The USA dollar strengthened its position quite strongly last week. Updated a maximum for the last one and a half years. The last two days were marked by a test of strong resistance 98.20 (we are talking about the DXY dollar index), but the current week begins with the correction of the growth of the past week. The same dynamics are observed in the main currency pair. An important driver of the American was the USA Stock Market, where investors are attracted to record the dynamics of the stock. Investor confidence underpins the improvement in the macroeconomic data in the US and wait-and-see attitude of the Fed relating to interest rates.
Against this background, the meeting of the USA regulator comes to the fore when trading in the coming week. The same meeting of the Fed will end on Wednesday, at the same time and will be announced the decision on interest rates. As much as changes in the monetary policy of the USA regulator no one expects. The rhetoric of the Federal Reserve will be the key. In particular, chairman of Fed Jerome Powell.
From the last Fed meeting in March, after which the dollar literally collapsed, the employment rate, retail sales, activity in the manufacturing sector and inflation strengthened. A GDP growth, which was released last Friday, and surprised the market participants.
So, market participants expect in the statement of the Fed that their expectations regarding the reduction of interest rates are unfounded. In this case, the American will continue his rally. After all, futures on the Fed rate with a probability of 67% provide for a reduction in interest rates this year.
Otherwise, if doubts about the monetary policy of the Federal Reserve are not dispelled, all attention will be focused on the report of the USA Labor Market. This release, due to its specific release at the end of the trading five-day period, will be a worthy end of the trading week.
If we talk about the single European currency, we should not expect optimism without improving the situation in the manufacturing sector, without GDP growth and accelerating inflation. So, this week the EU will provide all these economic reports. Data on the GDP of the Euroblock will be released on Tuesday, business activity in the manufacturing sector on Thursday. The main event of the week for the Euro will be the release of the base and consumer inflation on Friday. Should be noted that, according to consensus forecasts, expects a modest improvement in GDP and both inflation releases. This can be due to the weakness of the Euro and not to the improvement of the economic situation in the EU.
It's been such a busy week. Increased volatility is expected, therefore it is necessary to take into account all factors, both technical and fundamental, in making trading decisions!
GBP/USD
After the prolongation of the exit from the EU, the attention of investors is focused on the economic statistics of Britain. This week will be busy and interesting not only for the USA dollar but also for the pound sterling. Foggy Albion's labor market has grown significantly, unemployment at a record low since the 70s. The production activity in the green zone. The building sector, according to expectations, will also leave the red zone in the green, and the services sector, as one of the most important for Britain, will follow the building sector in growth.
Data on all the sectors listed above will be released during the week. The release of business activity in the service sector, which will be released on Friday and will be the key. The British service sector accounts for two-thirds of the country's total GDP. The main share is occupied by business and financial services, which is about 40%. Others are public services - 35%, trade - 20% and hotel services - 5%.
The attention of investors will be attracted by the meeting of the Bank of England on monetary policy, which will be held on Thursday. Changes in monetary policy are not expected, but the rhetoric of the head of Bank of England the Mark Carney will be interesting, even decisive. If Carney focuses on a strong Labor Market and improved economic macrostatistics, sterling will be able to feel the ground under his feet and strengthen. Taking into the account that sterling is heavily oversold, this optimism is extremely necessary for sterling. On the contrary, if the head of the Bank of England will exercise caution and restraint, the pound will remain under pressure. On the contrary, if the head of the Bank of England will exercise caution and restraint, the pound will remain under pressure.
OIL
In the oil market, the tension does not subside. Begins the week with a decrease, continuing the fall to Friday. The President of the United States Donald Trump, in a familiar manner, demanded that the OPEC member countries increased production, which would neutralize the impact of the USA sanctions against Iran. That means, to fully compensate for the lack of Iranian oil on the market.
“I spoke with Saudi Arabia and other OPEC participants about increasing oil supplies. All agree” - said Trump for reporters. Against this background, taking into account the tougher of the USA sanctions since the second of May. The market participants believe that Saudi Arabia will increase production in May, which they were going to do, in any case, on the eve of the summer.
Ally of OPEC, Russia has announced that it will be able to satisfy China's need for oil, as Beijing tries to replace imports, which they used to get from Iran. In that way, Russia has every reason to resume increasing production. The basic scenario for the reduction of production, which is followed by the OPEC oil cartel member countries and their OPEC+ allies, will take into account the coverage of the deficit from Iran.
So, as the risk of supply shortages in the crude oil market, according to the statements and assurances of its participants, leveled. We are waiting for real numbers that will confirm the increase in the production of some major exporters. But, as we know, the market participants, namely oil traders, put expectations in the price, not on the fact. Therefore, it is expected that crude oil prices will remain under pressure throughout the current week.
