Week Ahead – The focus remains on COVID-19, the Fed and Congress


The US economic recovery depends on three factors, namely, COVID-19, the Fed, and Congress. The battle against the coronavirus in the Sunbelt is improving, but the US is still seeing the death toll rise by over 1,000 every day. The CDC forecasts nearly 189,000 US coronavirus deaths by 5 September. A big amount of focus will fall on how successful some schools are with their in-person classes. If large parts of the country see failed openings of schools, that lead to a fresh surge of virus spread, the reopening of the economy will struggle strongly and sink risk appetite.

The Fed put has never been greater and that is why risky assets have rebounded sharply since the end of March. The upcoming Fed minutes could provide further insight on how the review of its monetary policy framework is progressing. The 28-29 July FOMC meeting provided no surprises as they reiterated that they will keep rates very low until they are confident the economy is underway and the increase of asset holdings will stay at the current pace. The minutes will likely emphasize the importance of fiscal support and given Washington DC’s current struggles; the Fed will likely be forced to do more for the economy.

The aftermath of Saturday’s meeting between the US and China will likely have a big impact with risk appetite. US and Chinese negotiators review the terms of the phase-one trade deal, with Beijing pushing to widen the agenda to include President Trump’s crackdown on businesses including TikTok and WeChat. It would make all the sense in the world for both sides to deliver a de-escalation, but that seems less likely.

US Politics

Capitol Hill failed to deliver the next round of stimulus and next week will likely be the blame game. The economy has been heavily reliant on government aid and we could quickly find out that the recovery will quickly stall now that it seems nothing will be done till September.

Former-VP Biden will officially accept the Democratic nomination at the 2020 Democratic National Convention. The four-day event will be held on 17-20 August, at the Wisconsin Center in Milwaukee, Wisconsin. All the speeches will be virtual due to concerns about the coronavirus.


ECB minutes shouldn’t reveal too much of note this week, with the central bank committed to stabilizing the economy but unlikely to increase its programs just yet having only recently done so with PEPP. Reports of Euribor falling below the ECBs own official rate this week appear to suggest the system is flooded with liquidity but probably too early to consider removing any unless it becomes a common feature.


The UK is in its most severe recession ever but growth in June was encouraging, at 8.7% compared with May. The Bank of England recently raised its forecasts for the year, likely reflecting such a rebound as shops reopened.

The UK added France, Netherlands, Monaco and more to the quarantine list that already contains Spain this week as the countries exceeded 20 cases per 100,000 people over the course of seven days. With Europe seeing a rising number of cases at the moment and the UK keen not to see a severe second spike of its own, others may follow.


Talks to continue next week with the aim of finding agreement on the more contentious issues, notably fishing rights and level playing field. Both sides are keen to have an agreement by September but we’ve all seen how these things play out. A deal remains the hope of both sides, especially under the circumstances with the pandemic wreaking havoc on the global economy, but it may go down to the wire.


Divided by financial markets that want higher interest rates and President Erdogan who wants cheaper funding costs, the Central Bank of the Republic of Turkey will likely make no changes to interest rates, but leave the door open for stealth hikes.


China’s Retail Sales and Industrial Production hints that it is not immune from the global slowdown. However, all eyes will be on the trade deal progress report meeting between the US and China this weekend. Its outcome will set the tone for the early part of the week in Asia.

China’s PBOC will launch a new medium-term lending facility on Monday, ostensibly to roll over the CNY 400 bio that is maturing, but it could also increase the amount and boost markets. The PBOC has actually been withdrawing liquidity over the past two months.

The PBOC is unlikely to cut its one and five-year Loan Prime Rates on Thursday. China is keeping its monetary powder dry, as it has for much of the year.

Hong Kong

Covid-19 restrictions have been tightened again in Hong Kong as it battles to contain the latest wave of Covid-19.

Another day, another set of arrests under the new security law is further eroding confidence in the SAR. How banks navigate the delicate path between China security and US sanctions will be an evolving story in Q4.

Wednesday’s unemployment data expected to remain steady at 6.20% with the SAR mired in a deep recession.


Covid-19 continues to wreak havoc on the domestic economy, heightening fears about growth as the stability of the banking system. The Rupee has stabilized for now thanks to a weaker US Dollar but continues to be an Asian underperformer along with the Indonesian Rupiah. India’s economic conflict with China is heightening, if anything, but it’s fallout on the domestic economy is limited at this stage. India has more pressing concerns.

Reserve Bank of India minutes released on Thursday will be interesting reading as the RBI threads the needle between monetary stimulus and supporting the currency.


The Reserve Bank of Australia was unchanged this week, but extremely dovish in its outlook. That was reinforced by statements by various RBA officials later in the week. The RBA will press the monetary policy accelerator to the floor if necessary.

Concerns continue about the drag on the economy of the Victoria state lockdown, with movement restrictions in force between other states. An escalation of the community outbreak in Sydney could rapidly unravel Australia’s recovery.

RBA minutes will reinforce that message and Friday’s Services PMI should continue to remain in recovery territory. The Australian Dollar’s advance has well and truly stalled, risking a decent correction lower this week.


Japan has a heavy data week ahead. Monday likely shows Japan’s GDP likely contracted by an enormous 27% annualised in Q2 with Industrial Production shrinking 18%. Wednesday should show a modest MoM recovery in Machinery Orders, but Friday’s PMI is expected to be flat at 45.0. Overall, the picture painted will be one still mired in a deep recession.

USD/JPY has rallied strongly recently as Japanese fund managers rotate into overseas bonds. The data will reinforce that premise and USD/JPY could well advance to near 108.00 by the week’s end.

Covid-19 cases continue to stubbornly increase in Japan, presenting yet another growth risk to a government that is determined to keep the economy open, no matter the outcome.




Oil prices have been consolidating over the past few months as energy demand slowly improves. The focus this week will fall on Wednesday’s OPEC+ JMMC meeting which will study compliance with the coalition’s output restraint deal and strategies going forward. Initially planned for Tuesday, the meeting was pushed back a day at the request of Russia.

The global oil market is slowly stabilizing and that will likely keep OPEC+ committed to keeping the production cuts in place for the rest of the month. The crude demand outlook is not improving fast enough to warrant the easing of output cuts.


Gold mania is ready for a break and with that prices could see a small period of consolidation between the $1900 and $2000 level. The pullback could deepen if Treasury yields continue to rise, but that seems difficult in the short-term. Gold’s strong fundamentals will likely see a broad spectrum of investors buying every major dip. The primary drivers for higher gold prices remain unprecedented stimulus will continue until next year, global growth risks, geopolitical tensions, and the fall wave of the coronavirus.


Bitcoin continues to attract new investors as central bank show no end in sight for their stimulus measures. 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.



Saturday 15 August

-The UK government must announce by 15 August whether casinos and other facilities in England can reopen. The move was delayed by concern about spikes in the number of coronavirus cases, which have led to local social-distancing measures and may do so again. Parliament is in recess until 1 September.

Monday 17 August

-Democratic National Convention is held in Milwaukee, Wisconsin. The speeches will be virtual, including Joe Biden’s acceptance speech. Biden’s running mate, Kamala Harris, will give her acceptance speech on 19 August, and Biden will accept the nomination on the final day of the event, 20 August.

-Bank of Canada releases its Senior Loan Officer Survey on the business lending practices of Canadian financial institutions.

-Atlanta Fed President Raphael Bostic discusses “inclusive innovation” at a virtual event hosted by the Rotary Club of Atlanta

Economic data:

  • S. empire manufacturing, net TIC flows
  • Japan GDP, industrial production
  • Singapore exports
  • Thailand GDP
  • Philippine overseas remittances
  • K. Rightmove house prices

Tuesday 18 August

-The sixth round of talks on a trade deal between the EU and the U.K. is scheduled to take place in Brussels through the rest of the week.

-Norway’s $1.2 trillion sovereign wealth fund publishes its first-half report.

Economic data:

  • S. building permits, housing starts
  • Australia central bank minutes

Wednesday 19 August

– Fed’s Minutes of the 28-29 July meeting that highlighted that the economy has picked up in recent months but still below pre-pandemic levels.

– Key OPEC+ ministers will meet online to review strategies for poor compliance, a dominant topic of recent gatherings.

– EIA crude oil inventory report

-The National Economist Club hosts a conversation with Richmond Fed President Thomas Barkin on the economic outlook.

Economic data:

  • Canada CPI
  • New Zealand PPI
  • Japan trade, core machine orders
  • Australia Westpac leading index
  • Hong Kong jobless rate
  • Philippine balance of payments
  • K. inflation rate

Thursday 20 August

-San Francisco Fed President Mary Daly discusses the new future of work at an event hosted by her bank.

-Bank of Canada Deputy Governor Lawrence Schembri gives a video webcast speech.

-The ECB publishes the account of the monetary policy meeting of the Governing Council held July 15-16.

Economic data:

  • US initial jobless claims, leading index
  • Argentina economic activity
  • China loan prime rate
  • Turkey interest rate decision
  • Philippine interest rate decision
  • Taiwan export orders
  • Hong Kong CPI
  • Norway rate decision
  • Macau visitor arrivals

Friday 21 August

Economic data:

  • S. Baker Hughes U.S. rig count, Markit manufacturing PMI, existing home sales
  • Mexico retail sales
  • Canada retail sales
  • South Korea PPI
  • Japan CPI
  • New Zealand credit card spending
  • Malaysia CPI, foreign reserves
  • Euro-area PMIs, consumer confidence
  • K. PMIs, public sector net borrowing, retail sales

Sovereign rating updates:

  • Turkey(Fitch), Switzerland (S&P), and France (Moody’s)

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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