By Deepta Bolaky
Another packed week for investors with the focus predominantly on the US-China tech war, the controversial executive orders for the US coronavirus relief, the growing number of COVID-19 cases in Europe, and leading economic releases.
Following signs of improvement in the manufacturing data and better-than-expected jobs report, investors will continue to monitor incoming economic data to determine the extent of the resurgence of the number of infections against economic recovery. Retail Sales will stand out this week as investors will try to gauge the impact of renewed lockdowns on the American shopper. In May, Retail Sales jumped to 18.2% – the highest level on record followed by an increase of 7.5% in June. The July monthly reading is expected to be lower at 1.7% given the lockdown restrictions. Industrial Production updates will also be eyed and are expected to increase by 3.3% in July.
On the economic front, it will be a muted start of the week. Consumer Surveys and Jobs reports will dominate the news towards the end of the week. The stricter lockdown measures in Melbourne following the mounting number of coronavirus cases will likely negatively impact the employment data. The unemployment rate is expected to increase from 7.4% to 7.8%. The Australian dollar remains strong despite the virus woes but any worse-than-expected jobs figures may impact the uptrend of the local currency. Eyes are also on the clusters in New South Wales.
In New Zealand, the RBNZ meeting will gather much attention. The RBNZ is expected to strike a similar tone as the RBA. We do not expect any policy changes in this meeting – we may see the expansion of the quantitative easing programme and further insights on the views of the central bank on negative interest rates.
Aside from the brewing tech war between the two most powerful countries, Retail Sales and Industrial Production figures will be the highlights.
After the rebound seen in the manufacturing sector, attention will switch to the GDP figures and the employment data. The second-quarter GDP figure is expected to show a severe contraction of more than 20%. Manufacturing and Industrial Production are expected to improve as the country has eased lockdown restrictions.
The start of the week will probably be geared around the controversial executive orders of the US coronavirus relief package, the start of a new cold war between the US and China and the fears of a second wave in Europe against improving economic data.
In the pandemic-induced environment and escalating geopolitical tensions, gold is shining bright. Last week, the precious metal rose above the $2,000 mark for the first time and reached a high of $2,072.25. Gold has been on an unstoppable rally recently as investors are hedging with safe-haven assets. A weaker US dollar is also helping the bullish momentum. The fundamentals remain bullish amidst the ongoing uncertainties.
By Deepta Bolaky
|Tuesday, 11 August 2020
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