Summary:
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China-US trade talks to resume this week
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Minutes from FOMC and ECB may offer insight into policymakers’ moods
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Services ISM scheduled for release in the afternoon
The 2019 started with a flash crash on Asian currencies as investors panicked after hearing a sales warning from Apple. These concerns have been confirmed by the macroeconomic data from around the globe, especially in the industry. Are we headed for a global slowdown or even recession? What central banks could do about it? We will learn more this week.
Readings scheduled for today:
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10:00 am GMT - Euro area, Retail sales for November. Expected: 0.4% YoY, previous: 1.7% YoY
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3:00 pm GMT - US, ISM Non-Manufacturing for December. Expected: 59 pts, previous: 60.7 pts
Central bank speakers scheduled for today:
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12:45 pm GMT - ECB’s Guindos
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5:40 pm GMT - Fed’s Bostic
What to watch for the remainder of the week?
Sino-US trade talks (Monday and Tuesday)
It’s easy to forget where all of this has started when president Trump slapped tariffs on steel and aluminium and effectively started Trade Wars. Let us recall that the December G20 meeting produced a “truce” between US and China, offering 3 months for trade talks before more duties go live. These talks start on Monday and while markets reason that deteriorating economic picture should encourage compromise, it’s easier said than done. Affected markets: US30, AUDUSD.
US data: ISM services (Monday, 3pm BST), CPI inflation (Friday, 1:30pm BST)
The ISM manufacturing slump in December has been a shock to investors as the US joined EU and Asia on the slowdown path. Service sectors are often slower to react but should we see a deterioration here as well, rate cut speculation could erupt for good, especially if inflation stays under control which - with oil prices now that much lower - should be the case. Affected markets: US500, USDJPY.
Central bank minutes: FOMC (Wednesday, 7pm BST), ECB (Thursday, 12:30pm BST)
It’s been just three weeks but now the vision of 4 interest rate hikes in one year looks to be so distant. Only in December the Fed saw 2 more hikes in 2019 and the ECB still prepared ground for the first hike in 8 years. Did central bankers got it wrong? What were they thinking? We will learn more from the minutes this week. Affected markets: DE30, EURUSD.
EURUSD rebound recently but is still trading within its previous range of 1.1310-1.1450. Services ISM reading scheduled for today may spur some additional volatility on this pair. Source: xStation5
