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Based out of Auckland, New Zealand, we bring an institutional trading experience to the retail market.
Mark O'Donnell
Research Analyst
July 13, 2020

Interest rates, OPEC, Employment - Week ahead

Interest rates, OPEC, Employment - Week ahead

Many “this week ahead” articles start off referencing the Coronavirus and how it is still front and center of many news and data headlines. However, we all know that, and therefore I felt that I should start this article with something more positive. A federal court of appeal has ruled against Trump and his proposed legislation to allow hunters to kill Yellowstone grizzly bears, stating that they were illegal. Yellowstone Grizzly bears are now officially protected by the Endangered Species Act once again. Here is your week ahead.

Yellowstone Grizzly Bear and its cubs

All dates are in NZDT.

Tuesday, 14th July– UK GDP YOY

As Coronavirus cases approach 300,000 and deaths 45,000, the UK remains in level three since 19th June. At level 4, social distancing measures continues but is short of the most severe level 5, which requires citizens to impose strict lockdown. With citizens roaming around, there has been a spike in Coronavirus cases, forcing multiple pubs to close again. The UK has seen a resurgence in shopping, seeing online and in-person retailers boom with consumer confidence being the strongest it has been since the lockdown. However, with Brexit being in play amidst the Coronavirus, the UK has significant headwinds to overcome before they get firmly on the road to recovery. This is on the back of the UK expected to hit Debt to GDP levels at 100%. Previous UK GDP YOY plummeted to -24.5%

Wednesday 15th July – OPEC Meeting

With oil prices double from their May lows, the cartel has done well, stabilizing prices by inducing deep cuts. At the detriment of US Shale producers, Oil prices have been fluctuating between $40 and $42 for WTI and Brent, respectively, on the back of 9.7 million barrels per day. However, as demand slowly picks up, all eyes are on Wednesday, meeting on whether the cartel decides to ease up cuts to 7.7 million barrels per day. This is a giant exercise of game theory, and it will be a challenge in balancing profitable oil prices vs. attaining market share.

Wednesday 15th July – Bank of Japan Interest Rate decision

Japan has reported just over 21,500 Coronavirus cases and only under 1,000 deaths. With a debt to GDP ratio of 235%, Bank of Japan Governor Haruhiko Kuroda sees interest rates remaining low for the foreseeable future. He stated, “whether it’s the fiscal year 2021 or 2022, I do feel we’re a long way from a situation where we can raise rates.” This is on the bank of the BoJ, increasing their support up to $1 Trillion. Analysts predict interest rates to stay at -0.1% this week ahead.

Thursday 16th July – Australia’s Employment and Unemployment rate

With Melbourne re-entering a six lockdown after the city reporting 191 new Coronavirus cases, criticism on how Australia is handling post lockdown Coronavirus is heightening. With the state of Victoria contributing 24% of Australia’s GDP in 2019, a second lockdown may be detrimental to Australia’s economy and recovery. IBISWorld has stated that “the overall recovery of the Australian Economy is expected to be significantly hindered by the second lockdown.” Analyst predict a job gain of 112,500 and an increase in the unemployment rate to 7.4%, from 7.1%.

Thursday 16th July – Bank of Canada Interest rate decision

Coronavirus cases stand at 108,000, with 8,783 in Canada. With one of the only countries not imposing a mandatory lockdown, Canada has fared relatively better than its border country, the United States. With Bank of Canada Governor Tiff Macklem ruling out negative rates, eyes are on the BoC as analysts predict them being one of the only Central Banks to raise interest rates. Analysts forecast a 50% chance of a rate hike in 2022. However, analysts predict the BoC to keep prices at 0.25% on Thursday this week ahead.

Thursday, 16th July - ECB Interest Rates

As European countries such as Italy and Spain slowly opening their borders to other European countries, the Central bank is in no rush to increase interest rates like their Canadian counterparts. They state that the “Coronavirus crisis is having serious humanitarian and economic consequences” and a “decline in economic activity of almost 9% in the Euro Area in 2020, and around 7% in Germany.” They also state that the economic effects will reach “far beyond the current year.” Analysts predict the Central Bank to keep rates at 0% this week ahead.

Saturday, 18th July – Euro Meeting on Common Recovery Plan

With a proposed €750 Billion recovery package funded by extensive debt, poorer European Countries are hoping to get a lifeline from richer countries as the Coronavirus ravages the continent both physically and economically. This €750b recovery package is on top of a proposed cut to the continents budge to €1.07 Trillion from 1.1 Trillion.

Key earnings are set to be released this week, with banks being the headline

In such turbulent times, investors and traders need to be aware of key news events this week ahead to enter and exit investments/trades at reasonable levels.

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