Investors will focus this week on the latest political events after the U.S. withdrawal from the nuclear deal with Iran, as well as release of a spat of important economic data from major economies.
The U.S. dollar came under pressure at the end last week, after the release of soft U.S. inflation data that lowered the chances of seeing an aggressive interest rate hike path by the Federal Reserve this year.
This week, the focus will be on the release of important economic data including, retail sales, housing starts and industrial production.
However, retail sales could get more attention as it mainly reflect the strength of consumer spending.
Retail sales volume probably have soared 0.2 percent in April, following a 0.6 percent advance in March, according to analysts’ estimates.
On the political front, investors will keep their eyes open on any updates from the latest U.S. re-imposed sanctions on Iran that caused division between the U.S. and its European allies
Also, investors will carefully watch the second round of trade negotiations between U.S. and Chinese officials that will take place this week in Washington.
This week, the most important data from the euro area will be the second GDP reading for the first quarter and the final consumer price index.
The second GDP reading is predicted to confirm an ease in the pace of growth to 0.4 percent in the first three months of the year, down from 0.7 percent in the three months before.
Euro area CPI for the year ended April may be revised up to 1.4 percent increase from the flash estimate of 1.3 percent, which would remain far from the ECB’s 2-percent target.
The weak inflation as well as the slowdown in euro area growth pace pushed the euro lower versus the dollar to the lowest level in four-and-a-half low last week.
However, correctional movements that started at the end of last week may continue this week, with eyes focusing on the above mentioned euro area economic data.
The pound sterling rose at the end of last week after getting some support when it hit the lowest level since January 7 against the green currency.
The hold of interest rates by the Bank of England and the uncertainty about the timing of the first interest rate hike this year have pushed the pound lower.
The movements of the sterling this week will rely on U.K. unemployment data that will give an update about the labor market and wage growth in the first quarter.
The wage growth for the three months through March is predicted to rise to 2.9 percent from a previous of 2.8 percent. Unemployment rate for the same period may signal a stability at 4.2 percent.
Last week, gold managed to rebound from a low of $1304.27 an ounce to lock its first weekly gain in four weeks as the ease of the dollar from multi-month high boosted demand on the metal.
Hence, the movements of gold this week will largely depend on whether the dollar will start a downside correction or continue its bullishness.
Regarding oil, it climbed to the highest level in nearly 3-1/2 years last week on concerns of oil supplies from Iran after the U.S. re-imposition of new sanctions.
However, some analysts believe that OPEC members would increase their production to compensate the potential drop in Iran’s output share.
The rising U.S. oil production, which set a new record high of 10.27 million barrels per day in the week ended May 4, could also fill Iran’s supply gap.
U.S. crude inventories probably soared by 0.09 million barrels in the week ended May 11 after a 2.197 million-barrel decrease a week before, the EIA report due this week may show.
A rise in U.S. crude inventories could add some pressure on oil prices,
thereby pulling it lower from record highs.