MARKET REVIEW MAY 20 – 24
This week begins no less stressful than last week. The markets since the middle of last year, or rather since the beginning of the summer of 2018 are quite nervous, and volatile. We recall, that the USA president Donald Trump postponed for six months the possibility of introducing trade duties on European cars and spare parts, giving more time for negotiations with the EU and Japan. At the same time, Trump demonstrates how tough the USA can be in negotiations.
By the end of last week, the States have blacklisted the Chinese giant - Huawei. The Huawei company produces not only high-quality smartphones but also the equipment for cellular networks, which are used by almost the whole world. In that way, Trump forced American companies to refuse to cooperate with the Chinese company. For example, Alphabet Inc (or rather Google, as a subsidiary) has already suspended cooperation with Huawei. This also includes the suspension of services and technical support for the Chinese company. Against this background, elections to the European Parliament, will be held in Europe. This event, will be held on Thursday. European investors will be careful to make trading decisions.
Before the key day will be speeches of ECB members. On Monday, ECB chief economist Peter Pratt will speak, on Wednesday, we will hear the speech of ECB head Mario Draghi. On Tuesday, the volume of sales in the secondary housing market in the United States, will be known.
On Wednesday, the Federal Open Market Committee will publish a Protocol on monetary policy from the last meeting. Before publication, the head of the Fed Jerome Powell will speak.
On Thursday, there will be releases of Germany's GDP, business activity indices in the main sectors, as well as an assessment of business expectations, the business climate and an assessment of the current situation in Germany, in addition to the elections, which is certainly a very important event.
The ECB will publish the financial report and the Protocol on the monetary policy of the ECB since the last meeting. The composite index of business activity, in the EU, will not be ignored by market participants.
On Friday, the EU elections will continue, more news from Europe is not planned. But in the USS, on the background of the continued escalation of the USA-China trade war, the basic orders for durable goods will be extremely important.
GBP/USD
Against the background of the start of elections to the European Parliament, the position of the pound sterling will again be under pressure.
Because it adds uncertainty to the already difficult situation in the UK. In a country, where the Parliament cannot reach a consensus on the deal on the withdrawal from the EU. Where the current government threatens its Prime Minister Theresa May with removal from her post. The currency is difficult to find reasons to strengthen, in such a country. On Monday, the Chairman of the Bank of England Ben Broadbent will speak, tomorrow, the head of the Bank of England Mark Carney will make his speech. After the speech of the head of the BE, releases of industrial orders indices will take place, as well as a hearing of the inflation report, data on which will be released on Wednesday.
On Thursday, when the EU is just starting elections, Britain will publish data on basic retail sales and its volumes. As we know, these are strong enough inflation indicators, so special attention is paid to them. Sam Woods, the Deputy Governor of the Bank of England, will finish the week with his speech. The very interesting week is coming, not only for the euro but also for the pound sterling.
OIL
The USA President Donald Trump, yesterday made a new threat to Tehran, saying that the escalation of the military conflict will be the "official end" of Iran. Saudi Arabia supported the statement of the American president, saying that it is ready to help "by all means". But, it was also emphasized that the Middle East Kingdom wants to avoid war.
The sharp rhetoric followed last week's attacks on Saudi Arabia's oil assets and rocket fire on Sunday at the fortified "green zone" of Baghdad, near which the USA Embassy, is located.
We recall that the States evacuated the staff, by the end of last week, so American citizens were not injured. This was reported by the representative of the US Department of State, that the rocket fire in Baghdad did not affect the USA populated object and did not lead to victims and significant damage. The responsibility for the incident has not yet been announced, but the US took it very seriously. “The Kingdom of Saudi Arabia does not want war in the region. At the same time, if the party chooses war, the Kingdom will respond with all force and determination to protect itself and its interests”, the foreign Minister Adel al-Jubeir said at a press conference on Sunday.
Taking into account the real possibility of an escalation of the military conflict in the Middle East, most likely, oil prices will start the week in a bullish mood. However, we do not ignore the consequences of the trade war. The tension of which, will not give rest to oil traders and limit the growth of quotations.
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