It’s a quieter week in the calendar, although there’ll be intense scrutiny on the Bank of Japan’s meeting on Tuesday as well as the action in US equities after Facebook’s huge fall last week and Twitter (a much smaller company than Facebook, but obviously in the same sector) also had a double-digit pullback.
In Australia, Malcolm Turnbull has tried to dismiss the results in the Super Saturday by-elections as just what was to be expected, but the massive drop in the primary vote for the Coalition in the marginal Queensland seat of Longman will be a source of intense concern in government circles. More on that here.
Quarterly US GDP data on Friday night showed the US economy grew by 4.1% in Q2 — the fastest rate of growth since 2014.
US President Trump talked up the strong result, although many economists said the Q2 print is unlikely to be sustainable.
Earnings results weighed on US stocks, led by falls in the tech sector as Twitter got crushed after reporting a decline in monthly active users.
The US dollar index drifted lower to end the week, and US bond yields also dipped slightly as quarterly inflation data within the GDP numbers showed a slight easing in inflationary pressures.
One other talking point: over the weekend Business Insider UK published an extraordinarily detailed outline on the theory in FX trading circles about how hedge funds could have made a killing from Nigel Farage’s initial concession
To the week ahead:
The monthly retail sales print from the ABS on Friday is likely to be one of the main highlights.
The median forecast is for a monthly rise of 0.3% in June, with recent data showing sales growth in Australia’s struggling retail sector has been making a bit of a comeback lately.
However, currency strategists from ANZ said any upside surprise would merely provide an opportunity to reset short positions against the AUD.
“Our analysis shows that retail sales have only a temporary effect on the currency. Importantly, we think relentless USD strength plus a likely escalation in US=China argy-bargy makes it hard to see the AUD doing anything other than under-perform,” ANZ said.
Friday’s print will also include quarterly volume data for Q2, which is expected to show a steady 0.8% gain.
The ABS also has June building approvals data on Tuesday, which has been subject to wild swings in recent months due to volatility in approvals for new apartment projects.
And there’s CoreLogic’s monthly house price index for July on Wednesday. The monthly print is likely to get plenty of attention with interim data pointing to more price falls in Australia’s major housing markets.
The Bank of Japan holds its policy meeting on Tuesday, following speculation in financial markets last week that the BoJ may tweak its ultra-accommodative monetary policy settings. Here are useful summaries of what analysts at CBA and ANZ think may happen next.
On the data front, the latest PMI figures out of China on Tuesday will give an update on how the Chinese economy is tracking amid escalating trade tensions with the US.
And the Eurozone has Q2 GDP and July inflation data on Tuesday night. ANZ currency strategists said the euro is now reliant on positive data surprises to push higher, after the ECB reiterated its cautious approach to withdrawing stimulus at last week’s policy meeting.
“A positive surprise in Q2 GDP could improve sentiment towards the euro, but it’s CPI this week that will be key. Core inflation needs to print at 1% at the very least to provide the euro with a sustainable leg of support,” ANZ said.
The US Fed will hold its policy meeting on Wednesday night, with no major surprises expected in the wake of Friday’s strong GDP print as the Fed remains on track to raise rates again in September. Key data in the US this week will be led by ISM manufacturing figures on Friday night.
And the Bank of England is widely forecast to raise rates by 25 basis points to 0.75% on Thursday night, although ANZ said weaker economic momentum and ongoing Brexit turmoil both present downside risks to the UK pound.
Here’s the full calendar, via Westpac:
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