The Week Ahead 14th September – 18th September 2020

Market Outlook for Today 

U.S. stock futures rose early Monday morning after a sell-off in tech shares led to the market’s first back-to-back weekly declines in months. 

Dow Jones Industrial Average futures traded 300 points higher. The S&P 500 and Nasdaq 100 futures were also in positive territory.  

Sentiment was lifted in part by news of Nvidia buying chip maker Arm Holdings from SoftBank for $40 billion. Nvidia will finance the deal through a combination of cash and common stock.  

The S&P 500 fell by 2.5% last week. It was the broader-market index’s worst one-week drop since June 26. That decline also marked the first time since May that the S&P 500 closed lower in two straight weeks. 

Those losses were driven in large part by a steep drop in tech, the best-performing market sector year to date. The S&P 500 tech sector plunged more than 4% for its biggest weekly loss since March. Apple, the biggest U.S. company by market cap, dropped more than 7% last week. 

The FOMC’s upcoming meeting this week comes just weeks following the central bank’s annual economic policy symposium, during which officials announced a new framework to inform their thinking on rate-setting in light of inflation. The updated framework will allow for a moderate overshoot of their 2% inflationary target, alleviating the urgency for officials to step in and raise rates to stave off a run-up in inflation. 

However, in announcing this decision, Federal Reserve Chair Jerome Powell omitted specifics on how the FOMC would achieve higher average inflation following years of undershooting its target, leaving the committee to discuss tactics at forthcoming meetings. Many economists expect details of the central bank’s means of implementing its new framework will remain elusive at the September meeting. 

Powell’s press conference, scheduled to take place Wednesday afternoon following the conclusion of the monetary policy meeting, is expected to include remarks that strike a cautious tone on the pace of the economic recovery amid the ongoing pandemic, even as newly released economic data moves in a marginally more positive direction. 

On the economic data front, the August retail sales report released on Wednesday will draw considerable attention, offering an updated view of the state of consumption at the end of the summer as shutdown orders abated further. 

The pace of gains in month retail sales has slowed considerably from May’s record 18.2% urge. Retail sales in July rose 1.2% to pop back up above pre-pandemic levels, leaving “much less scope now for rapid monthly gains,” Michael Pearce, senior US economist for Capital Economics, said in a note Friday. 

Consensus economists expect to see a 1.0% month-over-month rise in retail sales in August following a 1.2% gain in July. This would mark the fourth straight month of increases in monthly retail sales. 

In the UK, the government is to begin debating its controversial internal markets bill which could wreck its EU divorce treaty. Meanwhile, the Bank of England and the Bank of Japan will both hold policy meetings just hours after the Fed on Thursday.  

Overview for the Week Ahead 

Investors, rocked by a volatile stretch of trading in equity markets last week, will turn their attention this week to the Federal Open Market Committee’s (FOMC) September meeting, along with two key reports on the state of the consumer in the U.S. These events have the potential to influence the markets which means there is plenty of trading opportunities. 

Today’s High Impact Events

The times below are GMT+3.

Monday 14th September

No high impact events today. 

Tuesday 15th September

  • 09.00 UK Claimant Count Change 

Potential instruments to Trade: GBP Crosses.  

Wednesday 16th September

  • 09.00 – UK CPI y/y 

Potential instruments to Trade: GBP Crosses.  

  • 15.30 – US Core Retail Sales m/m 

Potential instruments to Trade: GBP Crosses.  

  • 21.00 – US FOMC Economic Projections, Interest Rate Decision & Statement 

Potential instruments to Trade: USD Crosses & Metals.  

  • 21.30 – US FOMC Press Conference 

Potential instruments to Trade: USD Crosses & Gold.  

Thursday 17th September 

  • 01.45 – GDP q/q (New Zealand)   

Potential instruments to Trade: NZD Crosses.  

  • 04.30 – Employment Change & Unemployment Rate (Australia) 

  Potential instruments to Trade: AUD Crosses.  

  • 04.30 – RBA Meeting Minutes (Australia) 

  Potential instruments to Trade: AUD Crosses.  

  • Tentative – Monetary Policy Statement (Japan) 

  Potential instruments to Trade: JPY Crosses.  

  • 14.00 – BOE MPC Meeting, Monetary Policy & Rate Decision (UK) 

  Potential instruments to Trade: GBP Crosses.  

  • 15.30 – ADP Non-Farm Employment Change (Canada) 

  Potential instruments to Trade: CAD Crosses.  

  • 15.30 – Philly Fed Manufacturing Index & Unemployment Claims 

  Potential instruments to Trade: USD Crosses.  

Friday 18th September 

  • 09.00 – UK Retail Sales m/m 

Potential instruments to Trade: GBP Crosses.  

  • 17.00 – CB Leading Index m/m & Prelim UoM Consumer Sentiment (US)   

Potential instruments to Trade: USD Crosses and to some extent Gold. 

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