Week Ahead – Is the economic recovery stalling?



Possible further evidence that the US economy is stalling could continue to take a bite out of risk appetite.  On Monday, the ISM manufacturing reading is expected to show the rebound continues, with textile mills, wood products and furniture leading the way.  The virus spread however will drag down prospects for new orders and investors will likely be skeptical of any strong prints.

The main event of the week is the US July unemployment report.  Job growth is expected to come in at a much slower pace, a gain of 1.52 million jobs, lower than the prior 4.8 million in June and the 2.5 million in May.  Given the volatility of this release, traders should not be surprised if we see a negative print.  If too much damage happens in the labor market, it won’t matter how much stimulus is thrown at the situation.  The recovery can level off, but if it reverses, that could trigger a significant selling of risky assets.

US Politics

Lawmakers have botched the latest COVID-19 relief bill.  Partisan politics provided unnecessary uncertainty for many Americans and that will weigh significantly with upcoming consumer data points.

Former-VP Biden will make his decision on his running mate.  Biden has signaled four African American women are under consideration as his running mate.  Biden will turn 78 a few weeks after the election, so his VP selection will be critical for many voters.


The EU is officially in recession. No shock there, obviously, but as with the rest of the world, there are pockets of concern, Spain being one of those. With the UK imposing restrictions on those travelling to Spain this week, the tourism sector looks set to take another hit in what should have been the crucial final months of the summer. This may not be the bounceback third quarter the country had been hoping for. PMIs next week may give a sense of the mood heading into the end of the summer among businesses.


The sterling recovery trade gathered momentum this week, even as parts of the UK faced tightening restrictions following a rise in Covid cases. The inevitability of this possibly explains why the currency has shrugged off these latest developments but its resilience may be tested over the next month.

Next week’s BoE meeting shouldn’t offer much of interest, with the central bank having only just increased its asset purchases and policy makers not likely ready to go negative on rates.

South Africa

South Africa is in the midst of a severe recession and is expected to contract by more than 7% this year. This comes as government debt balloons and with its credit rating already in junk territory. Moreover, Covid cases and deaths are on the rise even as the government attempts to ease restrictions, which have been among the harshest in the world. Difficult days lie ahead.


The Caixin PMI’s are expected to remain expansionary highlighting a slow but steady recovery.

Geopolitics is quiet at the moment as domestic issues take Trump’s attention.

Hong Kong

Covid-19 spread increases restrictions in HK. HK CEO to announce postponement of election due to Covid-19. Comes after 12 opposition candidates were barred under security provisions. None of this is good economic news for Hong Kong.



Covid-19 cases continue skyrocketing. India is now in top 4 for infections. INR remains under pressure as stress on the government budget and banking sector continue. A weaker US Dollar appears merely a stay of execution.  Very real possibility that India will repeat Indonesia’s recent playbook, and get the central bank to directly purchase new government bond issues. Negative currency and stocks.

Highest risk economy in Asia from an economic and Covid-19 perspective.

The Reserve Bank of India to cut 25 bps this week, will not lift the gloom.


Australian Dollar grinds higher but momentum slows as domestic issues weigh heavily..

Restrictions increased in Melbourne as Covid-19 cases jumped to 700+ a day. Borders closed with NSW and Queensland. Community infections increase in Sydney. Beginning to weigh on domestic recovery sentiment. The return of movement restrictions in Sydney a potential negative game-changer.

RBA rate decision. Unchanged but uber-dovish guidance. AUD has not rallied high enough to bring comments yet.


USD/JPY has crashed through 106.00 approaching 104.00. Higher Yen is driven by weaker Dollar and haven flows, weighing on Nikkei 225 with its export heavy components.

Covid-19 cases continue spiking higher in Tokyo. Local government is close to finally declaring a state of emergency. Negative Japan equities and Yen.



Crude prices could start to slide further since global oil demand continues to struggle and as OPEC+ begins to ease production cuts.  WTI crude prices continue to hang around the $40 level since the consensus remains that the worst of the economic downturn is behind both the Americans and Europeans.  The global economic recovery is teetering but a persistently weaker dollar and the ability for OPEC+ to remain nimble regarding production cuts have provided a strong layer of support for oil prices.

Important Chinese manufacturing data showed their recovery is still intact, however concerns remain that the data is plateauing.  The crude demand outlook will be dictated by the spread of the virus and in the short-term, it seems the US is getting a handle of the virus and that after a painful few more weeks, new cases, hospitalizations will all be trending lower.

Oil prices seem poised for further consolidation with risks to the downside.  WTI crude could consolidate between the $38.50 and $42.50 region for the next week.


Gold mania continues and after tentatively clearing the $2000 level, traders are starting to doubt whether a profit-taking pullback is in the cards.  Safe-haven demand remains strong as Congress and the White House continue to struggle to break the impasse on extending emergency unemployment benefits.  Gold will continue to shine bright as real yields continue to fall deeper into negative territory, virus surges will keep economic recoveries limited, and the stimulus trade will not go away until the labor market bounces strongly back.  Skyrocketing since the middle of July, gold should see a significant pullback at some point over the next week.


Bitcoin continues to benefit from the dollar’s demise.  The largest cryptocurrency in the world continues to dominate, now making up just under 80% of the crypto market.  Bitcoin seems like it has room to run higher but calls for a return to record highs seems premature.

Key Economic Events:

Sunday, Aug. 2
-Bavarian state premier Markus Soeder, an emerging contender to succeed German Chancellor Angela Merkel as the candidate for Germany’s ruling coalition in the next general election, gives an extended interview to ARD TV.

Monday, Aug. 3
-St. Louis Fed President James Bullard speaks at a virtual event hosted by the Memphis branch of his bank. Chicago Fed President Charles Evans holds a conference call with reporters to discuss the economy.
-Most Canadian provinces observe the Civic/Provincial Day holiday. The Toronto Stock Exchange will be closed.
-Poland’s Supreme Court to rule on complaints of irregularities in July presidential election.
Economic Data:
US ISM manufacturing, construction spending, auto sales
Markit PMI manufacturing: Brazil, Mexico, U.S.
Brazil trade balance, total exports
Australia AiG performance of manufacturing index, CBA manufacturing PMI, inflation gauge, ANZ job advertisements, CoreLogic house prices
Japan GDP, PMI, vehicle sales
Markit PMI Vietnam, Malaysia, Indonesia, South Korea, , Thailand, Taiwan, India
China Caixin PMI
Thailand business sentiment index
Singapore purchasing managers index, electronics sector index
South African PMI, vehicle sales
Switzerland CPI, PMI
Sweden GDP
Manufacturing PMI Spain, Sweden, Netherlands, Italy, France, UK, Eurozone, Germany, Norway, Greece, Denmark, Ireland, Hungary, Polish,
Italy new car registrations, budget deficit
Tuesday, Aug. 4
Economic Data
U.S. factory orders, durable goods
Canada Markit manufacturing PMI, trade
Australia rate decision, trade, retail sales, ANZ Roy Morgan consumer confidence, commodity index
Japan monetary base, CPI
Saudi Arabia crude prices
South Africa economic outlook
France budget balance
Spain unemployment
Turkey CPI
Switzerland consumer confidence

Wednesday, Aug. 5
– EIA crude oil inventory report
-Cleveland Fed President Loretta Mester discusses the economic outlook
-Samsung plans to unveil a slate of new mobile devices at a virtual Galaxy Unpacked event
-Bank of Japan Governor Haruhiko Kuroda and former Fed Chair Janet Yellen take part in an hour-long web event hosted by Columbia University.
Economic Data
U.S. ADP employment change, trade balance
Canada international merchandise trade
New Zealand house prices, unemployment, ANZ commodity prices
Australia performance of construction index, CBA PMI
Markit PMI Hong Kong, Singapore, India
Japan PMI
China Caixin PMI
Thailand rate decision, CPI
Services PMI Spain, Sweden, Italy, France, Germany, U.K., South Africa
Thursday, Aug. 6
Economic Data
U.S. initial jobless claims
India rate decision
New Zealand inflation expectation
Italy Industrial Production
U.K rate decision
Czech rate decison
South Africa electricity production
Friday, Aug. 7
-The U.S. July nonfarm payroll report: 1.52 million eyed vs 4.8 million prior, expected to show payrolls grew for a third consecutive month.
Economic Data
U.S. unemployment rate, wholesale inventories, Baker Hughes U.S. rig count
Mexico CPI
Chile trade balance, copper exports
Canada unemployment rate
Australia AiG performance of services index, RBA statement on monetary policy
Japan cash earnings, business cycle indicators index, household spending
China trade, BoP, foreign reserves
South Africa bond holdings, reserves
Germany Industrial Production
Sovereign Rating Updates:
– Russia (Fitch),
– Czech Republic (Moody’s)

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya