The Friday Forex Takeaway – Episode 42

<h2>Key Points from This Week</h2>
<p><strong>RBA Holds Rates Steady</strong></p>
<p>The RBA opted to keep rates on hold this week at its July meeting and struck a broadly optimistic tone. The bank cited a firm rebound in domestic activity and better global financial conditions, despite noting a great deal of uncertainty in the outlook. Parts of Australia, such as Victoria and Melbourne, have returned to lockdown amidst a fresh uptick in new cases there over the last two weeks which will no doubt be adding to the uncertainty in the bank’s outlook. The RBA added that it stands ready to scale up its bond purchases if necessary.</p>
<p><strong>Dollar Sells Off on Virus Fears</strong></p>
<p>The Dollar has come under heavy selling pressure this week over growing concerns that a second wave of the virus is underway. While the death toll has not yet increased , over 40 states have reported a steady increase in new infections and there are fears, supported by the leading US health expert, that the death toll will start to rise again, running the risk of broader lockdowns being reintroduced in the US, which has already started happening in places.</p>
<p><strong>US Threatens Fresh Sanctions Against China</strong></p>
<p>There has been fresh speculation this week over imminent US sanctions against China. Secretary of state, Mike Pompeo, told reporters that the US is drawing up sanctions to be announced and suggested these could include actions such as banning the popular TikTok app in the US. Equities have seen a loss of upside momentum this week as virus fears and US/China tensions have weakened risk appetite into the end of the week.</p>
<h2>Key Events Next Week</h2>
<p><strong>BOJ July Meeting</strong></p>
<p>The BOJ recently downgraded its view of all nine of the country’s regional economies amidst the ongoing COVID-19 crisis and warned that it will be swift to take action if necessary. With this in mind, the chances of further easing have grown though the consensus view remains that the BOJ will keep policy steady next week, while citing downside risks and willingness to act further if necessary.</p>
<p><strong>BOC July Meeting</strong></p>
<p>The BOC meeting next week is not expected to see any further policy adjustment. With the post-lockdown recovery continuing tentatively, the BOC will likely choose to keep its powder dry at this point while it monitors the recovery, keeping an eye on the possibility of a further outbreak of the virus which might see lockdown measures reintroduced.</p>
<p><strong>ECB July Meeting</strong></p>
<p>The ECB meeting next week will be a key market event to watch. Expectations are that the bank will remain on hold for now, acknowledging the better activity and demand seen since the last meeting. However, traders can expect the bank to retain a cautious tone, citing downside risks and great uncertainty along with the bank’s readiness to do more as necessary.</p>
<h2>Keep an Eye On</h2>
<p><strong>US Virus Stats (Particularly Death Toll)</strong></p>
<p>While new cases of the virus have been spiking over recent weeks, for now at least, the death toll has not seen a similar spike. However, in recent days it has started to creep higher again. If a fuller upward trend begins to develop this will likely warrant a greater response from authorities and will certainly be reflected in weaker investor appetite.</p>
<p><b><i>Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.</i></b></p>
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