A relatively quiet start to last week, with markets still in consolidation mode from mid-July, BUT that all changed from midweek, with the Federal Reserve in play Wednesday, President Trump taking to Twitter on Thursday and the always much watched US Employment report last Friday.
Wednesday saw the end of the two-day meeting of the Federal Open Market Committee (FOMC). The result was an expected 25bp rate cut, which then produced a broader “risk off” move with equity markets selling off, somewhat disappointed with a less dovish tone than anticipated from the Fed. Then markets saw a more aggressive move lower for equities and a strengthening of the US Dollar in the wake of Chairman Powell’s comments after the rate cut announcement, stating that the rate cut was a “mid-cycle adjustment”.
Thursday then saw an initial rebound higher in equity markets before President Trump Tweeted that the US would impose another 10% of tariffs on $300bn of Chinese goods from 1st September. This again sent the equity markets plunging lower and the US Dollar gained versus most currencies (but with the Japanese Yen by far the strongest performer).
Finally, Friday saw the release of the much-watched US Employment report. This report came in mixed, but again saw equities lower and pushed the US Dollar to the upside against most currencies.
Throughout the broad “risk off” scenario from the middle of last week, Gold has been a firm performer, whilst the Japanese Yen has rallied even more than the US Dollar across G10 currencies, in flight to quality moves. Equities averages in the US, Asian and Europe all look technically vulnerable to further losses into August.
What to Watch
Key this week will be to monitor further comments from Fed speakers as to the potential impact on the US economy from the imposition of further tariffs. Plus, any further developments on the US-Sino trade talks from the White House.
The key macroeconomic data points in focus for this week are; global Purchasing Managers Index (PMI) surveys Monday, the Reserve Bank of Australia (RBA) rate decision Tuesday (expected unchanged) and the Reserve Bank of New Zealand (RBNZ) rate decision Wednesday (rate cut possible). We also get UK GDP on Friday.
Earnings season is coming to an end but with Walt Disney (US) the standout this on Tuesday after the close.
- Monday: Markit PMI (global); US ISM Non-Manufacturing Index
- Tuesday: RBA rate decision
- Wednesday: RBNZ rate decision
- Thursday: China Trade report
- Friday: China CPI; UK GDP, Industrial and Manufacturing Production; Canadian Employment
- Monday: HSBC (UK)
- Tuesday: Walt Disney (US)