Learn To Trade
 
Indicators & Chart Patterns

Deepen your knowledge of technical analysis indicators and hone your skills as a trader.

Find your detailed guides here
Trading Glossary

From beginners to experts, all traders need to know a wide range of technical terms. Let us be your guide.

Learn More
Knowledge Base

No matter your experience level, download our free trading guides and develop your skills.

Learn More
Learn To Trade

Trade smarter: boost your skills with our training resources.

Create a live account
Market Analysis
 
Market News

All the latest market news, with regular insights and analysis from our in-house experts

Learn More
Economic Calendar

Make sure you are ahead of every market move with our constantly updated economic calendar.

Learn More
Technical Analysis

Harness past market data to forecast price direction and anticipate market moves.

Learn More
Live Webinars

Boost your knowledge with our live, interactive webinars delivered by industry experts.

Register now
Special Reports

Engaging, in-depth macroeconomic analysis and expert educational content from our in-house analysts

Learn More
Market Analysis

Harness the market intelligence you need to build your trading strategies.

Create a live account
Partnership
 
Affiliate Programme

Grow your business and get rewarded. Find out more about our Affiliate Programme today.

Learn More
Money Manager

Increase your income and get compensated for your trading knowledge with ThinkInvest, putting you in control.

Learn More
API Trading

Create your own trading platform or data tools with our cutting-edge APIs.

Learn More
Introducing Broker

ThinkMarkets ensures high levels of client satisfaction with high client retention and conversion rates.

Learn More
White Label

We supply everything you need to create your own brand in the Forex industry.

Learn More
Regional Representatives

Partner with ThinkMarkets today to access full consulting services, promotional materials and your own budgets.

Learn More
Partnership

Plug into the next-gen platforms and the trades your clients want.

Create a live account
About ThinkMarkets
 
About Us

Find out more about ThinkMarkets, an established, multi-award winning global broker you can trust.

Learn More
Careers

Discover a range of rewarding career possibilities across the globe

Apply now
Security of Funds

Security of your funds is our number one priority. Find out more about our insurance policy with Lloyd's of London.

Learn More
Trading Infrastructure

When it comes to the speed we execute your trades, no expense is spared. Find out more.

Learn More
ThinkMarkets News

Keep up to date with our latest company news and announcements.

Learn More
Contact Us

Our multilingual support team is here for you 24/7.

Learn More
About ThinkMarkets

Global presence, local expertise - find out what sets us apart.

Create a live account
Create account

Week Ahead: July 19, 2021

Fawad Razaqzada Fawad Razaqzada 16/07/2021
Week Ahead: July 19, 2021 Week Ahead: July 19, 2021
Week Ahead: July 19, 2021 Fawad Razaqzada
  • Central bank emergency stimulus measures are winding down
  • US Federal Reserve making a mistake?
  • European Central Bank likely to maintain dovish rhetoric
  • A few central banks have turned hawkish
  • Earnings: Focus turns to technology from banks
  • Macro data and earnings highlights include ECB and PMIs
US index futures managed to rebound on Friday after what has been a choppy week. The market was relieved to hear dovish rhetoric from the Fed and BoJ. But other central banks have turned hawkish in light of rapidly rising inflation across the globe. Investors are still giving the Fed the benefit of the doubt and evidently happy to buy any dips in US stocks. But with a falling number of stocks supporting the indices, are the US markets going to correct themselves in the week ahead, or will the bullish trend continue? The focus will turn to the ECB policy meeting and technology earnings after another strong season for banks.
 

Central bank stimulus measures are winding down

 
The major central banks have been consistent at one thing: sending mixed signals regarding their respective monetary policy guidance in the near-term outlook. But amidst the uncertainty, one thing is becoming clear: emergency measures are slowly being removed or reduced. However, not all central banks are at the same wavelength, as growth has been strong in some regions and not so strong in others. Meanwhile, there are elevated levels of uncertainty over whether inflationary pressures are transitory or likely to be more sticky. Complicating the economic outlook further has been the rapid rise of the delta variant of coronavirus despite successful vaccination programmes across the major developed economies. There is also the unknown threat posed to vaccinated people by future strains of the virus, as lockdown measures continue to ease, and people return to office life.
 
US Federal Reserve making a mistake?
 
The uncertainty surrounding central bank policy has started to hurt some stocks and sectors, while causing the major currencies to weaken with the US dollar coming back amid rising inflationary pressures in the US and despite the Fed’s continued dovish rhetoric. On the one hand, it looks like the market is betting that the Fed is making a major policy mistake by not withdrawing monetary support sooner given the above 5% CPI inflation. On the other hand, the lack of a more significant sell-off on Wall Street or in Treasuries suggest some investors are still giving the Fed the benefit of the doubt.
 
This week, we have twice heard from Fed Chair Jay Powell, who was characteristically dovish at his testimony, causing yields to dip he continued to defend the central bank’s stance to keep providing support to the U.S. economy despite rising inflationary pressures. However, while adamant that inflation is going to be transitory, Powell did warn that the Fed is ready to act if needed, particularly because there’s still a lot of unknowns.  He acknowledged that no one knows for sure how much longer price pressures in categories like used cars, which has been one of the main drivers behind CPI, will remain elevated. “We also don’t know whether there are other things that will come forward and take their place,” Powell added.

We won’t be hearing from Fed officials given that the next policy decision is less than two weeks away now. And with the economic calendar being fairly quiet in the week ahead, we won’t have many macro indicators to provide us strong clues as to what the FOMC might decide at its next meeting on 28 July. But given the stronger-than-expected rise in inflation, will the Fed surprise the market at that meeting? Time will tell. It could be a long wait.
 
European Central Bank likely to maintain dovish rhetoric
 
The European Central Bank meeting on Thursday will likely be the week’s main macro event. Last week, the ECB announced a change in its strategy, allowing the central bank to tolerate inflation higher than its 2% goal when rates are near rock bottom. That is the case right now, but this does not mean the Governing Council will agree on the economic and inflation outlook – and thus on how much more bond buying stimulus is needed. ECB President Christine Lagarde has also said that “forward guidance will certainly be revisited." At the moment, the guidance says the ECB will purchase bonds for as long as necessary and will keep interest rates at current levels until the inflation outlook "robustly” converges to its goal. With the cases of the delta variant of Covid-19 rising sharply across Europe and elsewhere, you can rest assured that the centra bank will not even entertain the idea of dialling back stimulus. Indeed, Lagarde has already said that her sense is that the ECB will be “maintaining favourable financing conditions in our economy," and that the ECB's Pandemic Emergency Purchase Programme (PEPP) could "transition into a new format" after March 2022, which is the earliest the programme can end.

In short, expect the ECB to remain dovish, especially if we see further sharp rises in Covid cases until the central bank’s meeting. This should keep the likes of the EUR/NZD under and EUR/GBP under pressure, while supporting the European stock markets.
 
A few central banks have turned hawkish
 
Above I mentioned the EUR/NZD and the reason for that is that the Reserve Bank of New Zealand has announced it will end QE and we have seen further gains in NZ inflation data on Friday. Meanwhile, the Bank of Canada has already been tapering its asset purchases programmes. Elsewhere, a couple of policymakers from the Bank of England also spoke last week, calling for the reduction of monetary stimulus, which helped to keep the pound stable and caused the FTSE to once again struggle. The  next BoE meeting is scheduled for 5 August, and ahead of that meeting I wouldn’t expect too much of a moment in the pound -although it could move higher against currencies where the central bank is still dovish – such as the euro and yen.  
 

Earnings: Focus turns to technology from banks

 
The earnings season will kick into a higher gear and the focus will turn to the US technology sector after banks posted mostly above-forecast results thanks to strong deal making in the last quarter. Morgan Stanley posted its second-most profitable quarter on record thanks to $2.38 billion in revenue from its investment banking division. This helped to offset a big drop fixed-income trading revenue. Other US banks such as JPMorgan and Goldman Sachs have posted similar results.

In the week ahead, we will hear from the likes of Netflix, Intel and Twitter, among others.
 
  • After its meteoric rise, Tesla will be in focus afters its shares pulled back about 25% from record highs in recent months. Its shares have fallen in part due to valuation concerns with other carmakers such as GM, Ford and Daimler all ramping up their own electric vehicle offerings.
  • Netflix has managed to regain its poise after the big miss on Q1 user growth in April saw its shares tumble. Investors will be wondering how many new subscribers the streaming services has been able to add after its explosive growth during the pandemic. With lockdown restrictions having been eased further in the recent quarter, the risk is that we may see another miss.

 

Macro data and earnings highlights

 
The economic calendar for the week ahead is fairly quiet with only a handful of potentially market moving data to look forward to in the second half of the week. These include the European Central Bank meeting, retail sales from Australia, Canada and the UK, and global services and manufacturing PMIs.
 
Monday
  • No major data
  • Earnings: IBM
Tuesday
  • RBA meeting minutes, and US building permits and housing starts
  • US Earnings: Netflix
  • European Earnings: Volvo, EasyJet
Wednesday
  • Aussie retail sales
  • Earnings: Texas Instruments, Verizon, Coca-Cola and Johnson & Johnson
Thursday
  • ECB policy decision and press conference
  • US jobless claims and existing home sales
  • US Earnings: Intel, Twitter, AT&T and Snap
  • European Earnings: Unilever, SSE
Friday
  • Retail sales from UK and Canada
  • Global flash manufacturing and services PMIs, including from Eurozone
  • Earnings: Honeywell International (US) and Vodafone (UK)
 
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

Related articles:

GBP/USD in no man’s land ahead of BoE and NFP

By Fawad Razaqzada

05/08/2021

BoE Preview

By Fawad Razaqzada

04/08/2021

Technical Analysis Review: July 2021

By Fawad Razaqzada

03/08/2021

Investors brace for busy week

By Fawad Razaqzada

02/08/2021

Precious metals shine brighter after weak US ...

By Fawad Razaqzada

29/07/2021

Meet our contributors
Fawad Razaqzada
×
Fawad Razaqzada
Market Analyst, London

Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms. He leverages years of market knowledge to provide retail and professional traders worldwide with succinct fundamental & technical analysis. Fawad also offers trading education to help shorten the learning curves of developing traders.
 
His colleagues consider him an expert at reading price action on the charts. This together with his deep understanding of economics and fundamental analysis, and trading experience, puts him in a great position to forecast short term price movements. Fawad covers a wide range of markets, including FX, commodities, stock indices and cryptocurrencies and his comments are regularly quoted by the leading financial publications such as Reuters and Market Watch. In addition to ThinkMarkets, Fawad also provides analysis and premium trade signals on his own website at TradingCandles.com.
 
 

Carl Capolingua
×
Carl Capolingua
Market Analyst, Melbourne

Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions. Specialising in Australian and US stock markets in particular, Carl uses a top-down approach to assess the global macro picture before using both technical and fundamental techniques to select stocks. He regularly appears as an expert commentator on a number of media outlets throughout the Asia-Pacific region.
 
 
 

Kearabilwe
×
Kearabilwe Nonyana
Market Analyst, South Africa

Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives. His career in the financial markets has seen him hold various positions in global investment banks and global CFD and Spread betting firms. He has deep interest in using quantitative methods to help him understand and teach the fundamental drivers of asset prices.
 
 
 

Fawad Razaqzada
Fawad Razaqzada
Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms.
Carl Capolingua
Carl Capolingua
Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions.
Kearabilwe
Kearabilwe Nonyana
Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives.

Feel confident?

Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
Back to top