Today, US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer are leaving for Beijing to continue the trade debate with the Chinese side. This is the third round of negotiations from the start of the “temporary truce” in the trade war. Trump's statement, which was written above, can only talk about one thing, the parties did not find a consensus, and the President of the United States resorted to his characteristic tools, namely pressure and threats. Of course, this makes investors nervous and withdraw their funds from risky assets.
Additional pressure will be the approach of the end of the US federal government funding; by the end of the week Trump, the US Congress and the Senate must break the deadlock in budget matters. Donald Trump insists on funding the wall on the border with Mexico, although Democrats in the government consider it a waste of money. If a consensus is not found by the end of the week, the shutdown will resume on Monday, or the US President will introduce a state of emergency. Neither the first nor the second benefits the US dollar.
From economic news, the upcoming week will tell us about the US consumer inflation, retail sales, manufacturing activity in New York. And at the end of the five-day trade, we learn about the mood and expectations of consumers from the University of Michigan.
In the EU, the Eurogroup meeting and the finance ministers will begin on Monday, where the Brexit issue will also be discussed with British Prime Minister Theresa May. During the week, we will learn about the volume of industrial production, the evaluation of GDP growth for the fourth quarter and the EU trade balance.
The American Dollar is still more attractive to buy, and only negative statistics can make investors aware of it this week. The political background should not be ignored, since there is a risk of resuming the shutdown.
GBP / USD
British Prime Minister Theresa May urgently needs to make progress in negotiations with Brussels by February 13. Otherwise, the British Parliament will come up with an amendment that will allow the government to more closely control all processes related to Brexit. The chances of a revision of the achieved deal Mei with EU leaders are so miserable that investors are more actively starting to withdraw money from Britain.
Since the referendum was held in 2016, direct investment from the UK to the EU increased by 12%, when investment from the EU to Britain investment volumes fell by 11%. The study was conducted by the Center for Economic Indicators of the London School of Economics.
“The data shows that Brexit has made the UK a less attractive investment country,” said Thomas Sampson, one of the authors of the report.
Against this negative background, the United Kingdom will report economic indicators. Already on Monday, Britain’s GDP will be released for the quarter, industrial output, trade balance and business investment. Tomorrow Mark Bank Carney, the head of the Bank of England, will speak in London. Wednesday will tell us about the British inflation and producer purchasing price index. At the end of the week, we will find out about the UK retail sales.
The increase in the number of drilling rigs in the United States puts pressure on the black gold quotes at the beginning of the trading week. The risks of escalating trade war also haunt oil traders. The third round of negotiations will begin today, the investor will be extremely attentive to them, and any fresh news will immediately be reflected in the quotes. The US president plans to meet with the PRC leader on March 1, the deadline for signing the trade agreement, otherwise starting March 2, the fees for trades of over $200 billion will increase from 10% to 25%, which will further dampen the demand for raw materials.
An additional factor in the movement of quotes, as always, will be a report on the state of stocks of crude oil and its products in the United States.
Commotions around Venezuela do not subside, where the state-owned oil company PDVSA deposits the proceeds from the sale of oil to the account recently opened in the Russian JSC Gazprom Bank, according to sources and an internal document, Reuters reported this weekend. Attempting to evade US sanctions may cause them to become tougher, which the speculators will certainly play in the quotes.