› MARKET REVIEW JULY 01 – 05

MARKET REVIEW JULY 01 – 05

EUR/USD

The week starts on a positive note. The reason for this is the last summit in Japan. This summit was noted for several events. The first is the resumption negotiations between the USA and China. The second is the unexpected visit of the USA President Donald Trump in Korea and met with North Korean leader Kim Jong-un. There are no signed papers and comments about any agreement. But there is a resumption of negotiations from the last and very unsuccessful, meeting.

But on the markets are not particularly easy from all this positive news. “The ECB – like other Central banks – is operating in new conditions, when long-term trends such as population aging, lower long-term interest rates, and climate change have become key policy issues”, says Olli Rehn, head of the Finnish Central Bank, member of the board of the ECB.

The European Central Bank is ready to adjust all its instruments to raise inflation. But he must also to study a number of deeper issues that could change the course of his policies.

In Europe, this week, all attention will be focused on business activity. Important will be the releases of retail sales in the EU and industrial production in Germany. Also worth mentioning the not ended elections in the EU. The new government cannot decide who will take the five key positions in the European Parliament. In the USA, the week can be called short, on Wednesday the trading session is short, and on Thursday America celebrates the Independence Day. The fewer of trading sessions, the higher the volatility. And the first week of the month for the USA dollar is always volatile, due to the release of the report on the labor market.

This will be decisive for the Fed, as the USA Central Bank in mid-June made it clear that can reduce interest rates this month. However, in the short term, global trade disputes and other risks can slow the economy no matter what the Fed does. The ten-year expansion approach has spurred speculation about how long the recovery can last. Will the recession be inevitable in the next couple of years? Will the Fed and the US government be sufficiently prepared to deal with another economic downturn. The progress that the Fed and elected officials consider necessary to restore the middle-class income will take a couple of years.

MARKET REVIEW JULY 01 – 05


AUD/USD

On a positive note from the resumed trade negotiations between the USA and China, it is worth mentioning the Australian dollar. According to the USA President Donald Trump, China has agreed to go to new purchases of agricultural products of the United States and return to the negotiating table. There is no deadline for the agreement, so the differences on many points remained valid. But the cancellation of the new tariffs and the relaxation of the old has introduced tariffs and prohibitions ( refer to the blockade of the Chinese giant Huawei), it is definitely positive.

The Reserve Bank of Australia has planned to reduce the key interest rate. The decision will be announced at tomorrow's meeting on the monetary policy of the Australian regulator. However, since the solution was planned before the introduction of clarity in the prospect of escalation, or the de-escalation of the trade conflict between the USA and China. RBA may surprise the market! After all, the truce, is better for Australia, as one of China's main trading partners. Also, this week will be important releases of the trade balance of Australia as an export-oriented country. On Thursday, we should pay attention to the data on retail sales. Overall, the Aussie as a currency affected by a trade war, quite undervalued, and therefore promising.

MARKET REVIEW JULY 01 – 05


OIL

Black gold continues to benefit, last week on expectations, now on facts. Temporary, yet without deadlines, a truce in the USA-China trade war provides significant support to the asset.

Now all the attention increasing emphasis to the upcoming meeting of OPEC member countries and their allies, in particular, Russia. Oil prices of both varieties have already jumped by a dollar and more. Saudi Arabia, Russia, and Iraq support the prolongation of production cuts for six to nine months. This agreement was reached before the meeting of the representatives of the member countries of the oil cartel.

OPEC, Russia and other manufacturers of the alliance will meet today or tomorrow to discuss the reduction of supplies. The group reduces oil production in 2017, which would prevent the fall of prices on the background of a weaker global economy and rising production in the United States. Russian President Vladimir Putin said on Sunday that he agreed with Saudi Arabia to increase the existing reduction in production by 1.2 million barrels per day until the end of the year. It is not difficult to understand that bullish factors for black gold only increased.

MARKET REVIEW JULY 01 – 05


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