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gt.io
Date:
29th Jun 2020
Author:
gt.io

Week ahead: Focus shifts to China PMIs, European CPIs, and US NFP data

The South African dollar weakened against major currencies as traders worried about the surging coronavirus cases and weak economic data. According to the statistics office, the country’s unemployment rate jumped to 30.10% in Q1 while inflation dropped to a multi-year low in April. Meanwhile, according to the health ministry, the number of coronavirus cases continued to rise even as the country continued to reopen.

Elsewhere, the US dollar index and gold rose last week as the number of coronavirus cases spiked again in countries like China, Japan, and the US. At the same time, crude oil and global stocks declined sharply as investors started to price-in the probability of more lockdowns. Wirecard, the German payment company, made headlines when it filed for insolvency after its auditors found more than $2 billion in its accounts missing. It was a shame for a company that was added to the DAX index just 2 years ago.
After weeks of rallying, the South African rand dropped against key currencies last week as traders reacted to weak economic numbers and the rising coronavirus cases. Traders are also worried about the country’s debt after it unveiled a plan to invest more than $130 billion in infrastructure.

This week, we will receive the private sector credit data from the South African central bank. We will also receive the final reading of Q1 GDP data. Analysts expect that the economy contracted by 0.1% in the quarter. Finally, on Friday, we will receive the Q1 current account.
Early this month, data by the Bureau of Labour Statistics surprised the market when it showed that the economy created jobs in May. Analysts were expecting the data to show that the economy lost more than 3 million jobs.

This week, the bureau will release the same numbers but this time, analysts are hopeful. They expect the U3 unemployment rate to fall to 12.2% with the U6 rate falling to 20.5%. The latter number measures the people out of work and those working part time. Also, they expect the economy added more than 3 million jobs.

There are signs that they could be accurate this time. For one, manufacturing and services PMIs and new home sales numbers released last week showed that the economy was in recovery mode.

In addition to the NFP data, we will receive pending home sales numbers, factory orders, FOMC minutes, and ISM PMI numbers. The EUR/USD 12-hour chart below shows that the pair is above the 50-period and 100-period moving averages.
China is the second-biggest economy in the world and the biggest manufacturer and consumer. Therefore, traders follow the happenings there keenly. This week, we will receive important data, which will show us whether the country is indeed recovering. Tomorrow, China Logistics will release the manufacturing and non-manufacturing PMI data. This will be followed by a private PMI data by Caixin, which collaborates with Markit. A PMI reading of 50 and above will mean that the economy is making an impressive recovery.
This week, we will receive several important economic numbers from around the world. In Japan, the central bank will release the small and large manufacturers and non-manufacturers index on Wednesday. Expectation for these numbers is low because the country was in a state of emergency for most of the quarter. We will also receive the important CPI data from Turkey, eurozone and Switzerland. Also, we will follow up on the fifth round of Brexit talks.