July 2020 Financial Outlook

By Thomas  Kareklas | VP Sales

Shaken Not Stirred

COVID-19 is still very much the biggest event affecting everything and everyone around the globe. June saw some countries begin to lift restrictions on lockdowns, but nowhere near a full return to normal. The skies remain ominously quiet, sporting events are played without crowds while Beijing went back into lockdown – Economies and Markets have been reflecting this major worldwide phenomenon. 

Economies have been severely shaken with recessions being expected everywhere. Where declines are less than expected we have seen minor gains in currencies, stocks and commodities – but overall volatility has reigned and will continue to do so during July. 

As people drift slowly back to work, economies have not stirred back into full life; there is apprehension and uncertainty hanging in the air.

Week of July 1

A shorter week starting on a Wednesday, you can see the first half of the week in the June 2020 outlook [Link]. In two high impact days we are expecting news on Employment /  Unemployment in Europe and the US, both are expected to show increases in Unemployment and decreases in incomes.

On Wednesday, July 1, Europe takes center stage with the release of unemployment numbers. The Euro will be looking for any positives that can be taken from the numbers released, with indications of PMI and Employment being released later from the US, we could see moves on EURUSD.

Thursday, July 2, we get announcements from the US on Unemployment and Average Hourly Rates. The US has not fared well during the Coronavirus pandemic and there is less consensus on what to expect – what we can expect is volatility – this is the conversation to have with traders.

Week of July 6

The week could well start as it ended with the US when the Non-Manufacturing PMI data becomes available on Monday – we could see weakness or unexpected strength compounded. The rest of the week we shift to the Minors as we look to Australia and China.

Tuesday, July 7 Australia is to take an Interest Rate decision, with fragile economies globally, no change is expected. On Thursday, July 9, China releases its Consumer Price Index, for the first time in many years China is expected to move into decline with export markets also shrinking. Many analysts will be looking at China in order to predict how other economies will fare in post COVID-19 restrictions.

Week of July 13

This is the biggest week of the month by far. Get ready to have conversations with traders on a raft of events packed into three days. Use Monday to prepare as this is the calm before the storm. 

Britain kicks off the announcements on Tuesday, July14, with: the Unemployment rate, Unemployment benefits claimants, and Average Earnings report. As they are looking back to the 3 months from May we will start to see the true effects of Coronavirus on the economy. The next day, the UK also releases the year on year Consumer Price Index which is expected to rise by 0.5%. Any deviations from the expected may see high impacts, volatility and declines of GPB, Stocks, Markets and British Commodities. 

Also released on Tuesday is the German ZEW Economic Sentiment (published by the “Zentrum für Europäische Wirtschaftsforschung”). This is usually seen as an indicator for Europe as a whole and can have an impact on the Euro against other currencies.

Wednesday, July 15, focus switches to the Minors in a big way. Meetings in both the Bank of Japan and the Bank of Canada take place. Both will make a number of announcements during the day including interest rate decisions for their respective countries – a firm policy of no change is expected for both. 

Also on Wednesday, China and New Zealand will both release economic indicators. China is expected to release GDP statistics showing an almost 7% drop quarter on quarter and almost 10% for year on year with wider analysis on what this will mean for the global economy. New Zealand’s Consumer Price Index will have more localized effects on their currency, Markets, Stocks and Commodities. 

The European Central Bank meets on Thursday, July 16. Announcements on Interest Rates, Deposit Rates and a Monetary Policy Statement are not expected to surprise anyone, but in times of volatility small nuances may have effects on the Euro.

Although Sunday is traditionally a very quiet day, be aware that the Bank of Japan will release a statement on July 19.

Week of July 20

Compared to the previous week, we go back to a quieter week again. Monday sees the People’s Bank of China announcement on Interest Rates. 

The Royal Bank of Australia will release meeting minutes on Tuesday, while Canada releases year on year CPI on Wednesday – both could affect Minors. 

Thursday and Friday will see a raft of PMI stats released by both Europe and Great Britain which could have knock-on consequences for Currencies, Markets, Stocks and Commodities.

Week of July 27

By far the biggest event is the US Federal Bank’s Monetary Policy Statement and Interest Rate decision on Wednesday, July 29. Like all other national banks, no rate change is expected.  The US will also release annualized quarterly GDP statistics the following day. The same day, Thursday, a Harmonized CPI from Europe should give a good indication of the slew of CPI and GDP numbers released by the EU on Friday morning (July 31).

Looking Ahead

There is still a lot of volatility, apprehension and uncertainty now and moving ahead. There are many unanswered questions including whether August will be a typical slow down in activities (“Vacance” – as the French say) or given that the skies look to remain restricted and some countries will still close schools; are we going to still see people stuck in their homes?

There will be volatility and unpredictability in the markets and it is vital for traders to be aware and for brokers to ease them through this time in order to build lasting relationships.