Fundamental Comment

Trade tensions, Fed minutes top economic agenda this week

Economic week: Trade tensions, Fed minutes

Global financial market watchers will have a number of important events and economic data this week, as markets will continue to focus on the latest update regarding US-China trade talks and minutes of the Federal Reserve meeting, as well as a slew of economic reports from major economies.

US dollar to receive signals from trade tensions

The US dollar will continue to be more affected by the developments concerning the trade dispute between the United States and China after the recent escalation from both sides, as any negative developments should strengthen the dollar and vice versa.

The Federal Reserve meeting minutes for May will be published this week, where investors are expected to look carefully for the details of the vote by the Federal Committee members.

As for the economic reports from the U.S., the most important will be the PMI for manufacturing and services sectors for May, which will give an initial impression of economic activities in the world's largest economy during the second quarter.

The composite PMI is expected to drop to a reading of 52.0 this month from 53.0 in April.

Another very important report is durable goods orders, which may show a 1.7 percent slide in April after rising 2.7 percent in March.

European elections and PMI to weigh on euro

The most important events that may affect the movements of the euro are the European Parliament elections and the report of the flash manufacturing and service PMI for the month of May.

The European parliamentary elections, the EU's legislative body, will take place from May 23 to 26 in 27 countries committed to staying in the European Union, as well as Britain, which is seeking to exit the EU.

However, investors may focus more on the PMI Manufacturing Index in the eurozone, which may show a modest expansion in May to 51.8 from 51.5 in April.

Last but not least, the minutes of the ECB's monetary policy meeting will give an in-depth view at the economic conditions that influenced the Governing Council’s decision to set interest rates.

Brexit negotiations will remain key for pound

The pound fell last week largely because of the collapse of the Brexit talks between the Labor Party and the Conservatives, and this week the markets will follow the latest developments in this matter.

This week also the U.K. will release important economic reports, as it will release inflation and retail sales data.

The CPI inflation measure may signal a rise to 2.1 percent in the year ended April from 1.9 percent in March, while retail sales could see a 0.1 percent decline in April after a 1.1 advance in March.

Commodities face tough test

Commodities, most notably gold and oil, would face tough tests as they closed near critical levels last week.

Gold erased its gains at the end of last week as a result of the dollar’s rebound, which benefited from the state of concern in markets and after taking another strong push from the release of strong U.S. economic data.

Gold will look for support at $1275 an ounce and if it fails, the $1266 areas could act as a strong support that could help prices rise again.

Regarding oil, the prices of Brent crude rose to $73 a barrel by the end of last week, supported by a combination of oil supply cuts and fears of further unrest in the Middle East.

US government data released this week may show that crude oil inventories slipped by 0.8 million barrels in the week through May 17, after soaring 5.4 million barrels in the week to May 10.

While the drop in US crude inventories is likely to positively affect oil prices, optimism or pessimism in the market in the event of any new developments in US-China trade dispute could have a more impact on the prices of energy products.

Share Article