Weekly Market Outlook: All eyes on earnings and central banks

July 13, 2020 11:00

The much anticipated second-quarter earnings season is finally upon us. Heavyweight companies such as banking giants JP Morgan, Citigroup and Goldman Sachs are reporting this week, as are technology leaders Microsoft and Netflix. You can view the calendar breakdown further down.

While global indices ended higher last week, both traders and investors will be keen to hear the outlook for the rest of the year from some of the biggest names in corporate America. While the Nasdaq 100 stock market index trades at record highs, the other major indices such as the Dow Jones 30, S&P 500, DAX 30 and Nikkei 225 are still trading below their highs of the year.

Currency traders will also have an eye on a raft of different central bank announcements this week, including the Bank of Japan Monetary Policy Statement and Bank of Canada Rate Statement and Press Conference on Wednesday, along with the European Central Bank Press Conference on Thursday.

Source: Forex Calendar from the MetaTrader 5 trading platform provided by Admiral Markets UK Ltd.

Economic reports to watch

UK GDP Tuesday 14 July

The British pound has been one of the best-performing currencies in the last few weeks as some traders bailed on short positions ahead of the UK Chancellor's mini-budget announcement last week. Any optimism from a raft of measures to help businesses get back to normal may start to fizzle out as attention turns back to the deadlocked Brexit negotiations.

Tuesday's UK Gross Domestic Product (GDP) report - a measure of the change in total value of all goods and services produced by the economy - is forecasted to show a 5% growth month on month. While traders may not be expecting any significant changes - considering last month's report was -20.4% - current markets are much more sensitive to economic data shocks.

Source: Admiral Markets MetaTrader 5, GBPUSD, Daily - Data range: from 7 May 2019 to 12 July 2020. Please note: Past performance is not a reliable indicator of future results. Last five year performance: 2019 = +3.95%, 2018 = -5.54%, 2017 = +9.43%, 2016 = -16.26%, 2015 = -5.38%, 2014 = -5.97%.

In the daily price chart of GBPUSD above, price action currently sits inside of a trading range. The lift from the optimism surrounding the UK Chancellor's mini-budget has been contained at the top of the trading range which is also the 200-period exponential moving average. Traders may either trade in the range or wait for the price to break out.

ECB Press Conference Thursday 16 July

At Thursday's ECB Press Conference at 1.30pm BST, no changes are expected to be made to the central bank's currency monetary policy stance. In last month's meeting, the bank delivered on an increase in the size of the Pandemic Emergency Purchase Programme (PEPP) while also addressing Germany's Constitutional Court ruling on the legality of the Public Sector Purchase Programme (PSPP).

It's likely that the bank, headed up by ex-IMF chief Christine Lagarde, will wait for more economic data before making any significant changes. However, traders will be eager to hear from Lagarde herself who has said in the past that the stimulus measures brought by the bank are flexible and could even end early.

Source: Admiral Markets MetaTrader 5, EURUSD, Monthly - Data range: from 1 January 1995 to 12 July 2020. Please note: Past performance is not a reliable indicator of future results.

In the monthly price chart of EURUSD above, it's clear to see the long-term horizontal support levels which are holding the price in a trending range. It may be too early for the price to break out of such a long-term range until there is a political or economic divergence between the euro and US dollar.

Corporate trading updates and stock indices

This week marks the start of earnings season with some heavyweight companies reporting their latest second-quarter earnings. Global investors and analysts are in the dark on the outcome of this earnings season due to the volatile nature of the second quarter which included the period of the coronavirus pandemic and subsequent lockdowns.

Here are just a few companies reporting this week:

  • Monday 13 July - PepsiCo
  • Tuesday 14 July - Ocado, Delta Airlines, JP Morgan, Citigroup, Wells Fargo
  • Wednesday 15 July - Burberry, Goldman Sachs, Bank of NY Mellon, Alcoa, eBay
  • Thursday 16 July - Bank of America, Morgan Stanley, Johnson & Johnson, Microsoft, Netflix
  • Friday 17 July - Blackrock

While the Nasdaq 100 trades at record highs, other major stock market indices are still currently below their respective highs of the year which were made just before the coronavirus pandemic shocked the world.

Source: Admiral Markets MetaTrader 5, SP500, Daily - Data range: from 27 March 2019 to 12 July 2020. Please note: Past performance is not a reliable indicator of future results. Last five-year performance: 2019 = +29.09%, 2018 = -5.96%, 2017 = +19.08%, 2016 = +8.80%, 2015 = -0.82%, 2014 = +12.32%).

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