Last week was all about the Euro, as the European Central Bank (ECB) released its monetary policy statement on Thursday.
As it turned out, it was not the main event of the week, as traders focused on the all-important EU Summit that started Friday.
Judging by the outcome (no deal, with the European Union members divided over the size of grants vs. loans in the recovery funds), the market’s focus will not change in the week ahead. With little or no important economic data ahead, traders will, once again, turn their attention to the Euro and the mixed signals coming out of the European Union.
Economic Data to Watch on the Week Ahead
Monday is likely to be dominated by headlines regarding the EU Summit that ended yesterday. Over the weekend, numerous rumors and photos came out of Brussels, showing ongoing discussions, negotiations, arguments, frustration, etc. among EU members. That is not the signal Euro bulls want to see on the medium to long-term horizon, especially considering the dimensions of the health crisis at hand.
Today brings no relevant economic data during the London or North American sessions. Only during Tuesday’s Asian session, the first important event hits the wires – the Reserve Bank of Australia (RBA) Governor is set to deliver a speech about the Australian labor market in the times of COVID-19. The AUD pairs will be on the move for sure.
Canadian Retail Sales on Tuesday and Crude Oil Inventories on Wednesday will impact the CAD pairs’ volatility. Finally, the week ends with the Unemployment Claims on Thursday and Eurozone PMI on Friday.
As mentioned earlier, the week is poor in important economic data. Summer trading conditions are likely to set in after the EU Summit, as everyone looks at a short holiday after a tense second quarter.
The stock market, once again, will be the one to watch in the absence of important economic data. Since the COVID-19 outbreak, it was responsible for most of the FX moves, with main pairs like the EURUSD or AUDUSD moving in a strong, direct correlation with the main US indices.
Moving forward, the danger is that poor liquidity due to summer trading may create ample moves in the stock market. Given the correlations mentioned in the previous paragraph, any turbulence in the US equity markets will spill over to other markets too. Therefore, FX traders are better off watching US indices this week rather than the classic economic data that usually influence price levels.