Semi-annual report of the Federal Reserve System and the inflation in the eurozone are the main drivers for the upcoming week. Last week was extremely interesting, but traditionally it ended with profit fixing after a week's fall.
On Monday, the US dollar will take the initiative. There will be releases on retail sales excluding car sales. Monthly report on the base retail sales and retail sales for June will be released also. It is worth noting that the indicator shows positive data for four consecutive months, it is expected that June is going to be the fifth, although it is expected to decrease by half (according to the forecast of the Bloomberg experts).
On Tuesday, Jerome Powell will present a semi-annual report from the Fed to the Congress with. But the main question is, whether the Federal Reserve consider the beginning of the trade war with China?
On Wednesday data on inflation in the Eurozone will be published. It is expected that the index in monthly terms will slow down from 0.5% to 0.1%, but the base index in annual terms will remain the same. If inflation is going to be above expectations, we may expect strong strengthening of the European currency, although there are no prerequisites for this yet. Also, Jerome Powell will perform the second part of his speech, and later in the evening the Fed will publish its "beige book."
After that market participants are going observe the production activity and the employment index from the Federal Reserve Bank of Philadelphia. The producer price index in Germany and the preliminary meeting of OPEC on Friday.
It is worth paying attention to the meeting of Donald Trump with Vladimir Putin. The ex-developer will talk with the former KGB for ninety minutes in the presence of only translators. Results of this meeting draw attention of the most market participants.
GBP / USD
The upcoming week is going to set a lot of pressure on the Bank of England. Last Friday, American President Donald Trump, came to Great Britain and criticized the actions of British Prime Minister Theresa May. He also called the ex-Minister of Foreign Affairs Boris Johnson, the wonderful prime minister for Britain. The American leader has fueled already burning bonfire in the British government, that cannot come to a consensus on an exit from EU (Brexit).
On Tuesday, the UK is going to publish information on its labor market. After the speech of the head of the Bank of England Mark Carney, the average earnings index + bonus will be released, the drop of this indicator is expected to stop. The forecast says about the growth of salaries by 2.5%, despite the growth in the number of claimant count change by 2.3 thousand, employment as a whole is expected to grow by 150 thousand, and unemployment to remain at the same level of 4.2%. In general, very bullish expectations for the British pound
On Wednesday, the inflation data is expected to show growth from 2.4% to 2.6%. Although the index of purchasing prices on a monthly basis expected to decrease from 2.8% to 0.4%
In general, this week is to bring a lot of important data for the British pound.
The strong dollar rate keeps its pressure on the asset, even though the risks are growing. Gold is not that attractive as a shelter asset, as dollar’s rivals show downtrend, and since gold is traded vs. the dollar, this asset became too expensive for the shelter. It is more profitable to buy US debt securities, which now demonstrate a good income with a strong currency.
The fact that the growth of risks does not support gold means that the asset is losing its "protective" status today. With the escalation of the US-China trade conflict, many goods fell in price, and the precious metals market also fell. Over the past week, gold lost 1% in price, silver dropped 0.91%, and platinum lost 1.74%. Even copper has fallen in price by 1.28%.
The current situation says that at the moment the US dollar itself is a shelter-asset. The strengthening of trade strains between two leading economies of the world can exacerbate its position. Some investors prefer shares of large international companies, dividends serve as a pleasant bonus. It's an uneasy time for gold today, but it's worth keeping a hand on the pulse, with the current rapidly changing market, you can expect anything.
Last week black gold lost slightly more than 5% of its price. The drop in prices was facilitated by the reduction in the risks of supply shortage in the raw materials market. This is the first noticeable price decrease since the middle of last month.
After the statement of Saudi Arabia that the largest exporter is ready to cover the interruptions in the supply of raw materials from Libya, Venezuela and Iran, fears began to fade. And when Libya said that it opened seaports and was ready to supply about 850 thousand barrels per day to the world market, investors have calmed down completely. And the statement of the US Secretary of State Mike Pompeo that the administration of the American president is considering the possibility of exempting some buyers of Iranian oil from sanctions has also supported the price drop.
However, with such a rapid increase in oil production, which is caused by the desire to reduce the prices of raw materials, the International Energy Agency warns that the world reserves are being exhausted. Therefore, any interruption in production or the supply of raw materials will lead to an even more rapid price increase. But this is only a possible scenario.