Quiet day in terms of macroeconomic releases
Trade War theme to dominate the rest of the week
US and China data in the spotlight amid trade tensions
As usual Monday is calm in terms of macroeconomic publications. In the morning Halifax House Price Index from the UK is scheduled for release (8:30 am BST). Market consensus points for a increase from 1.8% YoY to 2% YoY. In the early afternoon (1:15 pm BST) Canadian figures concerning housing starts in March will take the stage and are expected to show the value of 218k against last month’s 229.7k. Apart from that some European central bankers are about to deliver their speeches today (Constancio at 2:00 pm BST and Praet at 5:45 pm BST).
What to watch for the remainder of the week?
There is no shortage of economic reports this week but market’s attention in on the line between the US and China. Interestingly we will have important reports from both countries. However, it’s politics that may have the biggest impact on markets as Trade Wars enter a critical phase.
Trade Wars with China (full week)
President Trump made sure that the Trade Wars theme was not going anywhere anytime soon. Just when investors relaxed a bit in a hope of negotiations between sides China shocked the community by proposing tariffs on sensitive goods like soybean or cotton that could hurt its economy as well. It didn’t stop there – Donald Trump moved the bar even higher by considering tripling the amount that led to escalation concerns. While this might be just a trial balloon, China’s reaction will be crucial and will be highly anticipated. Trump’s top economic adviser Larry Kudlow said that negotiations were still possible but Beijing may stiffen its stance just as well. Traders should monitor the news and act accordingly. Affected markets: US30, DE30.
US: inflation data and the FOMC minutes (Wednesday, 1:30pm GMT and 7pm GMT)
Trade Wars pushed back monetary policy to the second row but it’s certainly worth watching. Any signal that the Fed could increase rates four times this year could quickly influence all major markets: FX, precious metals and equities. Let’s highlight the fact that it took just one more member to be more hawkish during the last meeting and the median expectation in the so called dot-plot (the tool the Fed uses to communicate its intentions) would move from 3 to 4 hikes. Therefore it will be interesting to see if the minutes show this hawkishness while the CPI data is another update on the US inflation – the key metric for the Fed at this stage. Affected markets: EURUSD, Gold.
China: inflation (Wednesday, 2:30am GMT), trade balance (Friday)
The Chinese data are often ignored by the markets as investors have limited trust in it. However, with China in the epicenter of Trade Wars this may change. Tariffs on imports could push inflation higher and require more restrictive monetary policies which in turn could cause economic slowdown given high level of debt. Let us recall that the CPI inflation surprised to the upside last month so another rise could cause concerns on the markets. Affected markets: AUDUSD, CHNComp
After bouncing off 1.7855 handle GBPCAD is approaching 8- and 21-day moving averages. Today’s data may spur some additional volatility on the pair yet no major moves are expected to happen due to semi-importance of this figures. Source: xStation5