The key events of the upcoming week
Reports about the increased number of COVID-19 cases in the EU brought the significant nervousness in the market. Last week, investors were actively buying the US dollar, viewing it as the main defensive currency in the face of growing uncertainty.
The epidemiological situation in the United States remains tense, but the economy demonstrates good stability even in the absence of active support measures from the government.Legislators have not been able to adopt a new package of measures to help the economy. Most likely, the program will be established after the presidential elections scheduled for November.
A number of EU countries have again tightened quarantine measures to slow down the spread of the second wave of the COVID-19 pandemic. EU economic recovery prospects deteriorated significantly. During this upcoming week the leaders of the EU countries will hold a summit at which they will discuss possible options for combating the pandemic and the economic consequences.
In the United States, the focus will remain on the internal political battles, but the latest macroeconomic statistics can also significantly affect the dynamics of the market. The central event of the week will be the September report on the labor market.
USA - CB Consumer Confidence Index
The Consumer Confidence Index is an important leading indicator that reflects the level of consumer confidence in the economy. It helps assess the level of consumer expenses in the future. In August, the indicator did not reach the predicted level, putting serious pressure on the US dollar. In September, experts predict an increase from 84.8 to 90.0 points. If the forecasts are correct, the dollar may receive significant support.
China - Manufacturing and Non-Manufacturing PMI
PMI data of the manufacturing and service sector in China always produce a strong influence on investors in the stock markets. The world's second largest economy continues to show good recovery from the shock of the coronavirus pandemic earlier the year. In September, experts predict further growth of activity in key sectors of the Chinese economy, which may have a positive impact on investors' risk appetite.
EU - PMI data of the manufacturing sector in Germany
Preliminary PMI data of the German manufacturing sector, released last week, showed an increase from 52.2 to 56.6 points. But in recent weeks, the epidemiological situation in Germany and other EU countries has deteriorated significantly. There is a threat of introducing new strict quarantine measures, which could negatively affect the mood of purchasing managers in the manufacturing sector. Not really encouraging data is likely to be expected. That could put significant pressure on the European currency.
EU - EU Leaders Summit
At the EU summit leaders of the Union countries will discuss two key issues - the Brexit problem and the economic problems caused by the coronavirus pandemic. No breakthrough should be expected on the issue of Brexit. Negotiations between Brussels and London continue, and so far the parties cannot find a way out of the impasse. The threat of hard Brexit consequences is growing, so at the summit, EU countries can discuss issues related to the implementation of measures to mitigate the consequences of Brexit without making a trade agreement for the EU countries.
The issue of slowing down the second wave of the pandemic for the EU countries is no less significant. Many countries have again tightened quarantine measures to contain the spread of the virus. Here, the leaders of the EU countries will focus on the issue of economic assistance to the countries most severely affected by COVID-19, and will consider measures to mitigate the economic consequences of the second wave of the pandemic.
Let us remind that in the summer the leaders of the EU countries approved the formation of a common fund for a total amount more than 2 trillion EUR.
USA - Labor Market Report
The US labor market situation remains challenging. The weekly data shows that the number of requests for unemployment benefits remains abnormally high. The coronavirus pandemic continues to have a strong negative impact on the labor market, and legislators struggle to agree on a new package of economic assistance measures that could mitigate the impact on both the labor market and the economy as a whole.
Based on preliminary data, it can be concluded that the main indicators of the labor market report for September will be contradictory. The unemployment rate may decline slightly, but the pace of employment recovery will remain below market expectations. Traditionally, the dollar will react to the publication by quite high volatility, but, most likely, the report on the labor market will not change the general trend of the main financial instruments.