FXR Team

Firstly, remember that the UK and the US are on holiday tomorrow (Monday) so all trading commences on Tuesday. Also, there will be a European bank holiday on May  30th. Politics will dominate again this week as the markets digest the outcome of the EU Elections and the EU will be holding an emergency meeting to discuss the implications, and what to do with the UK after May’s departure. US/China trade debate will be the other main focal point with the upcoming G20 summit in focus.

Themes for the Week:

  • Market participants are expecting more pain for the Pound as Boris Johnson is the main candidate to take May’s place. He would support Brexit. But there is also a risk of general elections and a Corbyn-led government cannot be totally ruled out. Both situations would likely see the Pound lower. It is also unclear what the EU will do.
  • The US/China trade debate is now turning into a technology debate as well. So tensions are increasing although Trump continues to say “a deal is in the cards, will happen soon”. This will keep equity markets unstable.
  • EU Election fall-out: anti-establishment/anti-immigration parties are forecast to do quite well at these EU elections. The implications will be digested by the markets after the results are known.
  • FedSpeak:  the market is pricing in a more dovish scenario than the Fed is currently proposing. The Fed is “on hold” but the markets are pricing in ever lower inflation going forward, which means potential rate cuts. Fedspeak in the coming week will help ascertain whether there is any further preoccupation in their ranks.

Data in the Week ahead:

  • RBNZ Financial Stability Report + Governor Orr Speech
  • Fedspeak
  • Bank of Canada Rates Decision
  • US GDP Q/Q
  • CNY Manuf. PMI

On the Radar:

Into last week’s close, Jpy & Chf were leading whereas the USD was weakening alongside the Euro and the Pound. In equities, risk-off remained the predominant tone with Nasdaq lagging. Things may change based on the EU elections and other developments, but EurJpy & GbpJpy shorts could quickly become top picks if risk off and EU chaos ensues.

About the Author

Justin is a Forex trader and Coach. He is co-owner of www.fxrenew.com, a provider of Forex signals and Education from ex-bank and hedge fund traders (get a free trial), or get FREE access to the Advanced Forex Course for Smart Traders. If you like his writing you can subscribe to the newsletter for free.