Weekly Market Outlook: RBNZ, UK GDP and US Stimulus in focus!
Markets will be firmly focused on US stimulus talks, inflation numbers and retail sales figures this week. While the US dollar has been the weakest currency in the past month or so, traders may well be looking for a change in trend if this week's figures can build upon last week's positive Non-Farm Payrolls report.
First up on the calendar though will be Wednesday's Reserve Bank of New Zealand (RBNZ) monetary policy statement and press conference. While the country has managed the impact of the coronavirus better than most, its borders are sealed which is affecting its tourism industry. Interestingly, many New Zealand dollar currencies are trading at historic levels of long-term resistance as discussed further below.
Wednesday is also setting up to be a big day for the British pound as the UK releases its latest Gross Domestic Product (GDP) figures. The Bank of England has been more optimistic than many expected but traders will be interested to see whether or not the UK economy is growing. Any signs of weakness could bring back talks of 'negative interest rates.'
Global stock market indices diverged last week which is typical during earnings season. While US markets continued their upward trends, European indices struggled to follow suit - most likely due to a high euro and British pound. While earnings season is winding down there are still a few companies reporting this week such as Zalando, Cisco Systems, Lyft, ABN Amro, E.ON and more.
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Source: Forex Calendar from the MetaTrader 5 trading platform provided by Admiral Markets UK Ltd.
Key economic reports and markets to watch
US Retail Sales
The United States Census Bureau is due to release the latest retail sales figures on Friday 14 August at 1.30 pm BST. The figure is important as it's the primary indicator of consumer spending which is the most of all the economic activity in a country. With some states struggling to get out of lockdown due to an increase in coronavirus cases, traders are not looking for a huge rise.
However, with the backdrop of rising employment in last week's Non-Farm Payrolls number, a positive number could bring back US dollar bulls. While the US also releases inflation figures on Wednesday, the Fed is not interested in taming inflation just yet with the focus on getting the economy moving from a manufacturing, services and consumer perspective.
Source: Admiral Markets MetaTrader 5, #USDX_HU0, Weekly - Data range: from 14 July 2013 to 10 Aug 2020. Please note: Past performance is not a reliable indicator of future results. Last five-year performance:
Interestingly, the US Dollar Index, as shown above, has managed to stay above the key support level around 92.50. If US economic data can continue to improve this could be an area where recent sellers may exit with some buyers starting to potentially build positions on the possibility of further upside. A clear break below this level could see the index fall to the 88.50 price level.
RBNZ Monetary Policy Statement
The RBNZ is due to release its latest Monetary Policy Statement and Rate Statement on Wednesday 12 August at 03:00 am BST. This will be followed by a Press Conference at 04:00 am BST. Traders will be eager to hear the bank's recent review on the possibility of negative interest rates.
While New Zealand has fared better than most countries over the coronavirus pandemic, the RBNZ may stick with a dovish tone simply due to the fact its borders are still closed which could affect long-term unemployment. Interestingly though, many NZD cross-rates are trading at historical levels of resistance, as shown in the long-term weekly chart of NZDUSD below:
Source: Admiral Markets MetaTrader 5, NZDUSD, Weekly - Data range: from 28 July 2013 to 9 August 2020. Please note: Past performance is not a reliable indicator of future results.
The recent rally higher from the currency pair's March lows has stalled at significant levels of historical resistance as depicted in the chart above. A clear break above here will show the commitment of buyers in the market. However, a breakdown here could also be interesting, especially on the outcome of a weak NZD news announcement and strong US figures.
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Corporate trading updates and stock indices
Global stock indices diverged last week with US indices outperforming European and Asia indices. While Congress is yet to come to an agreement regarding the next round of economic stimulus measures, the hopes are that a deal can be done.
While the Nasdaq 100 has been on the only index to be trading at record highs, the S&P 500 is now only a few percentage points off its all-time high price level. Positive economic figures this week could help attract even more traders and investors into US markets.
Even though earnings season is winding down, there are still a few earnings announcements from some major heavyweights this week. This includes:
- Monday 10 August - Marriott International
- Tuesday 11 August - Zalando, Occidental Petroleum
- Wednesday 12 August - Cisco Systems, Lyft, E.ON, ABN Amro
- Thursday 13 August - Thyssenkrupp, Aegon, Deutsche Telekom
The long-term weekly price chart of the S&P 500 shows price just a few percentage points away from its all-time high price level around 3396. All eyes will be on stimulus talks in Congress with a deal helping to pave the way for a break above this level. However, with European indices still lagging and the Nasdaq 100 ranging, there is the possibility the lack of summer liquidity may remove some of the momentum seen in recent weeks.
Source: Admiral Markets MetaTrader 5, SP500, Weekly - Data range: from 28 July 2013 to 10 August 2020. Please note: Past performance is not a reliable indicator of future results.
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