Summary:
- Minor slowdown in the UK wage growth forecasted
- Swedish CPI inflation expected to rise above Riksbank’s target in April
- ZEW indices for Germany and the eurozone seen higher in May
China announced yesterday it will retaliate against the newest round of the US tariffs. In turn, market sentiment became even more downbeat than earlier and it is likely that trade theme will dominate headlines throughout the week. Nevertheless, investors should not forget about scheduled data releases as they can put current political developments in the context of numbers.
8:30 am BST - Sweden, CPI inflation for April. The Swedish krone is having a hard time. The currency has been depreciating against the US dollar since the beginning of 2018 and USDSEK is trading at the highest level since mid-2002. It is unlikely that Riksbank will raise rates anytime soon but such a move could take place at the end of the year. Nevertheless, a favourable data would be needed to support such a decision. The CPI inflation sat slightly below Riksbank’s target in March (1.9% YoY) and an acceleration to 2.1% YoY is expected in April.
9:30 am BST - UK, Labour market report for April. The British pound has found itself under pressure recently as cross-party talks between Conservatives and Labour Party seem to be heading for a failure. GBP may get a chance to recover with today’s labour market report. However, it should be noted that any rebound may be short-lived in case politics step in once again. Wage growth is forecasted to have slowed slightly in April and the employment change is also expected to be lower than a month ago. Nevertheless, with wages growing at the fastest pace in over a decade a slight deterioration should not be worrying as long as it is not extended onto following months.
10:00 am BST - Data from euro area. The industrial production data from the euro area declined on an annual basis in each month since November 2018. Nevertheless, the drop in January and February was minor compared to November and December. Situation may improve further in March as partial data from Germany showed an increase in spite of an expected drop. Still, market consensus expects a drop of 0.8% YoY. Apart from that, ZEW indices for May from euro area and Germany will be released simultaneously. Both gauges are expected to show an improvement.
9:40 pm BST - API report on oil inventories. Oil market has found itself at the crossroads. On one hand, escalation of the US-China trade war may dent global growth and in turn cause demand for oil to be lower. On the other, supply constraints effectively keep bears away. In turn, the commodity is trading sideways and waits for a trigger to a bigger move. Inventories data may spur short-term price swings although it is rather unlikely that any bigger trend will be launched with the release. Market consensus expects a drop of 2.1 million barrels.
Central bank speakers scheduled for today:
- 8:00 am BST - ECB’s Villeroy
- 8:15 am BST - Fed’s Williams
- 9:40 am BST - Riksbank Governor Ingves
- 5:45 pm BST - Fed’s George
EURUSD managed to recover greatly during the past two weeks. However, further upward move may be in danger as the pair has run into the 50-session moving average (green line) and the downward sloping trendline. Failure to break above may see the pair pulling back to 1.1185 handle while break higher could pave the way towards 1.13 area. Source: xStation5
