The Week Ahead with GO Markets
By Deepta Bolaky
Renewed trade fears are likely to continue to drive the markets as we start the week. President Trump’s announcement of 25% tariffs worth $50 billion on Chinese goods and China’s swift retaliatory response sparked a sell-off across the markets as investors retracted from riskier assets to seek safe havens.
With a relatively quiet economic calendar, investors’ attention will be focused on the trade rhetoric.
Key potential drivers this week:
The Bank of England’s rate decision, the OPEC meeting and a few of Fed speeches.
On the economic calendar front, the week will kick off with some Fed speeches. After last week’s hawkish Fed speech, it will be interesting to see the different point of view of other members which might help investors to gauge the overall stance towards interest rates. Housing and Building Permits, Jobless and Continuing Claims, Manufacturing and Services PMIs and the annual Bank Stress Info will be released this week.
The key risk event will be the release of the list of Chinese goods subject to the tariffs.
UK and Europe
The Bank of England monetary policy scheduled on Thursday will be an important event for the UK. This meeting might not see any change in interest rate given the recent soft data. Investors will most likely watch the language used around growth. If slow growth were to be temporary, it will be considered as positive for the Sterling. So far, the markets are pricing-in an interest rate hike in August with a 50% probability of it occurring.
In the Eurozone area, trade and PMIs figures will be released. The ECB Forum which will take place in Sintra from the 18th to the 20th of June will provide investors with insights on the current policy. Central bank governors, academics, financial market representatives and top economists from the world are expected to exchange their views on the current policy namely; Price and wage-setting in advanced economies.
Asia and Australia
Quiet week for Asia and Australia. As of writing, Japanese’s imports and exports came out better than expected. Japanese trade surplus with the United States fell by 17.3% but time will tell if those figures will tone down Trump’s criticism of Japanese’s trade policies.
In Australia, the House Price Index, RBA minutes and Westpac May lending Index will be released. The RBA’s minutes are unlikely going to reveal anything new. The Australian Dollar might once again be exposed to the overall market sentiment due to a lack of key economic drivers this week.
After the FOMC and ECB meeting, we have seen downside moves in other commodities such as oil, gold, copper and platinum. Technical commodities traders are most likely to keep an eye on key resistance levels.
OPEC tensions loom ahead of the most important meeting for the cartel. Decisions regarding production output will be discussed whereby the whole cartel must agree on a consensus. This meeting might be tricky given the recent resistance from some founding OPEC members and reports that Russia and Saudi Arabia are considering a bilateral agreement. Adding to production uncertainties, Fed rate hikes are also keeping oil prices on the weak side.