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Last week’s news

• The US Democratic Party convention was held last week, confirming Joe Biden as the nominee running for US President with Kamala Harris as Vice President. Ex-president Obama took the opportunity to criticise President Trump and his last four years in power, accusing him of treating the White House like a ‘reality show that he can use to get attention’. Michelle Obama added that President Trump ‘was not the President that America needed him to be’. Joe Biden continues ahead on all national polls.
• A strong recovery in petrol and clothing prices drove up UK inflation by more than expected in July as the opening of the UK and other global economies after the coronavirus lockdowns have led to increased spending. The Consumer Price Index rose 1% year-on-year, surveys had predicted a 0.7% rise. The increase in inflation is a reassuring start to the UK government that suggests spending is back on the rise with consumers feeling more confident again. Packaged holidays and camping equipment led the way on the biggest price increases, with prices rising 5.6% and 6.4% respectively.
• Australia’s Treasurer Frydenberg showed optimism on the job market as new analysis done by his department estimated more than 50% of people who lost their jobs due to the pandemic are back in the labour force. Despite the optimism, predictions are still seeing unemployment hitting 13% before end of year due to the outbreak in Victoria.
• Canadian Finance Minister Bill Morneau resigned last Monday and Chrystia Freeland was sworn in immediately as Canada’s new finance minister, becoming the first woman to take on the role. Trudeau said “Chrystia Freeland and I have had conversations over the past almost decade now about how we need to create a fairer country for Canadians, how we need to grow the economy in ways that [help] everyone…” Freeland also commented, “…the restart of our economy needs to be green…It also needs to be equitable, it needs to be inclusive and we need to focus very much on jobs and growth.”

Looking ahead

• Brexit’s negotiators have clashed heads once again, this time regarding access to the EU for British truckers. UK road haulage groups have warned that a failure to strike a deal by the end of the post-Brexit transition on December 31st would hurt hauliers and businesses on both sides of the Channel, driving up costs and reducing availability for pan-EU supply chains. Britain has requested that British truckers be allowed to continue to make pick-ups and drop-offs both inside EU member states and between them, known as ‘cabotage’ however the European Commission feels that this condition is too similar to Britain’s pre-Brexit access to the EU single market.
• The FX market had little volatility, but it continued to trade on expectations. The EUR/USD pair touched an intraday high of 1.1966 last Tuesday, which was the highest level in more than two years. However, it retraced from those levels and closed the week around 1.1750. From a trading perspective, the long term make-or-break level for the EUR/USD rate continues at 1.18, the fact that it closed below that is not encouraging but it’s still to be seen if it was just a small pause on the uptrend or the start of a wider correction.
• The US dollar in the other hand, is not looking attractive. Short-term interest rates are at historic lows, the Fed’s has a near-zero policy and the extended equity market bull run supports a weaker USD. Considering this year’s exceptional election circumstances, the US dollar might be vulnerable, unless we see a correction in global equities and it’s safe-haven status is still in play and generates demand.

Key market events this week

• USD CB Consumer Confidence (Aug) – Tuesday
• USD Durable Goods Orders MoM (Jul)- Wednesday
• MXN GDP Final Growth Rate YoY (Q2)- Wednesday
• CHF GDP Growth Rate YoY (Q2)- Thursday
• USD GDP Growth Rate QoQ 2nd Estimate- Thursday