The Friday Forex Takeaway – Episode 41

<h2>Key Points from This Week</h2>
<p><strong>Lockdown Measures Reintroduced in Places</strong></p>
<p>Fears of an emerging second wave of the COVID-19 virus have seen the return of lockdown measures in some areas around the world. The governor of California this week ordered the closure of bars and restaurants in 19 counties there while Texas has halted plans to full reopen the economy there. The US is now seeing more than 50,000 new cases a day with the death still rising. If the new upward trend becomes more widespread, the risk of a nationwide lockdown begin to increase. Along with the spike in US cases there have also been fresh regional outbreaks in Australia, leading to fresh lockdowns in Melbourne and Victoria, while Tokyo has also noted its largest daily spike in two months raising risks of fresh lockdown there also.</p>
<p><strong>China Implements Hong Kong National Security Law</strong></p>
<p>China went live with its highly controversial National Security Law in Hong Kong this week. The implementation of the new law, which marks the first time China has written its own laws into Hong Kong penal code, giving it policing power there, was marked with protests. Several hundred have already been arrested, some of whom under the terms of the new law, with China receiving widespread criticism from the global community including an offer from the UK PM to give any Hong Kong citizens a 5-year visa to the UK to allow them to flee.</p>
<p><strong>Brexit Talks Stumble</strong></p>
<p>The first round of face to face Brexit talks this week ended a day earlier due to “major differences” with Michel Barnier, the EU’s chief negotiator, accusing the UK of showing a “lack of respect”. Given the tight timeline the UK has given for establishing an outline for a deal, the prospect of the two sides resolving their differences appears slim at best, creating tail risks into year end with the UK is due to leave the customs union.</p>
<p><strong>US Jobs See Record Build in June</strong></p>
<p>The US roared back in June, marking growth of 4.8 million jobs, seeing the unemployment rate falling back to 11.1%. On the back of the bumper 2.5 million jobs seen in May, this marks the highest monthly jobs gain on record and is helping fuel optimism in the economic recovery despite the fears of a second wave of the virus.</p>
<h2>Key Events Next Week</h2>
<p><strong>US Non-Manufacturing</strong></p>
<p>The next ISM data set is due next week and given that the non-factory sector accounts for the vast majority of the economy, the reading will be closely watched. Still seen in negative territory last month at 45.4, traders are hoping for a move back into contractionary territory to help consolidate optimism on the back of the bumper jobs report seen this week.</p>
<p><strong>RBA July Meeting</strong></p>
<p>The RBA meets next week and is widely expected to keep policy levels on hold given the stabilisation we have seen in financial markets over recent months. However, the bank’s guidance will be key and the RBA is expected to highlight the risks of a second wave of the virus and its willingness to do more if necessary.</p>
<h2>Keep An Eye On</h2>
<p><strong>Second Wave News</strong></p>
<p>If the upward trend in new infections starts to spread around the US we could see more states starting to reintroduce lockdown measures which would be negative for risk snetiment. There is also a risk of furtehr global lockdown measures needing to be reintroduced given then localised spikes we have seen in certain countries. With the UK due to re-open pubs and restaurants this weekend, traders will eb keeping a very close eye on infection data over the next couple of weeks.</p>
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