his week will be full of indicators from the labor market of the European Union and the United States. It is also worth noting that the week will be the defining one for the US dollar, which has completed its best quarter since 2016. In the EU, on the contrary, the migration issue rose tension. Today the last meeting will take place and, if no consensus is found, the office of German Chancellor Angela Merkel risks to fall apart. Also from the next week, price for all European cars in the US will be 25% higher due to imposed tariffs. And not only those that are imported from Europe, but also produced in the United States.
Friday will be hot. Traditionally, on the first Friday of the month, the release of NFP data will take place (change in the number of people employed in the non-agricultural sector). Just a lot of attention will be paid to the indicators of average wages, because if wages do not rise, inflation will slow down. The volume of exports / imports, the proportion of economically active population, trade balance, unemployment rate - all of the above mentioned indicators will be published at 12:30 GMT. Well, very high volatility is expected!
As you can see, the week is extremely interesting and rich in signals. Also do not forget about the rising trading heat. Car tariffs soon are going to come into force, next step is for the European Union. How far is the American president ready to enter into trade disputes? We'll find out everything this week.
British Prime Minister Theresa May still can not find a compromise on Brexit, she travels from London to Brussels and back, but consensus has not been found yet. There are risks that the referendum on the exit from the EU will be proclaimed invalid and a new one will be held. This fact will pressure the British pound this week.
Upcoming week is going to be full of the "business activity" events. Business activity in the manufacturing sector (Monday), in the construction sector (Tuesday), in the services sector (Wednesday). And the service sector is one of the most important, since exactly it "produces" almost 80% of the British GDP. On Thursday, the head of the Bank of England, Mark Carney is going to speak. We would like to mention that the issue of raising the interest rate, as the Bank of England planned to do it in the beginning of the year, is still valid. The rise of the repo rates this year is still relevant for the pound. But a drop of the business activity may force the regulator to postpone this.
The shelter-asset sell off continues. Strong US dollar spurs profitability of US debt securities. But this week everything can change. A radical American president will not tolerate answers to his duties and trade restrictions from rivals. It is the rivals, because the trade war can be said to have begun. Additional duties of 25% on European cars will take effect next week. The European Union will certainly answer, as it promised last week at the summit of EU leaders.
Also, rumors have it that Kim Jong-un is not going to follow the agreement on denuclearization. Instead, it builds up its nuclear potential. Sure, now it is only a rumor. But if they are confirmed, the reputation of the American president, that is far from perfect, will be spoiled even more. Here gold and will turn into growth. As always, geopolitics and world sentiment can support the shelter-asset.
For the second week in a row oil opens with a gap down, and after that it begins to restore its positions. The key resistance level is $74.00, which was passed last week. The risks of supply reduction on the market are still relevant, so the price growth can be expected. Even despite the demands of US President Donald Trump to Saudi Arabia to increase the output of the raw materials. The fact that production will increase was confirmed by the OPEC. But this can be achieved not that quickly as the US president and world consumers would like.
On Wednesday in the US Independence Day, so the release of the report on crude oil inventories will be published on Thursday. A further reduction in the extraction of raw materials in Venezuela due to the growing economic crisis there may foreshadow further decline in US inventories of raw materials. And a drop in the number of drilling rigs will only contribute to this.
Preliminary further growth is expected, but a possible decline will begin as the world's raw materials production capacity increases. But as already mentioned above, this process will take some time.