Last week, the focus among investors was on the Federal Reserve and the jobs numbers. On Wednesday, the Federal Reserve concluded its meeting and left interest rates unchanged. This was an expected move but what raised concerns was the inclusion of the term, symmetry, which implied that the officials would continue with the current strategy.
On Friday, the Federal Bureau of Labor Statistics released the jobs numbers for the month of April. The numbers showed that the country added more than 164K new jobs during the month. The unemployment rate dropped to 3.9%, the lowest it has been since December 2000. The U6, often referred to as the real unemployment rate dropped to 7.6%. A day before, data showed that the productivity rate was going up. However, the main challenge was on the wage growth, which continued to sag. This prompted an important article in Wall Street Journal questioning the relevance of the Philips Curve. This curve states that the wages tend to increase as the unemployment rate falls.
This week, there will be no major economic news. Therefore, the focus among investors will be on politics. The first major issue will be on the Iran deal. This was an Obama-era deal to limit Iran from having nuclear weapons. The deal has been a major point of attack by Donald Trump who has vowed to decertify it. On Saturday, he is faced with a deadline and many expect him to decertify the deal. If he does, it will further increase the chances of crisis in the Middle East as countries start an arms race. This comes a few months after the Trump administration gave Saudi Arabia military weapons worth billions of dollars.
The next political issue will be on the ongoing Mueller investigation that Donald Trump has labelled a witch hunt. The investigation started in May last year to investigate whether the Trump campaign colluded with Russian agents. It has also expanded to investigate the obstruction of justice case. The current issue is whether the president will testify before the prosecutors. His lawyers have advised against doing the interview while the investigators have promised to issue a subpoena. If Trump fights the subpoena, there is a likelihood that the case could end up to the supreme court.
In the UK, Theresa May will continue with the fight of her political life. The current issue is about the customs union issue that has divided her cabinet. Some of her cabinet officials support her goal of a hybrid system while others oppose it. In recent weeks, the chief EU negotiator has said that the issue could lead to the hard Brexit Teresa is avoiding.
The major data to expect this week will be the interest rate decision from the Reserve Bank of New Zealand on Thursday. The officials are expected to leave rates unchanged. On the same day, we will receive the inflation report from the UK, and the CPI data from the United States. On Friday, we will receive the employment numbers from Canada.