It was another busy week for financial markets last week, with global equity markets pushing through to fresh record levels while expectations for further Federal Reserve rate hikes pulled back sharply following another run of weaker-than-expected US data.
The Middle East remained firmly in focus, with the situation continuing to deteriorate across both the Red Sea and Persian Gulf. Rhetoric between the US and Iran stepped up again over the weekend, with Iran calling on the US to accept defeat while President Trump warned Americans to expect higher fuel prices in the months ahead. That could see some downside pressure on risk sentiment as Asian markets open the week.
The macroeconomic calendar remains relatively quiet as northern hemisphere trading centres move through the summer holiday period, but there are still some important data points to watch. The FOMC minutes will be particularly closely followed after the recent run of weaker US numbers, while Australian employment data and UK inflation will also provide plenty of interest.
Here is our usual day-by-day breakdown of the major risk events this week:
Markets are likely to start the week with geopolitical developments firmly in focus as traders digest the latest updates from the weekend. Attention will then turn to China during the Asian session, with Industrial Production, Retail Sales and Unemployment Rate data all due for release. The London session is relatively quiet before focus shifts to Canada shortly after the New York open for the latest CPI numbers.
Tuesday is another relatively quiet day on the economic calendar, with UK employment data providing the main scheduled risk event during the London session. With little else on the calendar, geopolitical developments are again likely to have an outsized influence on market sentiment.
Wednesday is set to be the busiest day of the week, with key events scheduled across all three trading sessions. Australian markets will be in focus during the Asian session with the latest Wage Price Index, before attention shifts to the UK shortly after the European open for CPI and PPI data.
ECB President Christine Lagarde is also scheduled to speak later in the day, while the US session brings the weekly Crude Oil Inventories before the main event arrives late in the day with the release of the latest FOMC Meeting Minutes. Given the recent shift in Fed rate expectations, these minutes could provide some significant volatility across the dollar and US rates markets.
Australian markets will again take centre stage during the Asian session, with the latest employment numbers due around the middle of the day. The London session is relatively quiet, while the New York session brings the usual weekly Unemployment Claims alongside the Philly Fed Manufacturing Index.
Friday closes out the week with a broad range of Manufacturing and Services Flash PMI releases across the UK, Germany, France, the Eurozone and US. UK and Canadian Retail Sales data are also due, giving traders plenty to digest heading into the weekend.
Overall, it is another relatively light week from a macro perspective, but with markets sitting at elevated levels and geopolitical tensions still running high, traders should be prepared for volatility to pick up quickly if we see any surprises in the data or further developments across the Middle East.
