By Deepta Bolaky
After a relatively buoyant week, the attention switched to the intensifying tensions between the US and Iran after a US drone was shot on Friday. Stock markets closed lower on Friday while safe-haven commodity – Gold was in the spotlight following its impressive rally.
Undoubtedly, the attention will be on the G20 summit and the much-awaited trade talks between President Trump and Xi. Investors will keep monitoring central banks comments and speeches for signals of potential rate cuts while analysing key economic indicators for further clues.
The 2019 G20 Osaka summit will be held on the 28th and 29th of June in an unprecedented way as the meeting between the President of the world’s two largest economies could be pivotal de-escalated the trade tensions.
We expect market participants to keep an eye on the comments coming from Beijing and Washington across the week to depict how the negotiations will likely take place and gauge the best and worst scenario.
Investors are also likely to keep in mind that the 2018 G20 summit in Buenos Aires ended with full of promises as both countries declared a trade truce. It is unlikely that both leaders will be able to agree on deep structural differences, but we might see a similar cease-fire that will calm the tensions.
Some kind of trade truce this time will also be subject to much more scrutiny as investors are aware of the reality of those recent negotiations. However, as unlikely as it seems, a deal is a possibility as both parties are facing increasing pressure to strike a deal, and President Trump is facing a political backlash as protectionism measures are hitting the US farmers the most.
The Reserve Bank of New Zealand (RBNZ)
The RBNZ was the first major economies to slash its interest rate by 25 bps in May. Since then, we have seen the global run towards easing policies due to the risks to the global economy tilted to the downside.
We expect the central bank to keep its interest rate on Wednesday steady at 1.5%. However, attention will be on the future potential rate cuts. Despite the stronger-than-expected GDP growth, leading growth indicators have deteriorated, and market participants will monitor the extent of dovishness coming from the RBNZ’s comments.
The Federal Reserve
Another central bank that will be in the spotlight this week will be the Fed’s Chair Powell Speech on Tuesday. The stock markets had a solid week partly because of the Fed’s dovish stance. We expect investors to keep track of the speech on Tuesday for more insights on the global risks from the Chairman.
Autonomy and Independence of Central Banks
Last week, there were questions raised on the autonomy and independence of central banks. The European Central Bank (ECB) also surprised the markets with its easing policies. President Trump attacked the central bank of “currency manipulation”.
In the US, there were headlines that the US President is looking for ways to legally demote the Federal Reserve Chairman Jerome Powell.
While in Italy, a bill that plans to push the Bank of Italy under political control prompts fears of the independence of central banks.
The rise of populist governments and their fight for control are putting pressure of central bank governors.
The focus will be on the eurozone economy. We will kick off Monday with IFO surveys in Germany. Most importantly, the CPI figures on Friday will be the highlight of the week. As Mario Draghi, the President of the European Central Bank (ECB) talked about “additional stimulus” as inflation fails to converge towards their target range, we expect the inflation data to provide further insights on the matter.
The inflation data could influence the recent rebound of the Euro against the US dollar. If investors see a more disappointing inflation figure, which will mean justify the ECB loosening policy, the shared currency could face downward pressure. Other notable events for the Eurozone economy will be Business Climate on Thursday alongside a series of ECB speeches across the week.
In the light of the slowing global economy, the US and UK GDP, which will be released on Thursday and Friday respectively will be of utmost importance.
|Tuesday, 25 June 2019
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