Key Points from This Week

Trump Makes U-Turn on Masks

In a clear sign of how bad the renewed outbreak of the virus in the US is becoming, the president this week abandoned his typically nonchalant, dismissive tone and urged us citizens to wear masks. Trump said that doing so was patriotic and necessary given that the virus was likely to get worse before it gets better. With the daily death toll in the US having risen back above 1000 fears of a return to the height of the pandemic are increasing.

US/China Tensions Increase

Tensions between the world’s two leading economies were put under further strain this week as Trump gave the Chinese government 72 hours to close its consulate in Houston following reports of a fire on the ground which the US believes to be the burning of papers/documents, fuelling accusations of spying. China responded in kind by ordering the US to close its consulate in Chengdu and there are fears that the situation will continue to escalate.

Gold Rallies 5%

Amidst a general uptick in uncertainty and fuelled by the heavy sell off in the US dollar this week, gold prices have soared over 5% taking price back up towards all time highs. Gold prices had ben fairly stagnant over recent weeks ahead of this week’s breakout which comes despite equities prices remaining well supported also.

Key Events Next Week

July FOMC

The headline event next week is undoubtedly the July FOMC meeting. While no adjustment is policy is expected at this point, the market will be keen to hear the Fed’s latest assessment and particularly its view on how much of a threat the current uptick in the virus is. The Fed is likely to reiterate its message of readiness to do more as necessary and equities markets will likely remain supported on the back of the meeting with USD likely top remain under pressure.

US GDP

US GDP for Q2 is due next week and traders will be waiting to see if a technical recession is confirmed. Following a -5% reading in Q1, there are hopes that the easing of lockdown measures over Q2 will have avoided a continued to plunge from there. However, should a technical recession be confirmed on a further negative reading, USD is likely to remain under decent selling pressure.

China Manufacturing

The market will be keeping an eye on the latest manufacturing data next week. Last month the index moved lower again to 50.9, only just remaining in expansionary territory. If the factory sector there was seen sipping back into negative territory last month this will be a drag on risk sentiment, raising concerns over the health of the recovery there.

Keep An Eye On

OPEC Headlines

Reports this week that Saudi Arabia wants to push for current OPEC+ production cuts to be extended until the end of next year, and potentially beyond, have failed to move oil this week. However, if this story starts to gain more traction this could easily start to lift oil prices. Meanwhile, any reports of division or opposition to such a move will likely pull oil prices lower.

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