The coming week can be considered short, as on Friday most markets will be closed due to the celebration of "Good Friday". The main exchanges of Australia, USA, Canada, UK, and Germany will rest. Therefore, the volatile background will fade by the end of Thursday. But volatility will grow!
The pair starts the week in a positive mood, confidently testing the resistance of 1.13. The Monday morning started above this level. In the process of heightening tension in trade relations between USA-EU, the growth of the pair can be considered limited. It is too early to talk about the restoration of the former bullish trend. The US plans to introduce tariffs in the amount of 11 billion dollars when the EU has already prepared counter tariffs in the amount of 22 billion dollars. As practice has shown, the US is ready to press until the opponent makes concessions. Now talking about the trade war with China. For the EU the trade war will be even more difficult, because the first economy of the Euroblock (Germany) is export-oriented, if production has already slowed down, it is possible to imagine what the impact on the economy will be in the case of introducing tariffs for cars, milk products and wine in May. Therefore, this week, market participants will closely monitor the current economic conditions and sentiment from ZEW in Germany and the EU as a whole. This release will be released on Tuesday. On Wednesday, attention will be focused on data on consumer and core inflation in the Euro area. Statistics on the EU trade balance will also be important. In the extreme, before the long weekend, the trading day will be released preliminary data on business activity in the manufacturing sector and the service sector in Germany and the EU as a whole. So as the data ahead of April, and have more significant weight than the revised second and third release.
In the US, the most volatile day will be Thursday. And before that, data on industrial production volumes will be released on Tuesday, the release of export/import volumes and trade balance will be released on Wednesday. Before the Good Friday will be the most important statistics of the week for the USA dollar. The basic index of retail sales and their volumes will be released at the opening of the American trading session. Also, the number of initial applications for unemployment benefits will be released. The FRB of Philadelphia will publish data on a production activity and employment in the state. For dessert, there will be preliminary data on business activity in the manufacturing sector, the service sector, and a composite indicator.
On Friday, the EU releases are not expected, but the States, despite the weekend, will report about the real estate sector. Namely, the number of building permits issued and the volume of the build of new houses.
The British were not allowed below 1.305 almost all last week and on Monday morning, the market participants win back the positive in the form of a delay the until the end of October this year. However, it is fundamentally difficult to find a reason for optimism. Business investment and exports are declining, making the world's fifth largest economy dependent on consumers and their costs. The UK economy grew by 1.4% last year, this is the weakest growth in the last six years, this year is expected to further slow down. The amount of investment losses in the economy of the United Kingdom after the referendum in 2016, is about ten billion pounds, compared with simple trend growth from the end of 2009 to the second quarter of 2016 (see graph below).
Fearing a hard version of Brexit, manufacturers have increased their stocks of materials and spare parts at the rapid pace, for all history.
This fact worries economists because this desire to create inventories led to an increase in production, which was a precursor to the recession (see graph below).
On this rather alarming background, the British will be quite volatile due to important economic releases. On Tuesday will see the world the statistics on the UK labor market. Average wages, including bonuses, changes in the number of applications for unemployment benefits, changes in employment and unemployment. The full range of statistics, according to which it will be possible to start planning to trade for the current week. On Wednesday will see the world the consumer inflation of Albion, as well as the index of purchase prices of producers. In the case of growth, as expected according to the consensus forecast, the Bank of England will have to raise the interest rate.
So after this release will have the weight of the speech of the head of BE - Mark Carney. Retail sales statistics are expected on Thursday. The basic index of retail sales and their volumes will be released before lunch. Taking into account the factors outlined at the beginning, this release is critical for the British economy. Although the previous two days are important. The risks and concerns correlated with Brexit have faded into the background, so-as a delay of six months gives much more time to British legislators to find consensus. Therefore, economic releases come to the fore.
The crude oil market is also quite interesting. Last Thursday, a report from the International Energy Agency (IEA) tells that prices above $70 could be unstable. Reuters experts believe that OPEC member countries need to revise their plans to reduce production by the end of June, and the beginning of July. At the moment, members of the oil cartel have reduced the production too aggressively, and supplies of raw materials from Venezuela and Iran are steadily declining. American banks, such as Goldman Sachs, for example, have been actively increasing their bullish position in recent weeks, actively raising oil forecasts. Such large market participants are oriented by the reduction of supply in the market, and not on the economic slow down in the world. On Wednesday, a preliminary meeting of OPEC will be held, after which data on the state of commercial crude oil reserves in the United States will be released. These are the main scheduled drivers of the week. The OPEC member countries this year do not get carried away with the reduction in order to avoid a rise in prices to $80, and possibly up to $100, as it was in 2014. Then OPEC ignored the reduction in oil supply due to the USA sanctions on Iranian oil. Today, the picture is similar, and in the context of the global economic slowdown, the outcome can be much more serious.