Key Points From This Week

Trump Abandons Stimulus Negotiations

Following his brief stay in hospital over the weekend as part of his recovery from COVID-19, Trump took markets and politicians by surprise this week as he announced he was pulling out of stimulus negotiations. Republicans and Democrats have been locked in negotiations over recent weeks aimed at delivering a second stimulus package. While Republicans have been looking for a $1.6 trillion package, Democrats have been pushing for a higher $2.4 package. Trump has now said he won’t be passing any stimulus bill until after the elections.

RBA Turns More Dovish

Despite keeping rates on hold this week, the RBA delivered a much more dovish message. The bank warned over the damage to the labour market which it fears will take a long time to recover and said that it will do what it can to support the economy. Fears over the uncertainty in the outlook for the pandemic was also cited given the GDP damage caused by the local lockdown in Victoria. With the prospect of further lockdowns over the coming months, traders are anticipating further easing in the near term.

BOE’s Bailey Says Second Wave Won’t Hurt Economy as Much

BOE governor Andrew Bailey told markets this week that the bank does not expected the second wave in the UK to impact markets as much as it did in Q2 given the reduced risks of a full-scale nationwide lockdown. However, Bailey said that the bank will be aggressive in dealing with a second wave and will act as necessary to support the economy.

Key Events Next Week

US CPI

Over a mostly quiet data schedule next week, US inflation will be among the key events. Given that the Fed has now shifted its inflation targeting strategy, to allow inflation to run above 2%, the reading has lost a little potency in terms of market impact. Nevertheless, it still provides a valuable insight into the health of the US economy and should still see USD volatility on any surprise (either-way).

Australian Unemployment Rate

Following the RBA’s message of concern over the damage to the labour market, the unemployment rate will be closely watched next week. Any weakness in the reading will fuel expectations of imminent RBA easing.

US Retail Sales

Given that it is a main component in the GDP figure, US retail sales will be the headline data release next week. With most states having moved out of lockdown now, traders are forecasting further growth in the indicator from the prior month’s 0.6% reading (headline) and 0.7% reading (core)

Keep An Eye On

Brexit Talks

The UK PM’s initial deadline for talks is next Friday. Johnson recently agreed with EC president Ursula von der Leyen to extend talks by a month though is still looking for “clarity” by the end of next week. Some reports suggest the UK could still exit talks next week if no progress is made so the situation is certainly going to be closely monitored by traders next week.

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