Monday, July 20, 2020

Week ahead: Corporate earnings, coronavirus vaccine, and US home sales

NBHM Research Team

The euro was among the best-performing currencies in the developed world as traders reacted to the ECB interest rate decision and a meeting of European Union leaders. On Thursday, the central bank decided to leave rates and quantitative easing policies unchanged. Meanwhile, the US dollar declined as the number of coronavirus cases in the United States continued to rise. During the week, investors reacted to the Bank of Japan and Bank of Canada decisions, OPEC+ meeting, corporate earnings, and Moderna’s vaccine progress.

US dollar: The US dollar declined against most currencies as traders reacted to the rising number of coronavirus cases in the US. In total, the country reported more than 200,000 new cases in the previous week. Also, the market reacted to upbeat economic data, including strong retail sales, inflation, and industrial production from the US. This week, the economic calendar will be relatively light.

On Wednesday, the National Association of Realtors (NAR) will release the existing home sales numbers. Analysts polled by Reuters see the sales coming in at 4.5 million from the previous 3.9 million. Finally, on Friday, the Census Bureau will release the new home sales numbers.

Gold: The price of gold stabilised last week after reaching its 7-year high. As shown below, the price struggled to move above the previous week’s high of $1,818. The price reacted to the strong economic numbers from the US, the rising number of coronavirus cases, and news that Moderna’s vaccine had made progress in early tests.

This week, the price will react to more vaccine news and the US housing numbers mentioned above. Analysts believe that the current environment of low interest rates and easy money is positive for gold prices. The chart below shows that gold price has formed an ascending triangle pattern. This pattern is usually a sign of continuation, meaning that the price is likely to break out higher.

NBHM Weekly overview

Crude oil: The price of crude oil remained steady as investors watched the OPEC+ meeting held on Wednesday. In the meeting, the members agreed to gradually increase production as global demand rises. A day before, the cartel had released its closely-read report that predicted a gradual rise in demand in the second half of the year. The prices received a boost after data from the EIA showed that inventories dropped by more than 7 million barrels. Also, the impressive 3.2% growth of the Chinese economy and the Moderna vaccine helped. This week, the only major news will come from the American Petroleum Institute (API) and the Energy Information Administration (EIA), who will release oil inventory numbers on Tuesday and Wednesday respectively. The four-hour chart below shows that, like gold, Brent crude oil has formed an ascending triangle pattern.

NBHM Weekly overview

Australian dollar: Last week, the rising number of coronavirus cases in Victoria and Melbourne outweighed the strong economic numbers. On Thursday, the statistics office reported better-than-expected jobs numbers. A few days before that, China reported upbeat import numbers that supportws the Australian economy. For example, it’s coal and iron ore imports rose to the highest level in years.

This week, we will continue to follow the coronavirus situation. Further, we will receive the RBA minutes for the minutes held earlier this month. On Tuesday, we will receive the retail sales numbers followed by the NAB quarterly business confidence index. Finally, on Friday, we will receive the flash manufacturing PMI numbers.

Canadian dollar: The Canadian dollar rose slightly last week as investors reacted to the moderate BOC interest rate decision, the falling number of coronavirus cases in the country, and higher oil prices. This week, the currency will react to retail sales numbers that will come out on Tuesday and inflation numbers that will come out on Wednesday. Analysts believe that retail sales remained under pressure in May. They see the headline sales falling by 15.1% on a year on year basis. The two numbers are important because they provide a good measure of consumer strength.

New Zealand dollar: The New Zealand dollar was relatively unchanged last week. That is possibly because there was no major economic data from the country. The only related number was the strong employment numbers from Australia and GDP data from New Zealand. This week, we will receive several important numbers from the country. On Tuesday, the central bank will release data on credit card spending, which is an important gauge of the economy’s performance. We will also receive the Global Dairy Trade Index, which is an important number because of the role of dairy in the country. Finally, on Friday, we will receive the June trade numbers.

British pound: The British pound was cautiously higher last week as investors reflected on several important news from the UK. They included car registration numbers, inflation, GDP, employment, and industrial production among others. This week, the economic calendar will be relatively light, with the only major data coming on Thursday, when the Confederation of British Industry will release its industrial trends data. On Friday, the ONS will release the June retail sales numbers. Analysrs expect that the sales will rise by 4.5% on a MoM basis and drop by 17.1% on an annualised basis.

S&P 500: The S&P 500 and other indices were mixed last week as investors reacted to corporate earnings data. Most banks reported large provisions for bad debt as they started to project many delinquencies. However, Goldman Sachs and Morgan Stanley surprised investors with their success in the trading segment. This week, among the main companies to watch will be IBM, Philips, Haliburton, Coca Cola, Lockheed Martin, Microsoft, Gilead, and Amazon, among others.​

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