Market Review: President Trump and President Kim Meeting
Economic calendar (highest volatility): 11th June – 15th June 2018:
Timezone: (GMT -5:00) Eastern Time (U.S & Canada), Bogota, Lima
In the previous week, the market’s focus momentarily turned to G7 Summit in Quebec, Canada. The 2-day challenging summit ended up with a dramatic thud on Saturday, when hours after the release of a joint statement signed by all the G7 leaders, President Trump abruptly withdrew U.S support and launched a blistering Twitter attack on Canadian Prime Minister Justin Trudeau, describing Mr Trudeau as “meek and mild” and "very dishonest and weak". Earlier, a joint communiqué contains commitments from G7 leaders on fighting protectionism, reducing trade barriers, exchanging approaches for fair tax systems and fighting tax evasion, among other issues was released to conclude the summit. However, President Trump unravelled the progress made when he tweeted that he had "instructed our U.S. reps not to endorse the communiqué." The president cited Trudeau's "false statements at his news conference” for his reason for reversing course, and then threatened to "look at tariffs on automobiles flooding the U.S. market." In response, Trudeau's office released a statement saying that "we are focused on everything we accomplished here at the G7 summit."
Economic releases out of U.S last week were few but encouraging. The ISM non-manufacturing Purchasing Managers Index (PMI) beat the consensus estimate, pointing to a rapid expansion in services sector. On the other hand, data came out of Eurozone pointed a weaker picture with Eurozone composite PMI slowed for the fourth straight month in May, Germany manufacturing and the final reading of French services PMI also plummeted.
That said, on the political forefront the team here at FintechFX views the Trump and Kim Meeting schedules to take place this week in Singapore could potentially be a major volatility driver if any part of these negotiations go down South. That aside, for this fresh week, the team here at FintechFX opines that it will be rather tumultuous with policy meetings of major central banks taking place along with a slew of economic releases. In the U.S, the Fed rate decision is scheduled on Wednesday along with the release of U.S headline and core Producer Price Index. While there are expectations of a second rate hike this year by Fed, the absence of a strong consensus in the market could potentially spark an extreme volatility leading to the policy decision. In addition to the American policy meeting, another potential driver coming from the US would be the release of key Inflation figures on Tuesday, Retail Sales on Thursday and the Michigan Consumer Sentiment Index on Friday. The team here at FintechFX suggests our reader to also take a closer look at key US inflation numbers, given the Fed’s focus on inflation, the odds for rate hike could change at the last moment.
Two other major central bank meetings include European Central Bank (ECB) and Bank of Japan (BoJ). Nonetheless, the market is not expecting both central banks to take any fresh actions. As for Japan, a weak growth picture since the start of the year would further cloud the timing for a stimulus exit by BoJ.
While major policy meetings will likely overshadow economic releases, the team here at Fintech FX note that there will be releases of high frequency and important economic data which include Germany’s ZEW Economic Sentiment and inflation, UK inflation and industrial production, and Australian Employment figures.
This week, the EUR/USD will certainly be subjected to some degree of volatility given the upcoming ECB Main Refining Rate Decision. Formerly, the market focus was on when the timing of when ECB's asset purchasing programme would be scheduled to come to an end as well as to pick up a clearer timeline for an Interest Rate hike. At present due to the situation in Italy, the ECB's press conference at least, is expected to spur some confidence in regards to the bloc of countries once again. The team at FintechFX view that this could lead to a brief correction for the EUR/USD in the week before and have been well vindicated. This week, the team here at FintechFX views for some continuity in this trend up until the midweek's Fed rate decision.
This week, it would be a good time for 'safe haven' asset play one again as we approach the Trump Kim Meeting. In addition to this, there will be a Bank of Japan (BoJ)Policy Rate decision which takes place this week. These two factors combined could lead to some potential strenghtening as indicated in the chart below. The team here at FintechFX attributes a greater possibility of occurence for this since cross correlation wise, the two other safe haven counterparts namely Gold and the Swiss Franc (CHF) have already strengthened in greater comparison during the previous week.
Source (Charts): https://www.investing.com
Source (Economic Calendar): https://www.forexfactory.com/calendar.php
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