Week of July 29

The coming week provides a hectic schedule, with the FOMC meeting at the top of potential market movers, including Eurozone GDP and CPI figures, the BOE's interest rate decision and culminating NFP figures.

Week in Review

Last week, data from the United States was the primary suspect of market movements. First, disappointing earnings reports from several large corporations caused the market to fall midweek. Still, it was rescued by better-than-expected Q2 GDP growth of 2.8% annualised, above the projected 2.5%. However, in the latest report, durable goods contracted unexpectedly by 6.6% month-over-month. Major indices, the S&P500 and Nasdaq, suffered steep losses as investors flocked to defensive positions.

The BOC cut interest rates by 0.25 percentage points as anticipated, its second consecutive reduction. Governor Tiff Macklem warned about a lack of job creation, signalling further potential decreases. The USDCAD pair rose to an April high but faced resistance at 1.38.

Global flash PMIs showed mixed results, with Japan and the US performing better but disappointing figures in Europe, where German manufacturing contracted further.

The Japanese yen strengthened over the course of the week amid little official currency commentary. However, higher-than-expected Japanese producer price index figures fueled rumours the BOJ may raise rates at its upcoming meeting. Against the dollar, the yen strengthened to 152 momentarily before recoiling near 154. Still, USDJPY ended the week 2.50% lower. 

The PBOC unexpectedly lowered some of its non-policy interest rates in a technically driven move that supported Asian markets recovering from early declines.

In geopolitics, President Joe Biden unexpectedly announced over the weekend that he would not seek re-election. Vice President Kamala Harris is now the presumed nominee after quickly securing sufficient delegate commitments. This faded the "Trump trade" betting on higher tariffs and interest rates as election uncertainty returned.

Reportedly, UK Prime Minister Keir Starmer will soon meet European Commission President Ursula von der Leyen to "reset" European Union-United Kingdom relations.

Biggest Market Movers

• Wednesday saw the largest single-day drop for the S&P 500 since 2022 following disappointing earnings reports, including a significant decline in Tesla profits, raising questions about the AI sector's "froth."
• Gold prices fluctuated, gaining midweek on risk-aversion before reversing lower after the GDP news to trade over 1% lower for the week at the time of writing.
• The yen strengthened after the recent dual BOJ interventions, though no intercession was suspected last week.
• Australian and New Zealand currencies lost over 2% owing to an absence of new major economic support announcements from China following the Third Plenum meeting.

Top Events in the Week Ahead

Major US data stands out in the week ahead, with NonFarm Payrolls on Friday potentially taking centre stage given the market unanimity that the FOMC will maintain its policy. The statement and Fed Chair Powell will likely reiterate their data-dependency while reassuring on rate cut expectations. July's employment report takes on increased significance if the labour market tightens unexpectedly, jeopardising September's consensus move in light of the upbeat GDP. Nasdaq support lies around 18500.

European Movers and Shakers

The BOE is expected to lower rates on Thursday though the decision isn't strongly consensus, so failure could move the market either way. Meanwhile, the July eurozone consumer price index may heighten pressure on the ECB to act further as second-quarter gross domestic product reportedly slowed following disappointing flash purchasing manager index readings. EURGBP support can be seen at 0.8350 and resistance at 0.85.

Asia in Focus

Wednesday brings two consequential events for Asia's largest economies. China will release official Manufacturing and Services PMIs as investors watch for an industrial sector exit from contraction despite disappointing prior GDP. Later, the BOJ holds its policy meeting amid rate hike speculation, though markets have yet to price this in fully. 

Other Events and Earnings

Other scheduled events include UK mortgage approvals on Monday. Tuesday has Japanese unemployment. Wednesday sees the Australian CPI, Canadian GDP, and the US Treasury's borrowing projections. Thursday includes Australia's trade balance and US ISM Manufacturing PMI. Swiss inflation is on Friday.

Third-quarter earnings reporting peaks through the week across regions and sectors, with the bulk of Japanese and Chinese stocks reporting alongside major European and US names such as McDonald's, Philips, Microsoft, Merck, AMD, Meta, Mastercard, Boeing, GSK, Apple, Amazon, Shell, Exxon Mobil, Berkshire Hathaway and Linde.