As in the past few weeks, the issue of trade has continued to be the most closely-watched issue in the markets. The issue emerged early this year after the US passed the tax reform package. In the following weeks, the administration changed after key people – who were viewed as globalists – exited the administration. They were Rex Tillerson, H.R McMaster, and Gary Cohn. In their place, Trump filled the administration with key allies like Larry Kudlow and John Bolton. In March, he announced that the US would place a 25% tariff on all steel imports and a 10% tariff on all aluminum tariffs. He then gave the US allies an exemption.
Last month, the exemptions ended, and the tariffs were officially placed. The other countries retaliated against the United States. As this was happening, the administration identified Chinese products worth more than $50 billion and placed tariffs on them. These tariffs went into effect a few weeks ago. To respond, China identified key American products to put tariffs on. The country chose products in states that President Trump won like Wisconsin and Michigan. After the retaliation, the US started a review of additional Chinese products to restrict. The new list under review will have goods worth more than $200 billion. Trump has threatened to increase the number to more than $400 billion.
This week, the focus will remain on trade. A weekend report said that some US representatives were trying to initiate talks with China. These talks are aimed at preventing the region from falling to a full-blown trade war.
On economic data, the most important data this week will be the US GDP numbers. The data will be released on Thursday. Economists expect that the final reading of the GDP will show that the economy expanded by 2.2%. This will be lower than the 2.9% GDP growth for the fourth quarter. If the number doesn’t disappoint, it will be a continuation of the second biggest winning streak in history. The good economy has been attributed to the positive impacts of the tax reform and the deregulation policies of the Trump administration.
On Thursday, the Reserve Bank of New Zealand will declare their interest rate decision and do a forward guidance. It is expected that the bank will leave interest rates unchanged at 1.75%. The guidance is likely to show that the low interest rates will continue for a longer period than expected. This is because in recent months, the economy has had several challenges especially on slow rate of inflation.
Another focus this week will be on business confidence. Today, IFO will release the business climate numbers in Germany. They are expected to fall to 101.9 from last month’s 102.2, a reflection of increased pessimism about global trade. Tomorrow, we will receive the confidence number from the United States. The numbers are expected to show that the confidence remained at 128. On Tuesday, we will get the confidence numbers from Italy and France.
This week, traders will also focus on crude oil. This is because of the important OPEC meeting in Vienna. Traders will likely focus on the new decision to increase production. As the week goes on, they will get an indication of the US production and stockpiles. They will also get news from important countries like Iran and Saudi Arabia.
The post Week Ahead: Focus to be on Trade and US GDP appeared first on Forex.Info.
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