Weekly Market Outlook: Brexit talks, FOMC and Oil markets are in focus
In a relatively quiet week of high impact economic news announcements, there are some big picture narratives to keep an eye on.
Brexit talks resume this week and traders will be looking for much more progress than in last month's talks which were seen as 'crucial' but ended up with nothing. EU officials have already complained that trade talks have been going around in circles while UK negotiators say there are still significant differences on many different issues.
European traders may well be more concerned with Friday's French and German Services and Manufacturing PMI figures, which are released in the morning. While the Brexit counter is ticking it's not at 'crunch' time just yet, which means the Euro could be more impacted by what's happening domestically and - in particular - whether or not the EU's leading nations are showing signs of growth after the coronavirus pandemic period.
Oil markets will also be in focus this week as OPEC and other oil-rich nations meet on Wednesday to discuss the state of the oil market and production levels. Oil prices have stagnated in recent weeks after a record amount of volatility from February to July which involved the impact of the coronavirus pandemic and an oil price war between Russia and Saudi Arabia.
Global stock market indices showed some signs of hope early on last week before giving back their gains before the week closed out. While the Nasdaq 100 has been trading at all-time highs for quite some time, the only other index to come close to its all-time high price level is the S&P 500 which just missed it by a few points last week. All eyes may be on whether Congress can reach a deal for the next round of economic stimulus measures.
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Key economic reports and markets to watch
UK Retail Sales and PMI numbers
It's really setting up to be a big week for UK markets with key economic data points throughout the week as well as another round of Brexit talks starting. Here is a list of the key economic data points:
- Wednesday 19 August 7 am BST - Consumer Price Inflation
- Friday 20 August 7 am BST - Retail Sales
- Friday 20 August 9.30 am BST - Manufacturing and Services PMI
While the Bank of England may not yet be worried about Wednesday's inflation figures, any big drops from the forecasted 1.3% could be a cause for concern. If consumers are shunning the high street and forcing businesses to lower prices it could spell trouble for an economy that survives on the health of its buyers.
It's another reason why Friday's retail sales figures are so important. Investors - and the UK government - will want to see consumers are back on the high street now that lockdown restrictions have been eased. It is even more important as the UK government initiated a series of measures to help boost trade for the hospitality industry. When will they start to see a return on their money?
Of course, Brexit talks pose another risk factor for the week. Investors will want to see some progress being made but may already be resounded to the fact nothing major will happen until the last minute. The clues will be in how the price moves over the course of this week.
Source: Admiral Markets MetaTrader 5, GBPUSD, Monthly - Data range: from Nov 1, 2012, to Aug 17, 2020. Please note: Past performance is not a reliable indicator of future results.
The British pound against the US dollar currency pair is currently trading around an interesting area of technical resistance - the top of a descending triangle formation. After some impressive upside since the March lows, the next few months will be crucial on whether price can break through this level and attract more buyers, or whether price rejects the level and attracts more sellers.
The volatility of this week's news announcements could provide some interesting insight into the state of buyers and sellers.
Corporate trading updates and stock indices
In last week's trading, global stock market indices showed signs of a potential rally early on before traders bailed on positions before the week closed out. Currently, only the Nasdaq 100 has been trading at all-time highs as investors have piled into all different types of technology stocks.
The next stock market index which is close to its all-time high price level is the S&P 500 which just missed it by a few points last week. Traders may well be looking for the market to reach its all-time high price level before questioning whether to continue to buy or start taking profits off the table from the rally off March lows.
Traders will be keeping an eye on Congress and whether the Democrats and Republicans can come to an agreement on what the next round of economic stimulus measures should look like. The earnings calendar is quite light this week but there are still a few releases traders may be keeping an eye on. These include:
- Tuesday 18 August: Wal-Mart, Home Depot, BHP Billiton (UK)
- Wednesday 19 August: Target, Lowe's, Agilent Technologies
- Thursday 20 August: Estee Lauder, Antofagasta (UK)
- Friday 21 August: Deere & Co
The daily chart of the S&P 500 stock market index below shows just how close price is to its all-time high of around 3396.00 made just before the coronavirus pandemic towards the end of February.
Source: Admiral Markets MetaTrader 5, SP500, Daily - Data range: from Nov 21, 2019 to Aug 17, 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 = +8.08%, 2015 = -0.82%, 2014 = +12.32%.
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