Week In Review: July 31, 2020

US equity indexes slightly mixed to higher on the week. DJIA -0.16%, S&P 500 +1.73%, and NASDAQ +3.69%.

Market focus was on US Q2 GDP, the Federal Reserve Board monetary policy meeting, and major tech company earnings. On Wednesday, the FOMC left the policy setting unchanged and noted that “the path of the economy will depend significantly on the course of the virus.”  In the press conference opening statement, Chairman Powell mentioned that while overall inflation is running well below the 2% objective, that for some goods, supply constraints have led to notably higher prices. The Bank of Canada brought up this issue in its July MPR as well. Thursday, US Q2 GDP came in at -32.9% Q/Q, AR, weighing on market sentiment on the day. Post-close, AMZN, AAPL, and FB reported earnings that were stronger than expected. With its stock up 10.47% on Friday, AAPL surpassed Saudi Aramco to become the world’s most valuable publicly traded company. The $600 per week enhanced federal unemployment benefit lapsed at the end of the day, with Republicans and Democrats struggling to come to an agreement on a coronavirus relief bill – a topic the market will monitor ahead.

USD was broadly weaker (see heatmap below). GBP was a stand-out, breaking 1.3000 and 1.3100 resistance levels. EUR also gained, trading briefly above 1.1900 before coming back to end the week around 1.1770. AUD was supported with the recovery in US equity indexes Friday (especially NASDAQ) and broke 0.7200 resistance.  NZD and CAD didn’t benefit as much from US equities’ week-ending rally. CAD was perhaps weighed upon by the US outlook and data re: subdued Fed commentary and the historic fall in Q2 GDP. CAD is back above 1.3400 support.  DXY broke 93.00 support but finished the week above it at 93.40 area.  Renewed US-China tension didn’t lead to weakening CNH this week. Also, see Senior Advisor Brad Setser’s analysis: peak USD hoarding is over.  

Ahead: Central bank meetings, PMIs, and Employment data.

Select economic data releases: Sunday, Aug-2: Japan GDP; China Caixin Manufacturing PMI (Jul)  Monday, Aug-3: Holiday in Canada; Swiss CPI (Jul); German Manufacturing PMI (Jul), UK Manufacturing PMI (Jul), US ISM Manufacturing PMI (Jul), Australia:  Trade Balance & Retail Sales (Jun), RBA monetary policy decision.  Tuesday, Aug-4: NZ Employment (Q2)  Wednesday, Aug-5: UK Composite & Service PMI (Jul), US ADP Nonfarm Employment (Jul), US Trade Balance (Jun), Canada Trade Balance (Jun), US ISM Non-mfg PMI (Jul) Thursday, Aug-6: UK BoE monetary policy decision, BoE Financial Stability Report, US initial jobless claims Friday, Aug-7: US Payroll Employment (Jul), Canada Employment (Jul) & Ivey PMI (Jul).


Covid-19 Growth: US States

Cases are plateauing in the US and coverage is starting to focus on a global second wave. In the heatmap below, we look at the improvement across US states. In large second wave states Florida, Texas and Arizona – case growth is stabilizing and hit ratios are down or flat.  The same is true for Georgia, Louisiana, Nevada, and South Carolina. Michigan and Illinois have experienced consistently increasing case counts through July, though ratios have remained below 10%.  As of July-31, 12 US sates have trend daily case growth rates greater than 2%. For comparison, on July-17 there were 24 US states with trend daily case growth rates greater than 2%.  We continue to keep an eye on US fatalities. Fatalities are a lagging indicator, so they, very unfortunately, have continued to grow as cases normalize.  Founder Jens Nordvig speaks to this issue here



  • Founder Jens Nordvig gave an interview to CNBC on the USD.  Below is a quote on his thoughts regarding “Can US equity indexes rise as USD declines?”

  • Senior Advisor Brad Setser quoted in the Washington Post commenting on the global supply chain – that the likely impact of the pandemic should not be overstated.  

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