Fundamental Comment

Economic Week: Focus Returns to Economic Data

Economic Week focus returns to economic data

Participants in financial markets will once again focus on the most important economic reports from major economies this week, amid concerns about the growth outlook of the global economy, after a week that saw some progress in the U.S.-China trade relations and postponement of the Brexit date.

Participants in financial markets will once again focus on the most important economic reports from major economies this week, amid concerns about the growth outlook of the global economy, after a week that saw some progress in the U.S.-China trade relations and postponement of the Brexit date.

Perhaps the most notable data this week will be growth figures from the Chinese economy, which may indicate a slowdown to 6.3 percent in the first quarter of this year (on annual basis) from 6.4 percent expansion in the last quarter of the year.  

Market participants and economic analysts usually track China's GDP report since it is an important indicator of global growth, especially amid the lingering concerns regarding the US-China trade war.

Dollar Retreats Ahead of US Retail Sales

The U.S. dollar was negatively affected last week by the progress in US-China talks, as markets continue to treat the dollar as a safe haven currency.

Looking ahead into this week's economic reports, the most important will be U.S. retail sales, which may show a 0.7% rise in March after falling by 0.2% in February.

Another important report is the flash manufacturing and services PMI for April that should give an initial impression of economic activities in the world's largest economy at the beginning of the second quarter.

The Composite manufacturing and services PMI is expected to drop to 53.0 this month from 54.6 in March.

It should be noted that any developments or announcements related to the trade dispute with China would affect the movements of the green currency.

PMI Data to Weigh on Euro

The euro will be subject to serious testing this week, with the release of economic data of paramount importance in the eurozone.

Analysts expect the final reading of the eurozone consumer price index for the month of March to confirm the retreat to 1.4 percent (year-on-year), compared to the final February reading of 1.5 percent.

Falling inflation could add to concerns over the growth trajectory after recent economic data showed a marked slowdown in growth pace in the first quarter.

However, investors may focus more on the euro area composite PMI, which includes both manufacturing and services sectors, where it may signal a slight expansion in April to 51.8 from 51.6 in March.  

Pound Sterling Seeks Relief from Brexit Breakthrough

The British pound gained some support last week after EU leaders agreed to delay the date of the UK's departure from the EU until Oct. 31 to avoid Britain leaving the EU without an agreement.

Both Conservatives and the Labor Party will continue their talks, with Prime Minister Theresa May still hoping that the United Kingdom will be able to leave the EU before May 22 if Parliament backs here withdrawal agreement.

In the event of this scenario, the UK could avoid the participation in the European Parliament elections scheduled for May 23.

Movements of the pound this week would depend on the latest Brexit developments, as well as on the economic data from the British economy.

The most important reports due from the U.K. this week include unemployment, retail sales and inflation.

Gold and Oil Latest Updates

Gold made serious attempts to stay above the psychological level of $1,300 an ounce last week, but some optimism in the markets as a result of the progress in the US-China trade talks and the postponement of Brexit date shifted investors’ attention to the stock markets.

This week, gold is likely to remain dependent on the general trend in market, which in turn affects the dollar and global equities.

As for oil, the price of Brent crude hit a new record high for this year, buoyed by supply cuts from Venezuela, Libya and Iran, in addition to the already falling production from OPEC and non-OPEC countries.

But if worries about global economic growth falter and US oil inventories rose again, oil prices could halt their rally.  

The US government EIA report due on April 17 may indicate that US crude stockpiles edged up by 7.32 million barrels in the week ended April 12, after rising by 7 million barrels the previous week.

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