The US Independence Day holiday kept trading, market activity and volatility subdued for much of last week. In any case equity markets and risk assets have been struggling on the topside and appear to be losing momentum. Markets are being buffeted by conflicting forces; economic news has beaten expectations. For example, the US June jobs report was better than expected though total job gains of 7.5 million in recent months are still only around a third of total jobs lost. In contrast, worsening news on Covid 19 infections, with the WHO reporting a one day record high in global infections, threatens to put a dampener on sentiment. Consolidation is likely, with Summer trading conditions increasingly creeping in over the weeks ahead. As such volatility is likely to continue to be suppressed, aided by central banks' liquidity injections.
Over recent weeks geopolitical risks have admittedly not had a major impact on markets but this doesn’t mean that this will remain the case given the plethora of growing risks. China's installation of new security legislation into Hong Kong's basic law and the first arrests utilizing this law were in focus last week. A US administration official has reportedly said that the president is considering two or three actions against China, and markets will be on the lookout for any such actions this week, which could include further sanctions against individuals are more details of what the removal of HK's special trading status will entail. Meanwhile the US has sent two aircraft carriers to the South China Sea reportedly to send a message against China's military build up in the area, with China's PLA conducting a five-day drill around the disputed Paracel Islands archipelago.
Data releases and events this week are unlikely to lead to a change in this dynamic. At the beginning of the week attention will focus on further discussions between the UK and EU over the post Brexit landscape while in the US the June non-manufacturing ISM survey will garner attention. So far talks on a trade deal between the UK and EU have stalled though there were hints of progress last week, even as officials admitted that "serious divergencies remain". The US ISM non-manufacturing survey is likely to move back to expansion (above 50) but is increasingly being threatened by the increase in Covid infections, which could yet again dampen service sector activity. On the policy front there will be fiscal updates from the UK and Canada on Wednesday against the backdrop of ramped up spending, and monetary policy decisions by the Reserve Bank of Australia (RBA) and BNM in Malaysia on Tuesday. The RBA is widely expected to keep policy unchanged while BNM may cut rates by 25 basis points.
The views expressed here are purely personal and do not represent the views or opinions of Calyon.
The information published at econometer.org and republished at FXstreet.com has been prepared on the basis of publicly available information and other sources believed to be reliable. Whilst all reasonable care is taken to ensure that the facts stated are accurate, the author is not in any way responsible for the accuracy of its contents. The comments are intended to provide clients with information and should not be construed as an offer or solicitation to buy or sell securities, currencies or any other financial product. The author makes no recommendations as to the merits of any financial product referred to in this website, emails or its related websites and the information contained does not take into account your personal objectives, financial situation and needs. Therefore you should consider whether these products are appropriate in view of your objectives, financial situation and needs as well as considering the risks associated in dealing with those products.
Recommended Content
Editors’ Picks
USD/JPY advances toward 149.50 ahead of crucial BoJ policy decision
USD/JPY is rising toward 149.50 in the Asian session on Tuesday, picking up fresh bids. Traders keenly await the highly-anticipated Bank of Japan policy decision. The BoJ's outlook on the negative interest rate policy and the Yield Curve Control (YCC) will play a key role in influencing the Japanese Yen.
AUD/USD creeps lower to test 0.6550 ahead of RBA’s decision
AUD/USD is grinding lower to test the 0.6550 level in Asian trading on Tuesday. The Aussie Dollar stays on the defensive against the US Dollar as markets prepare for the Reserve Bank of Australia's extended pause but the Bank's rate outlook will hold the key.
Gold stays afloat despite high US yields as traders focus on Fed policy
Gold sees a modest increase, as investors watch this week's central bank meetings. Focus remains on the Federal Reserve, where a hawkish stance could potentially impact XAU/USD price while bolstering the US Dollar.
Avalanche price could rise 20% on gaming narrative ahead of GDC conference
Avalanche is an outlier on Monday, rallying while the broader market is crashing. It has outperformed Bitcoin price, as well as meme and AI crypto coins, sectors that have been thriving of late.
Australia Interest Rate Decision Preview: RBA set to stand pat after discussing rate hikes in February
The Reserve Bank of Australia is widely expected to hold the Official Cash Rate steady at a 12-year high of 4.35% following the conclusion of its March monetary policy meeting on Tuesday. The decision will be announced at 03:30 GMT.