MARKET REVIEW MAY 27 – 31
According to the latest polls in the elections to the European Parliament, Pro-European forces are leading. It is favorable for the Euro in the future. There are not enough of the official data to fully understand the whole picture. But the beginning is very positive for the single European currency.
Meanwhile, the President of the United States Donald Trump visited Japan, where he met with Prime Minister Shinzo Abe. The leaders will discuss North Korea's issues, economic issues, particularly trade surpluses, and the upcoming summit of G2 next month.
Japan in the face of its Prime Minister said, that is ready to demonstrate the strength of the USA-Japan Union. The American president will appeal with a trade surplus with the Country of the Rising Sun, namely in the trade of cars. The USA Chamber of Commerce estimated the surplus at 68 billion dollars. At the same time, the trade war with China remains in the spotlight. China does not think to yield. Continuing to put pressure on the economic growth of both China and its trading partners, and eventually on the whole world. The USA slightly eased restrictions for the Chinese technology giant Huawei. But China itself intends to review the policy in the company. The version of dismissal of the personnel having the American passports sounded. However, this morning the Huawei President and founder Ren Zhengfei asked not to ban the products of his American rival Apple.
The most volatile news will start coming from the equator of the week. Tuesday will be marked only by the consumer climate in Germany and the consumer confidence index in the United States. But on Wednesday, it will be more interesting. The first EU economy will report unemployment and its changes, and the ECB will publish its financial report and forecasts. On Thursday, the attention will be paid to the USA, where the next GDP estimate for the first quarter, will be published. The balance of international merchandise trade will be particularly interesting, as the surplus is expected to increase. At the end of the trading five-day, we will know about retail sales and consumer inflation in Germany. The USA will publish a number of leading indicators, namely the basic price index for personal consumption and expenses of individuals. Also, we will know, about the index of business activity in Chicago. And the University of Michigan will publish indexes of expectations and consumers sentiment. The sentiment is often a leading indicator of the growth of the USA stock indices. Therefore, under the current pressure on the main USA indices, sociology is important.
USD/CAD
The Canadian dollar is one of the undervalued currencies, according to many analysts of world banks. Yes, there is a perception that the Bank of Canada overreacted with interest rate increases last year. The Canadian regulator, along with the Fed, has raised rates five times over the past two years. Since the last increase, inflation has slowed sharply, leading to doubts about the correctness of such a decision. Against the background of oil prices above $50, it would seem that the Canadian dollar should feel good enough. But market participants fear a change in the rhetoric of Stephen Poloz, the head of the Bank of Canada. Therefore, on Wednesday, all attention will be focused on the meetings of the regulator of Canada, which will announce the decision on interest rates. Of course, any optimism will support the Canadian dollar. And, of course, on the contrary, the caution of the Bank of Canada will confirm the correctness of a careful approach to trading this currency. But not a single Wednesday - on Friday will release of Canada's GDP. The moderate improvement, in the health of the economy, is expected.
If the environment is favorable for the Canadian dollar, and even GDP will not disappoint on Friday. The good reason to buy Canadian currency.
OIL
What about the black gold? The market remains, extremely fragile and nervous. Any deterioration, in trade friction between the US and China, is immediately reflected, in the quotes.
“The impact of a trade war is a medium-and long-term issue”, said the Edward Bell, commodity analyst at Emirates NBD. In addition to financial markets, there are also signs of falling oil demand. According to data released by the National Bureau of Statistics (NBS) today, on the background of the trading conflict between the USA-China, profits of industrial enterprises in China fell in April because of declining demand and manufacturing activity. The volume of car sales in China will reach 28.1 million units this year, which is a key factor in the growth of global oil demand. This is the absence of changes compared to the levels of last year, when the automotive market of China declined for the first time in more than two decades. Reported by the state news Agency Xinhua on Sunday. A bright event for automakers, but not for the oil industry. The sales of new electric cars are expected to grow by about 27% this year compared to last year. OPEC member countries and their allies, known as OPEC+, continue their policy of reducing production, trying to support prices, or at least keep from a significant fall. The meeting of the participants of the oil cartel will be held next month, after which the forecasts and plans, of the participating countries, will be announced.
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