May was a consequential month for the financial markets. During the month, the US administration exited the Joint Comprehensive Plan of Action (JCPOA), commonly known as the Iran deal. This was an important deal signed between Iran and the largest economies in the world. The US exited and announced that it would reintroduce the sanctions that existed before that. This led to the price of crude oil jumping to the highest level in three and a half years.
In the month also, the US opened its embassy in Jerusalem. This made the country to be the only one with the embassy in the city. By that move, the Trump administration complicated the issue of peace between Israel and Palestine. It also led to increased risks in the Middle East.
From a monetary perspective, there was no major news from the central bankers. All of them left rates unchanged. This week, the RBNZ and BOC left the possibility of increased rates in the near term, leading to the loonie and kiwi to surge against the dollar.
This month, the central banks meetings will start on June 5th when the Reserve Bank of New Zealand meets. Analysts expect the bank to leave rates at 1.50%. It will be followed by the Fed, ECB and BOJ which will release their interest rates decision on June 13, 14, and 15 respectively. A week later, the BOE and SNB will release their decision. In all these central bank meetings, traders will focus on the language the officials will use.
Apart from the central banks, traders will focus on the planned meeting between North Korea and the United States. This is an intriguing meeting that traders have waited since March when the North Korean leader suggested the meeting. A week ago, the US president wrote him a letter ending the meeting. This has been reversed after the senior-most North Korean leader visited the US and met with Secretary of State, Mike Pompeo. A successful meeting between the two leaders will be a good thing for global peace.
Between the lines however, things might not go as planned. Two weeks ago, Kim Jong Un visited China, which urged him to harden his stand on the US, which has been an unreliable partner for years. Yesterday, the Russian foreign minister visited Pyongyang and asked the world to end sanctions. This means that Russia and China are influencing the Kim regime before the summit.
Traders will also focus on global trade. The Trump administration moved forward with its proposed tariffs. The steel and aluminum tariffs will be placed on European, Candian, Mexican, and Chinese aluminum and steel. All these countries have indicated that they will take the complaints to the World Trade Organization (WTO). They have also issued retaliatory measures with the hope of influencing the mid-term elections.
On economic data, traders will watch out for the inflation. Yesterday, the CPI in the EU neared the 2% target, which raised chances of a rate hike in the near term. The US and UK inflation declined in April, with the latter falling below the one-year low. All this seems to favor the euro, which could reverse its decline this month.