Week Ahead – Market Volatility to Remain Elevated

Fundamental analysis of Forex market

Global stocks are all over the place as some indexes fall into correction as others continue to extend higher into record territory. The bond market volatility surprised many investors as the growth outlook took a massive hit as the spread of the Delta coronavirus variant showed many countries are still struggling to return to normal.

Asian stocks should have a strong open following the PBOC’s RRR cut. This is quite the pivot by the central bank and it should support the notion that crackdown over tech companies will probably ease. The yuan could be vulnerable following the RRR cut and that should be great news for exports.

The upcoming week is filled with many potential market moving events. A wrath of rate decisions (BOJ, BOC, RBNZ, and CBRT) will continue to show the unbalanced global economic recovery has some banks tapering, others poised for further cuts, and some stuck in wait-and-see mode. Traders will also closely watch three big economic releases: US CPI, China’s Q2 GDP, and US retail sales, which could show some weakness persisting across the world’s two largest economies. The banks will also kickoff earnings season and that should come with a better understanding of how strong is the US consumer. Fed Chair Powell will give his semi-annual Monetary Policy Report to Congress. Since Powell’s testimony will happen after the latest inflation report and fresh concerns about the pace of the global economic recovery, it could have a dovish outcome.



Next week is a jammed pack week with CPI data, key testimony from Fed Chair Powell, and the beginning of earnings season.  It will be a busy week of Fed speak as Quarles, Kashkari, Evans and Williams will all be making the rounds.

Tuesday will be a busy morning with the June inflation report expected to show inflationary pressures ease. The June month over month reading is expected to tick lower to 0.5%, while the year over year headline eases from 5.0% to 4.9%.  Earnings season officially begins with early reports from Pepsico, JPMorgan, Fastenal and Goldman Sachs.  Wall Street will closely listen to what the banks have to say about the US consumer.

On Thursday, Fed Chair Powell will deliver his semi-annual testimony to the Senate Banking Panel.  This could be big because Powell may start to see some easing of pricing pressures and further reasons to become slightly pessimistic to the short-term global growth outlook.  If Powell confirms his conservative, somewhat noncommittal approach to tapering, we could see Treasury yields remain heavy.

The June retail sales reading will draw a lot of attention on Friday given the big miss last month.  Investors will look to see if this trend continues.


Europe’s battle with Covid is, unfortunately, far from over. The World Health Organization has warned that a new wave of Covid in Europe is inevitable, with cases of the Delta variant on the rise.

The resurgence of Covid could have a devastating effect on the summer tourist season. France has warned its citizens against vacationing in Spain in Portugal, and other countries could follow suit with advisories against travelling to certain European countries.

The International Conference on Climate will take place in Venice on Sunday, July 11. ECB President and the Fed’s Quarles will be among the key speakers.

On Monday, eurozone finance minister will meet in Brussels to discuss economic and financial issues affecting the eurozone. US Treasury Secretary Janet Yellen will be in attendance.

The EU Foreign Affairs Council will also meet in Brussels. The agenda will include geopolitical hotspots, including Afghanistan, South Caucasus, Lebanon, Ethiopia, as well as digital technologies. The Council will also hold a working lunch with Israeli foreign minister Lapid.

German Chancellor Merkel will host Ukrainian President Zelenskiy in Berlin. The two leaders will discuss the Nord Stream 2 gas pipeline, which runs between Russia and Germany, as well as the conflict in Ukraine’s Donbas region.

On Tuesday, Germany releases the June CPI report.

On Wednesday, European Commission President Ursula von der Leyen and Commissioner for Budget Johannes Hahn host a press conference in Brussels. European Commission Vice President will discuss an EU digital tax, which the US opposes.

The European Commission will recommend new measures under its Green Deal plan, including expanding the EU’s carbon market. These proposals follow the endorsement of EU’s new Climate Law, which increases the bloc’s 2030 emissions reductions target.

France celebrates Bastille Day, with financial markets to remain open.

The eurozone releases Industrial Production for May.

On Thursday, Germany Chancellor Angela Merkel visits the White House and will meet with President Joe Biden. The agenda will include tensions over the Nord Stream 2 pipeline, which carries natural gas from Russia to Germany.

The eurozone releases CPI YoY readings on Friday, which could slip from 2.0% to 1.9%. The Core CPI YoY reading is expected to remain unchanged at 0.9%.


On Tuesday, Sweden Riksbank Governor Stefan Ingves will join in a panel discussion at a virtual conference in Jerusalem, entitled “Inflation: Dynamics, Expectations, and Targeting.


On Sunday, July 14, Prime Minister Boris Johnson is expected to confirm the decision to end most health restrictions in England, commencing on July 19. The UK has been hit with a surge in cases of the Covid delta variant, but Johnson is keen to reopen the economy.

On Wednesday, the UK releases June CPI YoY. The consensus is 2.3%, vs 2.1% in the May report. The monthly reading is expected to ease from 0.6% to 0.1%.  BOE Deputy Governor David Ramsden speaks at the Strand Group, in an event co-sponsored by King’s Business School.

On Thursday, the UK publishes the and the Unemployment Rate for May and Unemployment Claims for June. Also, BOE member Michael Saunders delivers a speech on the U.K. inflation outlook.

Emerging Markets


Poland will release the June CPI report on Thursday.  The June CPI Core YoY reading is expected to decline from 4.0% to 3.7%.

South Africa

On Tuesday, South Africa will release gold, platinum and mining production for May.


On Tuesday, Turkey releases Industrial Production for May.

Turkey’s central bank will hold a policy meeting on Wednesday, with analysts unanimously expecting the 1-week repo rate to remain steady at 19.00%. The central bank governor has promised to maintain interest rates above inflation until there is a permanent drop in price growth. Last week, the bank reiterated its projection that inflation will ease considerably in Q3 of 2021 and into Q4. The bank noted that the vaccine rollout is going well and has boosted economic activity.

ASIA Pacific


The Hang Seng Index tumbled into bear market territory as China’s technology crackdown continues to weigh on sentiment.  Given some economic data softness, the economy was clearly in need of some support and the PBOC delivered a well telegraphed RRR cut that will help boost lending.

The aftermath of the RRR cut could provide some support for the dollar against the yuan.

Investors will closely watch Tuesday’s release of trade data that could show exports and imports significantly pullback from elevated levels.  The main economic data release of next week will be China’s second quarter GDP reading.  The world’s second largest economy is expected to see a significant slowdown in the second quarter as GDP declines from 18.3% to around 8.0%.


India’s COVID-19 cases were appearing to be on the right track but a recent increase in cases have many worried that a third wave could be coming.  Until COVID cases start trending lower, the Indian rupee still remains vulnerable to the dollar.  A pullback with oil prices has provided some modest support for the rupee.

On Monday, India will release both Industrial production and CPI data. Pricing pressures continue to climb higher further above the RBI’s target range.  The June CPI YoY reading is expected to rise from 6.3% to 6.6%.  Base effects have distorted industrial production and the May reading will come back down to earth, dropping from 134.4% to 32.0%.

Australia & New Zealand

The AUD/USD and NZD/USD have performed poorly again for another week as global risk sentiment took a turn for the worse.  In Australia, traders will closely monitor Wednesday’s jobs data that should see the unemployment rate tick lower to 5.0%, with a gain of around 20,000 jobs.

A key event for the week will be the upcoming RBNZ rate decision.  The middle of the week policy meeting is widely expected to see the bank maintain the official cash rate at 0.25%, but they could possibly signal earlier tightening.

Both the Aussie dollar and kiwi will still closely observe what happens with the broader market risk appetite tone, which could take a lead following the release of China’s second quarter GDP reading on Thursday.


Risk appetite for Japanese assets took a big hit after news that fans will be banned at the Summer Olympics.  Japan is clearly still in the middle of its fight against COVID and the decision to declare a state of emergency through August 22nd will dramatically force investors to downgrade their growth forecasts.

The Nikkei 225 has weakened over 10% from the February peak and investors will closely watch to see how strongly the dip is bought.  The Japanese yen is tentatively finding support from the 50-day SMA, but if risk aversion reigns supreme early next week, price action could support a decline towards 109.20.



Following the worst week in a few months, crude prices may remain vulnerable if more countries continue to eye semi-lockdowns.  With international travel not coming back anytime soon and the US slowly passing peak driving season, the demand side does not provide such a rosy picture anymore.

Much of the energy market is awaiting to see what happens with Iran’s crude output.  Nothing is officially scheduled, but the seventh round of indirect US-Iran talks could resume and that could impact the next major move for oil prices.


The bond market rally has been gold’s best friend.  Much of Wall Street was behind the reflation trade and eagerly anticipated a steeper Treasury curve.  Yields are poised to bounce back some and that should be a slight headwind for gold prices.

Gold was already starting to see central bank demand improve and if ETF demand turns positive again, bullion bulls could become more aggressive with their bets.  The line in the sand for gold is the $1,800 level and if prices can remain elevated post the latest US CPI report, that could be the greenlight needed for many traders.


Bitcoin remains trapped between the $30,000.00 and $40,000.00 trading range but extended weakness could persist if the market keeps getting unnerved following continued headlines over the crackdown from Beijing and persistent worries about its massive carbon footprint problem.  Despite all the uncertainty over transitioning mining activity away from China, questions on whether miners are using optimal renewable energy, and nervousness over regulatory concerns from the US, cryptocurrencies continue to make progress in payment adoption and attract new investors.  If Bitcoin can maintain this consolidation pattern, longer-term bullish bets may start to return.

Key Economic Events

Saturday, July 10

  • The Group of 20 finance ministers and central bank chiefs finish a two-day summit in Venice, Italy.

Sunday, July 11

  • ECB President Lagarde and Fed Vice Chair for Supervision Quarles to speak at the Venice International Conference on Climate.

Monday, July 12

  • Eurozone finance ministers, the Eurogroup, and US Treasury Secretary Yellen meet in Brussels
  • UK PM Johnson to confirm a final decision on ending most restrictions in England for July 19th.
  • Ukrainian President Zelenskiy to meet with German Chancellor Merkel to talk about the Nord Stream 2 gas pipeline and the conflict in Donbas.

Economic Data/Events:

  • India industrial production, CPI
  • Mexico Industrial production
  • Japan core machine orders, PPI
  • Russia Trade Balance
  • South Africa manufacturing production
  • Denmark CPI
  • Turkey Unemployment
  • Sweden Unemployment

Tuesday, July 13

  • Fed presidents Kashkari (Minneapolis,) Bostic (Atlanta,) and Rosengren (Boston.) speak on racism and the economy with a focus on criminal justice.
  • Sweden Riksbank Governor Ingves speaks at the conference “Inflation: Dynamics, Expectations, and Targeting.”

Economic Data/Events:

  • US Earnings Season begins with JPMorgan and Goldman Sachs reporting before the opening bell
  • US June CPI M/M: 0.5%e v 0.6% prior; Y/Y: 4.9%e v 5.0% prior
  • Germany CPI
  • Czech Republic CPI
  • Australia NAB business confidence
  • China Trade, medium-term lending facility rate
  • New Zealand food prices
  • Turkey Industrial production
  • South Africa gold, platinum, and mining production

Wednesday, July 14

  • European Commission President von der Leyen and Commissioner for Budget Hahn speak in in Brussels.
  • BOE Deputy Governor Ramsden speaks at the Strand Group, in conjunction with King’s Business School.
  • Minneapolis Fed President Kashkari speaks
  • US House Financial Services committee holds a hearing on monetary policy and the state of economy.
  • France celebrates Bastille Day.

Economic Data/Events:

  • US PPI, Fed Beige Book
  • Earnings Season Reports from Bank of America, Citigroup, Wells Fargo
  • Australia Westpac consumer confidence
  • Canada BOC Rate decision: To deliver another round of bond tapering
  • Turkey (CBRT) Rate Decision: To keep rates steady, prospects of rate cuts likely to be later in the year
  • New Zealand (RBNZ) Rate Decision: To keep rates steady and possibly show willingness to tighten near year end
  • UK CPI
  • Sweden CPI
  • Russia CPI
  • Eurozone Industrial production
  • Japan Industrial production
  • India wholesale prices
  • Singapore GDP
  • South Africa retail sales
  • Canada manufacturing sales
  • Poland Current account
  • EIA crude oil inventory report

Thursday, July 15

  • Fed Chair Powell to deliver the semi-annual Monetary Policy Report to Congress
  • Germany Chancellor Merkel meets President Joe Biden in the White House
  • RBI Governor Das, finance ministry officials and company executives will attend the two-day, online Economic Times Financial Inclusion summit.
  • BOE policy maker Michael Saunders speaks on the U.K. inflation outlook.
  • Chicago Fed President Charles Evans discusses the U.S. economy at the annual Rocky Mountain Economic Summit.

Economic Data/Events:

  • US initial jobless claims, Empire manufacturing, industrial production
  • China Q2 GDP Q/Q: 1.2%e v 0.6% prior; Y/Y: 8.0%e v 18.3% prior
  • UK jobless claims, unemployment
  • Poland CPI
  • Italy CPI
  • Canada existing home sales
  • China new home prices, retail sales, surveyed jobless rate, industrial production
  • Australia unemployment, RBA FX transactions
  • India Trade
  • Japan tertiary industry index
  • Russia gold and forex reserves
  • OPEC Monthly Oil report

Friday, July 16

  • New York Fed President Williams and First Vice President Hassan speak at an event hosted by the New York Fed about culture in a post-pandemic workplace.

Economic Data/Events:

  • US Jun retail sales: -0.5%e v -1.3% prior, Tic Flow data, July Prelim Univ. of Michigan consumer sentiment: 86.5e v 85.5 prior
  • Bank of Japan (BOJ) Interest Rate Decision: No change to monetary policy, could downgrade growth forecasts
  • BOJ Gov Kuroda rate decision press conference
  • Eurozone CPI
  • Poland CPI
  • New Zealand CPI
  • Canada housing starts, wholesale trade sales
  • Eurozone new car registrations
  • Eurozone Trade
  • New Zealand manufacturing PMI
  • Singapore electronic exports
  • Thailand foreign reserves, forward contracts
  • Russia PPI
  • Turkey budget balance, house prices

Sovereign Rating Update:

  • Greece (Fitch)
  • EFSF (Fitch)
  • ESM (Fitch)
  • Russia(S&P)
  • Finland (Moody’s)
  • Ireland (DBRS)
  • Netherlands (DBRS)