Fundamental Comment

This Week: U.S. inflation, Fed minutes in focus

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The most important events this week that could weigh on the movements of major currencies will be inflation reports from the U.S., in addition to the Federal Reserve’ s latest meeting minutes.

US Dollar

The U.S. dollar gained some ground last week, doing attempts to rebound, despite the escalating trade war concerns between the U.S. and China.

While President Trump warned last week of identifying tariffs on $100 billion more Chinese imports, still some investors believe the new tariffs may not be implemented.

This week, the U.S. will release its CPI and PPI data for the month of March, where the data likely to be carefully watched, as it may shape of the Fed’s upcoming monetary stance.

Eyes will focus on the Fed’s meeting minutes for March’s rate decision that included hiking interest rates by 25 basis points.

A higher inflation and a more hawkish tone of FOMC minutes should give some support to the dollar, yet investors will also continue to watch the latest updates from Trump and China.

It is important to note that China will release its trade balance report this week after a report released last week showing U.S. trade deficit widened to a nine-year high in February.

Euro

Last week, the euro came under pressure amid attempts from the U.S. dollar to resume its rebound against major currencies.

This week, the euro area lacks the release of high-relevance data, yet investors could focus on the European Central Bank’s latest meeting minutes.

Hence, the euro’s direction is likely to be shaped by the general sentiment in the market.

Pound Sterling

Perhaps the most important data due this week is the U.K. manufacturing and industrial production for the month of February.

Markets will also focus on BOE Governor Mark carney who will speak at the Canada Growth Summit.

The pound has looked resilient over the past few weeks on hopes, the euro area and U.K. officials would reach a compromising Brexit deal.

Commodities

After falling over the last four weeks, gold managed to lock a weekly gain last week as it took advantage of haven demand amidst the escalating tensions between the U.S. and China.

The nervousness in the market over the trade woes between the world’s two biggest economies, helped gold to rebound from a three-week low.

Gold is likely to get its direction from the latest updates from both U.S. and China in addition to the dollar’s movements.

Regarding oil, it firmed last week on signs of tightening U.S. supplies, as the EIA report showed that U.S. crude inventories slipped by 4.6 million barrels in the week ended March 30.

However, U.S. crude stockpiles may have surged by 0.65 million barrels in the week ended April 6, the U.S. government report due this week may show.

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