reciprocated while London says Brussels’ suggestions do not go far enough.
• The UK is set to cancel its extradition treaty with Hong Kong, following China’s tighter grip over the city-state, angering Beijing. The Chinese ambassador to the UK said thee could be retaliation and hinted at his country’s investments in Britain. GBP/USD is moderately lower, under 1.2550.

Eurozone

• Headlines coming out of the fourth day of leaders’ talks in Brussels are suggesting that the Netherlands and the other “frugal” countries” are willing to accept €390 billion in grants, down from €500 billion originally suggested.
• Germany and France reportedly considered walking away. EUR/USD has risen back toward 1.1450 in hopes of a breakthrough.
• Citing an official familiar with the matter, the European Union (EU) hardliners are reportedly ready to accept EUR390 billion in grants on coronavirus recovery fund.
• This comes after the earlier Reuters report that the Frugal Four are ready to accept EUR390 billion in grants and EUR360 billion in loans.
• Austrian Chancellor Sebastian Kurz and Dutch Prime Minister Mark Rutte expressed their content over the current compromise proposals.

China

• The People’s Bank of China (PBOC) has set the yuan reference rate at 6.9928 versus Friday’s fix at 7.0043.

Australia

• AUD/USD is struggling under 0.70 as efforts to suppress the spread of coronavirus seem to have stalled and new restrictions are on the cards.

Japan

• Japan posted a merchandise trade deficit of 268.824 billion yen in June, the Ministry of Finance said on Monday.
• That missed expectations for a shortfall of 35.8 billion yen following the 833.4 billion yen deficit in May.
• Exports were down 26.2 percent on year to 4.862 trillion yen – shy of forecasts for a decline of 24.9 percent following the 28.3 percent drop in the previous month.
• Imports fell an annual 14.4 percent to 5.130 trillion yen versus expectations for a fall of 16.8 percent after sinking 26.2 percent a month earlier.

Market

Oil

• Oil market still struggling to clear the massive surge of Saudi exports that resulted from the short-lived price and market share war back in April.
• Data … shows a massive spike in Saudi oil exports to the US that have come onshore over the past six to eight weeks. In fact, there is still a large amount of crude oil on the water that is waiting to be cleared.
• WTI drops over 0.5% as dollar rises in risk-off trade 

Gold

• After settling last week higher around $1810, Gold is on the defensive starting out a fresh week. The risks, however, remain skewed to the upside with healthy support levels stacked up to limit any pullbacks.
• According to the Technical Confluences Indicator, the bright metal needs a decisive break the powerful supports around $1805 to reverse the near-term uptrend. That level is the confluence of the Fibonacci 38.2% one-week, one-day, SMA50 4H, SMA5 one-day and SMA100 one-hour.

Here’s a look at all the important market-moving factors for the week:

Week Ahead

All times listed are EDT

Monday

21:30 – RBA Meeting Minutes

Tuesday

8:30: Canada – Core Retail Sales: expected to surge to 12.5% from -22.0%.

21:20: Australia – Retail Sales: seen to drop to 7.1% from 16.9% previously.

Wednesday

8:30: Canada – Core CPI: likely to have jumped to 0.3% from -0.1%.

10:00: US – Existing Home Sales: seen to rise to 4.86M from 3.91M.

10:30: US – Crude Oil Inventories: probably soared to a drawdown of -2.098M from -7.493M.

Thursday

8:30: US – Initial Jobless Claims: came in last week at 1,300K.

Friday

2:00: UK – Retail Sales: forecast to drop to 8.5% from 12.0%.

3:30: Germany – Manufacturing PMI: expected to edge higher to 48.0 from 45.2.

4:30: UK – Manufacturing PMI: seen to edge higher to 51.0 from 50.1 previously.

4:30: UK – Services PMI: expected to rise to 51.0 from 47.1.

6:30: Russia – Interest Rate Decision: predicted to be cut to 4.25% from 4.5%.

10:00: US – New Home Sales: seen to rise to 700K from 676K.

Based on the above factors and the events lined up for the week, the analyst at RvR Ventures suggests you to Trade responsibly; invest only as much as you can lose. All the profits and losses due to the above data are your own personal responsibility. Kindly practice money management & risk mitigation while trading.

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