Week Ahead: Focus to Remain on Politics, Trade, US GDP, and ECB


After weeks of gains, the US dollar continues its losing streak against its peers. The decline on the dollar comes after the US president criticized the Federal Reserve for raising interest rates. This year, the bank has made two rate hikes and traders expect it to perform two more hikes. In addition, the current issue of a trade war has turned to currency wars as China influences its currency to remain lower. Other central banks in Europe and Asia do not seem like they will hike their interest rates too. Therefore, this week, traders will continue focusing on the Fed and whether it will respond to the president. Remember, they are not obligated to respond to the president because they operate independently from the executive branch of government.
Traders will also focus on the US-China relations. In an interview on Friday, the US president announced that he was likely to move his tariffs on Chinese goods to more than $500 billion. This sent jitters in financial markets around the world. This is because, China exports less goods to the United States. To retaliate, the country would be forced to enact more than tariffs. For example, the country could lower its currency with the aim of boosting its exports. Alternatively, the country could halt or significantly slow the purchases of US treasuries. This would send jitters around the world and potentially lead to a major correction in the markets. This is because, at $1.17 trillion, China is the biggest holder of US treasuries.
Another focus this week will be on earnings. Companies from around the world are reporting their Q2 earnings. The biggest focus this week will be companies like Alphabet, Hasbro, Illinois Tool Works, Ryanair and Whirl Pool, which will report on Monday. On Tuesday, 3M, AT&T, Ameriplus, Biogen, Centene, Chubb, Eli Lilly, Kimberly Clark, and UBS will report. On Wednesday, Barrick Gold, Boeing, Coca-Cola, Deutsche Bank, Facebook, Fiat Chrysler, General Motors, PayPal, Qualcomm, and Syngenta will report. On Thursday and Friday, Altria, Amazon, CME Group, Chipotle, and Chevron will report.

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Traders will also focus on crude oil. In recent week, the price of crude oil has dropped after traders grew concerned about the supply. A few weeks ago, the US president asked the Saudi Arabian king to boost production. A while later, it was reported that the country and other OPEC countries had boosted their production. In addition, the Libyan government received a major oil field from the rebels, which means that the country’s production will rise. Earlier today, the US sent a tough Twitter message to Iran’s Rouhani. Traders believe that a major confrontation between the United States and Iran could be on the horizon. To retaliate to the sanctions, Iran has threatened to interrupt a major trade route within its territory.

Traders will also focus on an important meeting between the US president and EU’s Jean Claude Juncker. This is a meeting that has been anticipated for a while after the US started imposing tariffs. US has threatened to put taxes on European cars, a measure that Germany’s Merkel has called the most dangerous thing to trans-Atlantic trade. Traders will wait for what will come out of the meeting.

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