10 to 16 August: Fed minutes and geopolitics to pull focus

Although a week has passed, it is still unclear whether President Trump’s executive orders on jobless benefits and reducing the payroll tax will have a meaningful impact on the economy. Since only Congress has the power to authorise new spending, the President can only re-allocate existing resources – this time the Department of Homeland Security’s Disaster Relief Fund will serve this purpose (although it was not originally created to address an issue of this nature). With congressional talks deadlocked, the probability of a genuine stimulus being approved just three months ahead of the Presidential election is declining. According to the latest political polls, Joe Biden maintained a 9-10-point lead over President Trump.

Although there are not too many datapoints in the US’ economic diary this week, markets will have plenty to digest after the Federal Reserve releases the minutes of its late-July meeting. In emerging markets, there will be a couple of datapoints to watch, such as monetary policy decisions in the ASEAN region or activity indicators in Latin America. But most importantly, EM investors will surely focus on geopolitics, such as any piece of news related to the US-China trade negotiations and half-year compliance review (no new date has yet been set).

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