After a week of key central bank meetings, this week will be slightly silent, with no major economic data expected. As a result, the focus will turn to trade and political issues.
Yesterday, the US president sent a tweet praising his decision to impose tariffs on Chinese goods. In the tweet, he said that the US was winning. By winning, he referred to the Chinese stock market which has fallen by more than 30% this year. Its currency has also fallen, showing that investors are concerned about the economy. On the other hand, the dollar has outperformed other currency peers mostly because of the hawkish Federal Reserve. The US stock market has remained stable and the economy is doing well. This will likely give the Trump administration motivation to press on with its tariffs.
On Sunday, Larry Kudlow, the US National Economic Advisor said that the president will not back down after China announced that it would retaliate on Chinese goods worth more than $60 billion. In an interview, he said:
“We’ve said many times: no tariffs, no tariff barriers, no subsidies. We want to see trade reforms. China is not delivering, OK? Their economy’s weak, their currency is weak, people are leaving the country. Don’t underestimate President Trump’s determination to follow through.”
This week, the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ) will release their interest rates decision. The RBA will release on Tuesday while the RBNZ will report on Thursday. None of the two central banks is expected to raise rates this week. However, traders will pay close attention to the statements that they offer. These meetings comes a week after the BOJ showed no indications of a rate hike, the Fed pointed to a September hike, and BOE made its first hike this year. As shown below, the two currencies have jumped recently as traders expect for a rate hike.
Iran will also be on the news this week as the country gets ready for sanctions. Today, these sanctions will kick off in a country that is facing a challenging economic period. Inflation is rising, unemployment rate is rising, the currency is falling, and firms are leaving in droves. At a press conference last week, the US president said that he was open to meeting with the Iranian leaders. The latter rebuffed the offer. During the weekend, the president said that a meeting between the two countries was up to them. Today, after the tariffs starts, the Iranian president will address the country and give a way forward. Iran has threatened to block gulf states oil exports, which will threaten the world oil market.
This will be a light week on economic data. On Tuesday, we will get the household spending data from Japan, Germany’s industrial production, and US JOLTs jobs openings. On Wednesday, we will get the cruder oil inventories data from the EIA and on Thursday, we will get the Chinese CPI and the US PPI. On Friday, we will get the Japanese GDP numbers, UK GDP, US CPI, and Canada’s employment numbers.