The Week Ahead – Trump, The ECB, the FED, North Korea and Trade in Focus

On the Macro

For the Dollar, key stats through the week include May inflation figures on Tuesday, wholesale price inflation numbers on Wednesday, and April business inventories, May retail sales, import and export prices and the weekly jobless claims figures on Thursday and May industrial production and June consumer sentiment figures on Friday. Tuesday’s inflation and Thursday’s retail sales figures will be the key drivers through the week, though much will depend upon trade noise from the G7 and talk through the week, Tuesday’s North Korea Summit and the FED’s monetary policy decision on Wednesday. The Dollar Spot Index ended the week down 0.66% at 93.535.

For the EUR, it’s a big week, with stats including 1^st quarter nonfarm payroll numbers out of France and Germany and the Eurozone’s ZEW economic sentiment figures for June, the Eurozone’s April industrial production and May inflation numbers out of Spain on Wednesday, finalized May inflation numbers out of Germany and France on Thursday and Italy and the Eurozone’s finalized May inflation numbers on Friday, with the Eurozone’s 1^st quarter wage growth and April trade figures also due out. Focus will be on ZEW economic sentiment numbers on Tuesday and the finalized stats out of the Eurozone on Friday, with any upward revision to inflation numbers likely to be EUR positive, though much will depend on the ECB press conference on Thursday, policy expected to be left unchanged this month., while talk of the ECB bringing to an end the QE program supported a rebound in the EUR through the last week. The EUR/USD ended the week up 0.94% at $1.1769.

For the Pound, it’s a busy week ahead, with April’s trade, industrial and manufacturing production numbers and the NIESR GDP estimate due out on Monday, employment numbers for April scheduled for release on Tuesday, May inflation numbers on Wednesday and May’s retail sales figures on Thursday to provide direction for the Pound. Recent economic indicators have pointed to a pickup in growth in the 2^nd quarter that has seen sentiment towards BoE monetary policy shift once more. Forecasts are skewed in favour of the Pound, with only Monday’s manufacturing production numbers a negative through the week. The GBP/USD ended the week up 0.44% to $1.3405 last week.

For the Loonie, it’s a relatively quiet week, with no material stats scheduled for release until Thursday’s April house price figures, which will unlikely have a material impact on the Loonie. Friday’s April foreign securities purchases and manufacturing sales on Friday will also likely have a relatively muted impact. Manufacturing numbers would be considered the key stat for the week, though much will depend on the G7, any positive commentary likely to spur a Loonie rally through the week. The Loonie ended the week up 0.18% to C$1.2928.

Out of Asia, it’s another busy week ahead.

For the Aussie Dollar: key stats through the week include April home loans and May’s NAB business confidence numbers on Tuesday, June’s Westpac consumer sentiment figures on Wednesday and May’s employment numbers on Thursday. While both business and consumer sentiment numbers will be of particular important, May’s employment numbers will be the key driver on the data front, with the RBA needing to be impressed to shift from its continued dovish stance on policy.

For the Japanese yen, April core machine orders on Monday, 2^nd quarter BSI Large Manufacturing Conditions and the tertiary industry activity index on Tuesday will provide direction ahead of April’s industrial production figures on Thursday. While the stats will provide direction in the early part of the week, focus will be on Friday’s BoJ interest rate decision and, more importantly, its outlook on inflation, the economy and monetary policy, the 1^st quarter contraction and weak household spending at the start of the 2^nd quarter likely to be of concern to both the BoJ and the government. Market risk appetite will likely be the key driver for the Japanese Yen through week however, with news from the G7 Summit and trade noise through the week, coupled with the U.S – North Korea Summit also there to factor in.

Out of China, Monday’s new loan figures will influence market risk sentiment at the start of the week, with Thursday’s fixed asset investment and industrial production figures for May the key stats of the week, any weak numbers expected to weigh on the commodity currencies, though trade tariff talk and North Korea will likely be the key drivers through the week.

The AUD/USD ended the week up 0.42% to $0.7601, the Kiwi Dollar up 0.74% to $0.7034, while the Japanese Yen slipped by just 0.01% to ¥109.55 against the U.S Dollar.

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Geo-Politics

On the political front, there’s still plenty to consider through the week…

Loonie Woes: Following some tweeting by the U.S president aimed at Canada ahead of the G7 Summit, progress for the Loonie could be hindered should Canada respond in kind to recent tariffs and the threat of more, NAFTA talks seeming to have ground to a halt as the U.S administration continued its war of words on trade. News of progress being made on NAFTA talks over the weekend may provide some early support, though the markets will need the details for the Loonie to benefit from a sustained rally.

U.S – China Trade Pact: With China not present at the G7, news from the G7 may leave China out in the cold. Any retaliatory move by China that would be the initial sparks of a trade war and a more material shift in market risk appetite in support of the safe havens.

U.S – North Korea Summit: With the Summit on Tuesday, all eyes will be on Singapore to see whether any good news can come from the get together, a positive for the markets being a willingness to begin talks on a nuclear agreement that would signal an end to the Korean War. There may be some market disappointment should no action plans come from the Summit.

Italy’s 5-Star League: Focus will be on the new coalition through the week, with any populist noise from Italy likely to weigh on the EUR ahead of the ECB monetary policy decision and press conference on Thursday.

Iran: Once North Korea is done, or at least there are signs of progress, focus will shift to Iran, which could come as early as this week, particularly if the EU fails to get exemptions from sanctions. Near-term impact will be more evident on oil prices, though any exchange of words between the U.S and Iran could give the markets another reason to jump back into the safe havens.

The Rest

Monetary policy will be in focus, with the FED, the ECB and the BoJ delivering monetary policy decisions on Wednesday, Thursday and Friday respectively. While the ECB and the BoJ are expected to stand pat, the FED is expected to lift rates to 2% and, while the move is largely priced in, the FOMC press conference, economic projections and rate statement will have a material impact, any hint of a more aggressive rate path through the second half of the year likely to hit the equity markets, driving Treasury yields back towards their recent highs.

For the ECB, the talk of bringing the QE program to an end may have been a little premature, with softer economic indicators and the shift in Italy’s political landscape, coupled with the introduction of tariffs on EU exports to the U.S a concern for the 2^nd quarter. With the EUR bouncing back on hawkish commentary through the last week, a reversal could be on the cards should Draghi deliver one of his more dovish statements.

Crude Oil: OPEC remains in focus with the OPEC monthly report due out on Tuesday and the IEA monthly report on Wednesday also expected to provide direction, though sentiment towards the Russia – OPEC oil agreement and any chatter of lifting production caps will need to be looked out for, while there will be some support should there be positive news from the G7 Summit.