Most of the news focused on over the weekend was political in nature and it seemed to have already caught the market's attention on Friday, so was somewhat in the price.

The long and the short of it

1. Namely, Sean Spicer stepping down from his post as White House press secretary, and hedge fund investment manager Anthony Scaramucci's appointment as White House communications director. It certainly won't surprise that Spicer has left his post, although the duration of his tenure was clearly unimpressive. While Scaramucci doesn't have a huge amount of experience in this field, Trump has been impressed with one incident in particular - his ability to have CNN retract a story regarding Trump and Russia earlier in the year.
2. Anyhow, the wash-up of these developments hasn't been hugely market moving, with only modest buying in US fixed income and selling in US equities, which face the sizeable proposition of 40 per cent of the S&P's market cap due to report this week. Names like Alphabet, Caterpillar, GM, McDonald's and Boeing will be on the docket, so earnings touch on multiple sectors. It was generally a decent week for US stocks, although we did finally see the Nasdaq 100 drop 0.04 per cent, breaking its 10-day streak, with the S&P 500 faring the same. Keep in mind we have seen some 20 per cent of the S&P 500 report thus far and the numbers are looking pretty good, with 69 per cent having beaten the Street's forecast, which is in line with the level of beats we have seen in the past four quarters.
3. Our call for the ASX 200, based on the fact SPI futures fell 25 points in the Friday night session, is for the local market to open close to 5700, so there'll be some weakness creeping in. As mentioned in prior reports, the ASX 200 is perfectly happy moving sideways in this range of 5800 to 5650 and I continue to expect it to respect these levels in the week ahead. That said, we start to pay greater focus on the Australian full-year earnings season, with Navitas kicking off proceedings on August 1, so if the index is to break this range it will come down to a combination of offshore leads and more likely the numbers and the outlooks from Aussie corporates.
4. Perhaps the most interesting aspect to trading this week this week will be on Wednesday, which is shaping up to be a huge day for forex and rates traders. The market is no doubt long of Aussie dollars (AUD), notably on the leveraged side where funds increased their gross long position to 69,100 and cut back on shorts a touch, to leave the net long position at 51,500 contracts and the highest since March. Of course, we know the US dollar (USD) is unloved by the market and that seems unlikely to reverse this coming week despite the July Federal Open Market Committee meeting and US second-quarter GDP print in store, although neither event should rock the USD in any great capacity.
5. We know that the Reserve Bank of Australia has back-tracked on its July meeting minutes to an extent, with deputy governor Guy Debelle on Friday signalling the markets over interpretation on the nominal neutral rate of 3.5 per cent and the view this could signal the cash rate was going higher. While fading the AUD rally into Debelle's speech was perhaps a fairly clear trade (at least in hindsight), it still seems so bizarre that the RBA would throw out such numbers and rhetoric and not expect the market to explore them in such depth.
6. So on Wednesday, we get Aussie second-quarter CPI, with the numbers unlikely to excite either the AUD bulls or bears and it should be steady as she goes. A trimmed mean print of 0.3 per cent or below on the quarter will likely remove a decent element of market pricing around rate hikes this year and cause good selling in AUD, with a move towards 80¢ in AUD/USD on a number above 0.7 per cent. RBA governor Philip Lowe then speaks shortly after and the question is whether he follows Dr Debelle's lead. If he does, this would be significant and the market will go after the AUD in a big way, clearly driven by a huge bid in front-end yields. My preferred way of trading the AUD at present is long EUR/AUD, with many seeing the ECB as quite calm about the recent moves in the euro, although we do have eurozone inflation numbers out this week and of course they pose a risk.
7. I would also be keeping a beady eye on commodity prices this week, notably spot iron ore, as weakness has been creeping into the price after the sizeable rally through July. Spot prices closed down 1.3 per cent on Friday and could weigh on the mining space, as will oil, which lost 2.5 per cent on Friday on a consultancy report showing an expectancy that OPEC production had increased for July, and that seems perfectly fitting given the focus this week turns to St Petersburg and the gathering of OPEC nations. One suspects we won't hear too much definition of output cuts and the idea that Nigeria and Libya will join in seems and even harder task.
8. Market highlights

• SPI futures down 24 points or 0.4% to 5640
• AUD -0.5% to 79.16 US cents
• On Wall St, Dow -0.2%, S&P 500 flat, Nasdaq flat
• In New York, BHP -1.1%, Rio -0.9%
• In Europe, Stoxx 50 -1.4%, FTSE -0.5%, CAC -1.6%, DAX -1.7%
• Spot gold +0.8% to $US1254.98 an ounce
• Brent crude -2.8% to $US47.90 a barrel
• Iron ore -1.3% to $US67.14 a tonne
• Dalian iron ore -2.3% to 505 yuan
• LME aluminium -0.1% to $US1915
• LME copper +0.8% to $US6004 a tonne
• 10-year bond yield: US 2.24%, Germany 0.50%, Australia 2.69% 
  

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