Central Bank speakers were out in full force last week talking about monetary policy stimulus and how they all have plenty of room to ease, if needed.  US/China relations continue to be threatened, this time as China steps up its agitation in Taiwan and Trump’s threat to hold China accountable for the global pandemic.  Coronavirus case spikes have become more numerous around the world, forcing new lockdowns in many countries.  Manufacturing data via the PMIs are improving, however they also showed services continuing to suffer. This week, the main event will be the first US Presidential Debate on Tuesday, where President Trump faces Democratic candidate Joe Biden.  US Non-Farm payrolls will be released on Friday as well. In addition, the number of new coronavirus cases will continue to be closely monitored!

On Tuesday, September 29th, US Republican President Trump will face off in the first of three debates with Democratic nominee Joe Biden, in the battle for the US Presidency on November 3rd.  Six topics have been chosen to be debated.  They include:

  1. The Trump and Biden records
  2. The Supreme Court
  3. Covid-19
  4. The Economy
  5. Race and Violence in our cities
  6. The integrity of the election

This is likely to be a heated discussion, as the difference of opinions and policies widely differ between the two candidates.   For example, Trump believes he is doing an outstanding job managing the coronavirus.  Biden has a list of policies he would implement that differ from Trumps, including the possibility of making it mandatory to wear masks in all public places.  In addition, due to the coronavirus, many states have implemented mail-in voting procedures, rather than in-person voting.  Trump believes this will lead to interference and fraudulent voting.  Biden believes it needs to be done for coronavirus reasons.  For you reference. experts have said mail-in voting may delay the results for weeks, so don’t expect an outcome of the election immediately.  Future debates will be held on October 15th and October 23rd, with a vice presidential debate on October 7th.

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The economic data recently is causing a good deal of uncertainty regarding the world recovery from the downfall of the coronavirus.  As we heard last week, central banks are still willing and able to provide more stimulus if needed.  US Fed Chairman Powell said,  “the US is recovering, but significant challenges remain”.  Indeed, the Fed’s dot plot from the last meeting showed that members don’t expect to raise rates until 2023!  The PMIs released last week showed that the manufacturing sector is in a recovery mode, however the service sector is still significantly lagging.  But also, US Durable Goods on Friday were a disappointing 0.4% for August vs 1.5% expected.  Does this mean that the lack of fiscal measures and emergency stimulus checks for the unemployed are starting to feed through to the real economy?  Central Banks are begging for more to be done regarding fiscal stimulus.  Last week, the UK Chancellor of the Exchequer announced a new program to replace the furlough job program when it expires at the end of October.  In the US, a fiscal stimulus package worth $2.4 trillion is being discussed,   however Republicans in the Senate have a problem with anything more than $1 trillion.  The Head of the Ways and Means committee said he is not optimistic a deal will be done before the election.  The big question for the Trump Administration is…Will there be more financial pain before the election?  Non-Farm payrolls may give us a signal.  It will be the last one before the election.  Initial unemployment claims seem to have stalled near 850,000/900,000, per week!  So, if the economy and the job market is beginning to stall, we may start to see that in the Non-Farm payroll report this Friday (or next months).

The coronavirus hasn’t gone away and may not for some time.  The UK and France are reporting record numbers of cases.  Parts of the UK have already been placed on further restrictions and Prime Minister Boris Johnson said the new restrictions will remain in place for 6 months.  On Tuesday last week,  the WHO said they saw the highest number of reported coronavirus cases in a single week since the pandemic began.  Watch for vaccine headlines!  Positive vaccine headlines have been risk-on!

As we enter October on Thursday, there is plenty of end of month economic data to consume on Tuesday and Wednesday.  Some of the more important data and events next week are as follows:

Sunday

  • China: Industrial Profits (YTD) (AUG)

Monday

  • US: Dallas Fed Manufacturing Index (SEP)
  • EU:  ECB President Lagarde speech

Tuesday

  • Japan: BOJ Summary of Opinions
  • UK: BOE Consumer Credit (AUG)
  • UK: Mortgage Approvals (AUG)
  • EU: Consumer Confidence Final (SEP)
  • EU: Economic Sentiment (SEP)
  • EU: Consumer Inflations Expectations (SEP)
  • Germany: Inflation Rate Prel (SEP)
  • Canada: PPI (AUG)
  • US: Trade Balance Adv (AUG)
  • US: CB Consumer Confidence (SEP)
  • 1st 2020 Presidential Debate

Wednesday

  • New Zealand: Building Permits (AUG)
  • Japan: Retail Sales (AUG)
  • Japan: Industrial Production Prel (AUG)
  • China: NBS Manufacturing PMI (SEP)
  • China: Caixin Manufacturing PMI (SEP)
  • Australia: Building Permits (AUG)
  • Germany: Retail Sales (AUG)
  • Germany: Unemployment Rate (AUG)
  • EU:  ECB President Lagarde speech
  • UK: GDP Growth Rate Final (Q2)
  • UK: BOE FPC Meeting
  • EU: Inflation Rate
  • US: ADP Employment Change (SEP)
  • US: GDP Growth Rate Final (Q2)
  • US: Chicago PMI (SEP)
  • US: Pending Home Sales (AUG)
  • Crude Inventories

Thursday

  • Global Manufacturing PMI Finals (SEP)
  • Japan:  Tankan Large Manufacturing Index (Q3)
  • EU: Unemployment Rate (AUG)
  • EU: PPI (AUG)
  • Canada: Building Permits (AUG)
  • US: Personal Spending (AUG)
  • US: Personal Income (AUG)
  • US: PCE Price Index (AUG)
  • US: Initial Jobless Claims (week ending Sept 26)
  • US: ISM Manufacturing PMI (SEP)

Friday

  • Australia: Retail Sales (AUG)
  • Japan: Consumer Confidence
  • US: NonFarm Payrolls (SEP)
  • US: Factory Orders (AUG)

Chart of the Week: Daily US Dollar Index (DYX)

Source: Tradingview, FOREX.com

The DXY had been moving lower since March 20th, after putting in a top at 102.99.  After Jerome Powell spoke at Jackson Hole and conveyed that the Fed would let inflation “run hot” for a while, the index put in a hammer bottom on September 1st at 91.75.   At that time, the DXY briefly broke through the 127.2% Fibonacci extension from the March 9th lows to the March 20th highs.  It also bounced off a downward sloping trendline of a descending wedge.  This week, the DXY broke higher out of the top of the descending wedge and hasn’t looked back.  It is currently trading near resistance from the March 9th lows, as well as the 50% retracement from the June 30th highs to the September 1st lows, near 94.75.  Horizontal resistance above there is previously mentioned June 30th highs at 97.80. Support is at the September 9th highs near 93.66, then the downward sloping trendline of the descending wedge near 92.75.

There is a lot happening this week with the US Presidential Debate and ongoing negotiations regarding stimulus monetary and fiscal stimulus packages.  Throw month end economic data into the mix, and we may see some extra volatility this week!

Have a great weekend and please remember to always wash your hands!

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