Week Ahead: US-China trade impasse and handful of macro pointers

The economic calendar is a lot quieter next week, but volatility could nonetheless remain elevated. At the time of writing this report, the US stock markets were bouncing off their lows after trade talks ended for the day.

The economic calendar is a lot quieter next week, but volatility could nonetheless remain elevated. At the time of writing this report, the US stock markets were bouncing off their lows after trade talks ended for the day. According to the US Treasury Secretary Steven Mnuchin, they were “constructive,” while China’s Liu said they went “fairly well.” We have heard this before, but “talks going well” headlines were enough to cause a 200-point ramp in the Dow off its lows. What the markets want now is either a deal or no deal, just so they can move on and focus on something else.

However, what is likely to happen is this: the “US and Chinese negotiators will maintain open lines of communication and continue to schedule occasional meetings while the newly-escalated US tariffs gradually weigh on growth on both sides of the Pacific.” That is what my colleague Matt Well thinks might happen, which could keep the losses limited for the US indices.  

As far as next week’s economic calendar is concerned, well there are only a handful of potential market-moving events to keep an eye on. These include:

  • Tuesday: Average Earnings Index and German ZEW Economic Sentiment
  • Wednesday: Chinese industrial production; German and Eurozone GDP; US retail sales and Canadian CPI
  • Thursday: Australian employment data

The UK wages data on Tuesday has the potential to move the GBP/USD decidedly above its short-term bear trend or break that 1.30 support in the event of disappointment. Likewise, the Aussie employment data on Thursday could very well lead to a sharp, short-term, move in the AUD.

But I suppose next week’s more important macro numbers will be those scheduled for release on Wednesday.

After a surprisingly strong 8.5% showing in March, China’s industrial production is expected to have moderated to 6.5% y/y in April. Anything less than that and growth worries could resurface and weigh on the Chinese stock markets and the yuan, as well as the likes of the Aussie and Kiwi dollars.

With regards to the euro area GDP figures, well both the German and Eurozone economies are expected to have expanded by 0.4% each in Q1. Recent economic pointers from the Eurozone have improved a tad, and the single currency has responded with the EUR/USD being on the verge of posting its first back-to-back weekly gains since February. A surprisingly strong set of GDP figures on Wednesday could help make that a hat-trick of weekly gains.

That’s assuming of course the US retail sales data do not show a massive surprise to the upside. Last month, both the headline and core retail sales were surprisingly strong, although this time analysts are expecting only a modest 0.2 and 0.7 percent respective monthly rises.

Last but not least, Canadian CPI data will be watched closely by FX markets in light of the big 107K upsurge in employment in April, as was reported on Friday. If the Canadian CPI data is also strong then the USD/CAD could break down after all and take out that 1.3380 support level.

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account