The Asian stock market began the week with an advance, in anticipation of the two-day meeting between Trump and China’s Premier Xi Jinping. The main topics of discussion will be the trade matters between the countries. The producer’s sentiments in Japan improved amid positive data on consumer inflation, however, the index from Tankan showed a slow improvement pace. Shares of the Japanese companies traded in a positive territory on Monday, but their dynamics during this week will depend on the outcome of the leaders meeting of the two countries, as well as the behaviour of the Japanese currency, which is sensitive to changes in the market risks. Following a statement last week by the FED representatives, the pair USD/JPY managed to win back losses, but the corridor of the movement will likely be outlined more accurately on Wednesday after the release of the minutes of the last meeting of the FED.
The Dollar came across a considerable resistance during the Friday trading session and failed to overcome the level of 100.50. This was also promoted by the “dovish” statements of the FED official Dudley, who advocated for a gradual rate increase for this year. This week, the fate of the American currency will be decided by the publication of the FOMC minutes on Wednesday, as well as the report on employment on Friday, which will significantly clarify the pace and timing of the monetary policy tightening. The forecast remains bullish until Friday, despite a possible correction on Thursday, as all previous data including inflation, sentiment and consumer spending indicate a lack of weaknesses in the US employment market.
Oil traded with minor declines, posting the biggest jump for this year last week. The stance of the OPEC officials, as well as the monthly cartel report, indicate the oil exporters desire to extend the agreement on curbing the production for another 6 months, which is what most investors are betting on. This week, the Oil market may be able to accelerate the recovery, the only hindrance can be the negative reports on API stocks on Tuesday and EIA on Wednesday.
The Australian Dollar retreats on Monday before the RBA’s decision on the interest rate on Tuesday. The maturing real estate bubble in Australia, which prices have recently shown the largest increase in recent years, requires an urgent intervention by the Central Bank. This might push forward the possibility to raise interest rates, reducing the divergence with the US Federal Reserve. The interest rate is not expected to be changed at tomorrow’s meeting, however, the change of rhetoric may give a bullish impulse to the Australian currency.