Fundamental Comment

Market Focus: US Jobs Report, Central Bank Meetings

Market Focus This Week

This week, financial markets will focus on the monthly U.S. jobs report as well as monetary policy meetings by both the Federal Reserve and the Bank of England, noting that any developments related to the trade dispute between the United States and China could have a major impact.

It is important to note that China’s manufacturing and service Purchasing Managers’ Index data released at the beginning of the week may have a significant effect on investors' sentiment, given the lingering concerns about the slowdown in global economic growth.

Dollar Faces Harsh Tests

The Federal Reserve will meet this week to set the interest rates and the course of monetary policy according to the latest developments in the U.S. economy, where markets expect that members of the Federal Committee would vote in favor of holding the borrowing cost.

Some economists believe the Fed will keep its current interest rates until 2020 without any cuts, while others expect U.S. benign inflation would prompt an interest rate reduction later this year.

In terms of economic data, the jobs report may point that US employers created 180,000 jobs in April and the jobless rate stabilized at 3.8 percent, according to median forecasts for the NFP.

The PMI reports for April will also be of interest to investors as it may give an initial impression of the shape of growth in the US economy at the beginning of the second quarter.

In addition to the important events, the US-China high-level trade talks will resume this week, with US Trade Representative Robert Leitzer and Treasury Secretary Steven Mnuchin traveling to the Chinese capital Beijing for negotiations starting on April 30, hoping to reach a trade agreement as soon as convenient.

It is worth mentioning that the outcome of the negotiations may affect the movements of the dollar in particular and the financial markets in general, noting that the dollar still plays the role of safe haven currency.

Pound Shifts Attention towards BOE Inflation Report

Pound Sterling fell for a second week in a row last week and some analysts expect investors to damp holding the pound amid rising fears that the impasse of Britain's exit from the EU and its delay is hurting the British economy.

Investors should keep their eyes open this week, as the Bank of England will decide on interest rates and publish its latest economic outlook.

The Bank of England will release its quarterly inflation report, which will include the latest inflation and growth forecasts for the UK economy. Based on the Bank's assessment, policymakers may decide to keep the borrowing cost at 0.75 percent.

Super Thursday is likely to affect the pound's movements more than any other evens, as the BOE will set interest rates, release the inflation report and the minutes of the monetary policy meeting, as well as the press conference of BOE Governor Mark Carney.

The U.K. will also release the Services, Manufacturing and Construction PMI data for April, which will give the latest update on the health of the economy at the beginning of the second quarter.

The services and construction sectors are expected to record a rise, while the manufacturing gauge is predicted to retreat.

Growth, Inflation Data To Weigh On Euro

The euro is expected to be affected by important economic data related to growth and inflation in the eurozone due this week, especially after the European Central Bank cut to euro area growth and inflation outlook in March.

Investors will focus on the gross domestic product (GDP) for the first quarter of this year, which could show a slowdown in the 19-nations’s growth rate to 0.1 percent after a 0.2 percent expansion in the fourth quarter last year.

The final euro area manufacturing PMI may point to continued contraction in April to 47.8 from 47.5 in March.

The euro zone flash consumer price index is also expected to rise to 1.5 percent in the year ended April from the previous 1.4 percent.

Commodities to Grab Investors’ Attention

Despite the large gains in the U.S. dollar recorded last week, gold was able to benefit from the strong support located around the area of $1,275 per ounce.

The direction of the yellow metal this week will largely depend on the outcome of the trade negotiations, as well as the ability of the precious metal to complete its rebound towards the psychological level of $1,300 an ounce.

Regarding crude oil, prices fell by the end of last week amid expectations that OPEC would raise production to compensate for shrinking exports from Iran after sanctions imposed by the United States, but oil was able to achieve the longest streak of weekly gains in years last week.

Brent crude rose above $75 a barrel for the first time this year after Germany, Poland and Slovakia halted their imports of Russian oil through a major pipeline.

Markets seem to be betting on further gains amid the success of OPEC's production cut agreement, sanctions on Venezuela and Iran and the unstable production in Libya.

But to ensure further gains, Brent crude prices should remain above $ 72.75 a barrel.

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