Markets are back full mode after a long weekend in the US and they await key messages from global leaders that are about to meet for the G20 summit in Argentina. The most important meeting in the reminder of 2018 could take place there as Donald Trump and Xi Jinping will discuss trade. A failure could result in a doom and gloom for the markets.
The calendar on Monday looks thin with the only noteworthy reading scheduled being the German IFO Business Climate index release (9:00 am GMT). The market consensus expects a drop from 102.8 pts to 102.3 pts. Apart from that, EUR may enjoy increased volatility as several ECB members are set to deliver speeches:
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9:00 am GMT - ECB’s Praet
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12:30 pm GMT - ECB’s Coeure and Nowotny
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2:00 pm GMT - ECB President Draghi
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4:00 pm GMT - ECB President Draghi
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6:30 pm GMT - BoE Governor Carney
What to watch for the remainder of the week?
G20 meeting (Friday and Saturday)
One can stress enough how important a trade relationship between the US and China is. Let us recall that at this stage $50 billion of the Chinese imports faces 25% tariffs and another $200 billion has been hit with 10% ones. The US administration has made it clear that it is ready to slap 25% tariffs on the whole trade ($500+ billion) if trade talks fail. That could not only cause hard landing in the Chinese economy but cause a global slowdown as the whole supply-chains would be disrupted. Both sides are optimistic heading into the summit but we had seen this optimism failing to translate into agreement before. Affected markets: US500, AUDUSD.
US PCE Inflation (Thursday, 1:30 pm BST)
If you look at the latest streak of the US data it has not really been all that supportive for the US dollar. This is very true for inflation that has been generally missing expectations lately. The reason why this is yet to drive the greenback lower is weakness elsewhere (like the EMU PMIs hitting another 2018 low). The PCE inflation will be another check for the EURUSD and related markets. Affected markets: EURUSD, GOLD.
DOE report on oil inventories (Wednesday, 3:30pm BST)
Oil prices are in a free fall with seemingly no help that could stabilize it. However, with the December OPEC meeting drawing close, efforts to bolster prices could intensify. One of the conditions for oil prices to bounce is an improvement in terms of the US inventories so the DOE report will be watched closely. Affected markets: OIL, OIL.WTI.
The latest steep surge on EURGBP was halted by the 38.2% Fibo level of the upward wave started in April 2017. The pullback reached the 200-session moving average and today’s speeches of Draghi and Carney may cause the pair to swing more wildly. Source: xStation5
