› MARKET REVIEW JUNE 10 – 14

MARKET REVIEW JUNE 10 – 14

EUR/USD

The release on the USA labor market, which was released last Friday, really surprised everyone. Outside the agricultural sector of the United States in May, only 75 thousand jobs were created. This, not the weakest value this year, but still below the required 90-100 thousand new jobs per month. However, as unemployment remained at a record low, the focus shifted to wage growth. After all, the slowdown in wage growth by 0.1% increases the chances of reducing interest rates by the Federal Reserve, as wages are a leading inflation indicator. As more people receive money, the more they spend, thus pushing inflation to growth.

Therefore, all hopes for a possible tightening of the Fed's monetary policy were dispelled. But this morning, the chances of the Fed lowering interest rates by the end of the year increased. However, the support for the USA stock market was provided by the refusal of tariff duties from the US to Mexico because of illegal migrants. As the USA president Donald Trump said on his Twitter:

- “I am pleased to inform you that the United States has reached a written agreement with Mexico. Duties on Mexico be postponed indefinitely”, wrote Trump.
In Europe, attention is focused on Italy, which begins to fight the European Parliament because of the large national debt of the country, which goes beyond the EU rules. And also the attention is focused on the upcoming election of a new Prime Minister in Great Britain. The basic tone was set last week, and the current, this tone will be either reinforced or slightly weaker. Of course, the most interesting will be the USA inflation indicators, as the fear of a slowdown in the USA inflation against the backdrop of a decline in wage growth has increased. Therefore, on Tuesday we follow the producer price index, on Wednesday we trade on base and consumer inflation, and on Friday we focus on retail sales in the United States.

In Europe, volatile releases are much less. On Wednesday, the head of the ECB Mario Draghi will speak, who did not give any reason to buy the Euro or sell on last week. Although the markets were waiting for details on TLTRO. And on Thursday, the volume of industrial production in the EU will be interesting.

MARKET REVIEW JUNE 10 – 14


GBP/USD

Today, in Great Britain begins the election race for the post of Prime Minister. Britain is looking for a new leader after Theresa May announces her retiring. May has not coped with the exit from the EU (Brexit), as evidenced by the crushing defeat in three votes in Parliament. Theresa May's successor will inherit Britain's deepest political crisis in decades, related to how, when and whether the United Kingdom should leave the EU. The choice of the next leader of the British Parliament will determine the future role of the country on the world stage and prosperity for future generations.

Election promises are very different, some even radically different. For example, Dominic Raab, one of Brexit's toughest defenders, says he had rather leave without a deal than delay the exit again. And on the other hand, Matt Hancock, who excludes the possibility of leaving without a deal, promising Britain a “new start” with a platform to support business, which will be attracting the new and young voters.

The British pound will also be interesting as the week is saturated with volatile statistics. Today, the UK GDP releases, industrial production and production volumes in the manufacturing industry will take place. Tomorrow, the British labor market will report, where we will know about the average wage and employment changes, as well as the unemployment rate. And then the markets will digest the information and evaluate the chances of a new leader in Britain.

MARKET REVIEW JUNE 10 – 14


OIL

The number of oil drilling rigs at the disposal of American energy companies decreased to the values of February of the last year. The number of installations by Friday last week fell by 11 units, the strongest decline since April. The number of drilling rigs is a leading indicator of future USA production volumes, which has been declining for the past six months. Independent American companies engaged in exploration and production, reduce the cost of development of new fields, focusing on profit growth, rather than increasing production. However, concerns about the state of the world economy and its impact on fuel demand continue to affect oil market sentiment. An additional bullish driver was Saudi Arabia, which, in the person of its energy Minister, reported that OPEC producers and their OPEC+ allies, including Russia, are close to extending their production reduction program for the second half of 2019. Rising stock markets, reflecting the general mood, will also support black gold, as U.S. trade tariffs against Mexico have been postponed “indefinitely”. Taking into the account, that the quotes were under the rapid pressure of the bears for a long time, it is likely that the bulls will have enough of these drivers to win back some of the losses.

MARKET REVIEW JUNE 10 – 14


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