US - China Trade Talks Are Still the Focus of Investors (Weekly Review)

Macroeconomic calendar of the last week did not contain important events that could trigger a surge in volatility in the foreign exchange market and the development of large-scale movements. Some exception was the meeting of the Reserve Bank of Australia, whose decision to leave the interest rate unchanged was predictable, but the neutral tone of comments provoked the growth of the AUD, that, nevertheless, was used for sales. In the absence of a deal between the US and the PRC its positions will be vulnerable.

All investor attention was focused on trade negotiations between these countries. Tweets of US President Donald Trump about the lack of progress provoked the fall of stock indices and the strengthening of safe haven assets, in particular the Swiss franc and the Japanese yen. Until a deal is concluded, these currencies may be in demand, while the differential in interest rates still does not justify their purchases for the USD.

Strengthening of the franc indirectly contributed to strengthening of the EUR paired with the USD. As a result of growth, it managed to test the level of 1.1253, which so far successfully holds back the onslaught of bulls. Yet we cannot speak of any improvement of prospects of the single European currency. Sluggish growth rates of the Eurozone economy and its member countries, as well as political and economic risks in Italy and France, will have a restraining effect on the EUR. Only technical factors may contribute to its strengthening, but on growth it will most likely be further sold.

Schedule for this week:

Monday, May 13
13:10 GMT - USA. Federal Reserve Bank of Boston President Eric S. Rosengren Speaks;
13:10 GMT - USA. U.S. Federal Open Market Committee (FOMC) Member Richard Clarida Speaks.

Tuesday, May 14
02:15 GMT - PRC. Foreign Direct Investments;
06:00 GMT - Germany. Harmonised Index of Consumer Prices (HICP);
08:30 GMT - United Kingdom. Average Earnings ex Bonus;
08:30 GMT – United Kingdom. ILO Unemployment Rate (3M) (Mar);
08:30 GMT – United Kingdom. Claimant Count Change (Apr);
09:00 GMT - Germany. ZEW Current Conditions;
09:00 GMT - Germany. ZEW Economic Sentiment (May);
09:00 GMT - Eurozone. ZEW Economic Sentiment (May);
09:00 GMT - Eurozone. Industrial Production;
12:55 GMT - USA. Redbook Index.

Wednesday, May 15
00:30 GMT – Australia. Westpac Consumer Sentiment;
01:30 GMT - Australia. Wage Price Index (QoQ) (Q1);
02:00 GMT - PRC. National Bureau of Statistics Press Conference;
02:00 GMT - PRC. Industrial Production;
02:00 GMT - PRC. Retail Sales;
06:00 GMT - Germany. GDP (QoQ) (Q1);
06:00 GMT - Germany. GDP (YoY) (Q1);
09:00 GMT - Eurozone. GDP;
12:30 GMT - Canada. Bank of Canada Core Consumer Price Index (CPI);
12:30 GMT - Canada. Consumer Price Index (CPI);
12:30 GMT - USA. Retail Sales;
13:15 GMT - USA. Industrial Production.

Thursday, May 16
01:30 GMT - Australia. Employment Rate;
01:30 GMT - Australia. Unemployment Rate;
02:45 GMT - Australia. Reserve Bank of Australia Assist Governor Bullock Speaks;
07:30 GMT - Eurozone. European Central Bank Praet Speaks;
08:15 GMT - Germany. German Bundesbank President Weidmann Speaks;
12:30 GMT - USA. Philadelphia Fed Manufacturing Index (May);
12:30 GMT - USA. Initial Jobless Claims;
12:30 GMT - USA. Building Permits;
12:30 GMT - USA. Housing Starts;
15:15 GMT - Canada. Bank of Canada Governor Poloz Speaks.

Friday, May 17 
21:30 GMT – New Zealand. Business NZ Purchasing Managers Index (PMI);
00:00 GMT - Australia. Inflation Expectations;
09:00 GMT - Eurozone. Core Consumer Price Index (CPI);
09:00 GMT - Eurozone. Consumer Price Index (CPI);
14:00 GMT - USA. Michigan Consumer Sentiment.

Author: Anthony Porter, IAFT Analyst