There will be a week ahead post where the data being released will revolve around how well the economy chugging along, and analysts will argue whether a country has reached its peak or whether the NASDAQ is undervalued at 40 times earnings. However, this week isn't that week. Coronavirus continues to be the primary context around headlines, showing that we are still in the pandemic's neck. I have a feeling that it will be like this until real progress regarding a vaccine is achieved. Here is your week ahead.
Japan continues to post significant Coronavirus figures, with over 1,200 Saturday, topping 1,000 for the third straight day with cluster outbreaks as summer holidays begin. Initially praised for their laissez-faire regarding their quarantine strategy, i.e., has come back to bite them. However, unlike New Zealand, where they essentially forced everyone back into their homes at the slight hint of a potential outbreak, Japan continues to allow its residents outside. For example, they placed restrictions on the maximum number of spectators, concerts, professional sports, and other events – to 5,000. This has made analysts wary of Japan, considering they had low GDP growth before the Coronavirus pandemic. Analysts predict a contraction of 7.3% last quarter, at an annualized pace of 26%. A 7.3% contraction this week ahead would mark the largest GDP decline post-world war.
Like Japan, Australia was praised for its laissez-faire approach resulting in early positive results in Coronavirus cases. However, also similar to Japan, that approach has come back to bite them. Most notably in the state of Victoria, in which the Coronavirus has run rampant. Although the rate of daily increase in cases has slowed down due to the Premiere of Victoria, forcing a mandatory quarantine to all citizens, they are still recording triple-digit cases regularly. They recorded 279 new cases today, with 16 deaths. However, this is an improvement from 2 weeks ago, when they were recording jumps from 200 to 700 new cases in a day. Australia's RBA before the "second wave," took a confident approach that Australia would be capable of pulling out of the pandemic similar to New Zealand with a lower economic cost, and their monetary policy showed that. However, due to the second wave, the report being released will likely be extremely dovish and hint and further rate cuts in the future.
The UK has seen its Coronavirus curve slowly rise, and that has made government officials anxious. They have recorded over 1,077 new Coronavirus cases in the pasty day, which is slightly under their 1,097 seven-day moving average. However, analysts predict CPI a small change from a 0.6% increase in the CPI to a 0.7% increase this week ahead. If the increase is larger than expected, we should see the GBP strengthen against its peers.
Canada was one of the only nations to not impose a strict lockdown for its citizens and come out flattening the curve. Yesterday, Canada confirmed 237 new cases. While not entirely eliminated, the country has not experienced breakouts similar to that of Japan and Australia. Previously, the CPI was up 0.7% compared to a year ago, with analysts predicting a CPI increase of 0.2% this week ahead. With such wild variations, it is yet to be seen what the CPI is going to be. However, a rise in CPI signals a bullish stance in the Canadian dollar, with a hawkish central bank.
A staggering number: 5,565,114 Coronavirus cases, 173,080 deaths – a 6% mortality rate. The United States has not been able to flatten the curve. With an election coming up, President Donald Trump has tried to re-open the economy to boost his chances come election time. However, this has not worked. His selflessness has cost many people their lives. Usually, a market-moving event, TD Securities analysts noted that "at the July FOMC meeting, the Committee did not imitate any new policy actions, and that changes to the statement were minor." Combining this with August being a month were a lot of traders and managers take leave for their summer holidays, we should expect this to be relatively non-market moving.
As stated above, this month tends to be quite slow due to many traders, investors, and asset managers taking leave for the summer holidays. Therefore, the market should be relatively muted at this time. This may be an excellent opportunity for traders and investors to backtest their strategy or even paper trade to practice for the coming months. Many elections are coming, such as the United States and New Zealand general elections, which will cause significant market moves.
Trade safe! Have a good week ahead.