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Implied volatility matrix – looking at the implied range with a 68.2% degree of confidence and 80% (the outlier move).
Event risks this week – risks underlined are deemed to be a higher risk event for traders.
China – Caixin China PMI manufacturing (consensus 51.1 from 51.2) and services (57.9 from 58.4) – both are released at 11:45 AEST and shouldn’t move markets too greatly - unless they miss the mark by a margin, which is typically unlikely with China data (ex-trade balance).
Eurozone – Markit July final manufacturing – no change expected at 51.1 – this is the final revision, so it’s unlikely this or the individual countries (that blend the aggregate number) will be a volatility event.
US – US ISM manufacturing (00:00 AEST) – consensus 53.5 (from 52.6) – usually a big-ticket item for markets, and historically correlate well to Treasury yields. Watch the forward-leaning sub surveys such as new orders and new export orders. I see a bigger move to markets on a decent miss than beat.
US – Fed gov James Bullard, Thomas Barkin and Charles Evans speak on the US economy (02:30, 03:00 and 04:00 AEST respectively).
Australia – Trade balance and June retail sales (consensus +2.4%, both 11:30 AEST). The August RBA meeting (14:30 AEST) – The Melbourne Stage 4 lockdown raises the risk of easing again in the future, although the focus falls fully on the prospect of fiscal support. If NSW follows suit down the line, then the rates market and AUD will start to factor in some sort of easing, although it seems unlikely to come from interest rates.
Large focus of the meeting will be on whether the RBA dial up the concern in their language. Consider the RBA will have factored in any economic changes (from Friday’s Statement on Monetary Policy) into their statement, although few expect any market-moving changes in their guidance.
Germany – June factory orders – consensus +9.7% MoM.
NZ – Q2 employment report (08:45 AEST) – employment change -2% QoQ, -1.1% YoY, unemployment rate 5.5%.
Canada – Markit July manufacturing PMI (23:30 AEST) – no consensus has been offered.
US – July services ISM (00:00 AEST) – consensus 55.0 (from 57.1).
US - Fed member Loretta Mester discusses the US economy at 07:00 AEST.
NZ – (Q3) 2yr inflation expectations (13:00 AEST).
UK – BoE policy meeting (16:00 AEST) – the debate about negative rates is still somewhat in vogue, while swaps are pricing a low in rates of -8bp, but not for until 2023. That said, there is a belief the bank offers a dovish signal, possibly opening the door for rates taken to zero in the November meeting, with possibly more QE. GBPUSD has printed a bearish hammer on the daily, and a lower low could indicate the market ready to close a stretched long position into this meeting.
US – weekly jobless and continuing claims (22:30 AEST) – consensus 1.41m and 16.94m respectively. While some talk about seasonal effects, the fact that continued claims look sticky above 17m is a worry.
Australia – August Statement on Monetary Policy – we saw some punchy downgrades to the RBA’s economic forecasts in May, with GDP expected to contract 10% in 1H20, with unemployment hitting a high of 10% in 2H20. Most now expect small upgrades to GDP, inflation and employment from the RBA’s May outlook, but with the market looking forward at the risks posed from the Melbourne shut down and the impact that is having on the mood that is having at a national level, one questions how impactful these revisions prove to be.
China - July trade data (no set time) - imports (consensus in USDs) +1%, exports -1.2%. Q2 Current account. With no set time these numbers rarely cause an immediate impact on USDCNH or China proxies (such as AUD or NZD). Always interesting for the global growth story, but unlikely a market mover.
Germany – June trade balance and industrial production (16:00 AEST) – industrial production (consensus +8.1%) could move the EUR, but it’s good for 10-15pips in EUR, depending on the outcome.
Canada – July net change in employment (22:30 AEST) – consensus 390k, unemployment rate 11.2% (from 12.3%), participation rate 64.4%.
US – July non-farm payrolls (22:30 AEST) – consensus is for 1.57m jobs to be created (economist range +3.21m to -500k), the unemployment rate at 10.5% (from 11.1%), average hourly earnings +4.2% YoY. This is the marquee economic data point for the USD this week and poor numbers will go some way in causing risk aversion. Look for the USD to outperform the AUD, NZD, CAD and EM FX on a poor number. Moves vs EUR, CHF and JPY are less obvious though, as we could see USDJPY trade lower on risk aversion. It would certainly shock to see a negative print, but it’s not out of the question.
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