Earnings season on Wall Street is almost over, while US investors are largely ignoring the still tense situation in the Middle East. Oil market volatility remains elevated due to uncertainty over whether the region is moving closer to peace or a renewed escalation of hostilities.
This week is expected to be particularly interesting for markets. On one hand, the US inflation report will be released, which is crucial for the Federal Reserve’s outlook. On the other, Jerome Powell’s tenure as Fed Chair is officially coming to an end. In addition, the market will closely watch a meeting between Donald Trump and Xi Jinping in China. Key markets to monitor in the coming days include EURUSD, CH50cash (China A50), and OIL (Brent crude).
EURUSD
Energy prices continue to weigh on the European currency, while investors remain focused on the possibility of a rapid peace agreement in the Middle East. Once geopolitical tensions ease, attention is expected to shift back to monetary policy.
On Monday, the Senate is set to confirm Kevin Warsh as the new Fed Chair, while Friday marks Jerome Powell’s final day in office, although he is expected to remain on the Board of Governors. The main focus for markets will be the US CPI inflation report for April, expected at around 3.7%, nearly double the Fed’s target.
Despite elevated inflation levels, investors still do not expect the Fed under new leadership to return to interest rate hikes.
CH50cash (China A50)
This week will also bring key macro data from China, including CPI and PPI inflation figures released on Monday. However, the main market focus will be the meeting between US President Donald Trump and Chinese President Xi Jinping.
Markets expect a potential extension of the trade agreement signed last autumn. Trump is likely to push for increased Chinese purchases of US goods such as soybeans, gas, coal, and Boeing aircraft. In return, China is expected to seek eased restrictions on technology exports, particularly in the semiconductor sector.
If positive signals emerge from the meeting, CH50cash (China 50), which recently traded near its highest levels since 2022, could extend gains, potentially moving towards levels last seen in 2020.
OIL
The first full weekend of May brought significant volatility in the oil market, with price swings of around 20 USD per barrel. Ultimately, prices retreated back below 100 USD for WTI and slightly above 100 USD for Brent.
Although there was a minor escalation in tensions in the Middle East, it does not appear that Donald Trump is aiming for a full-scale conflict ahead of his visit to China. From a data perspective, traders should also watch the DOE inventory report on Wednesday, along with monthly updates from OPEC and the IEA on the oil market.
It is also worth noting that the United States recently recorded record-high oil exports, which could contribute to further declines in inventories going forward.
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