A data-packed week lies ahead

22 May, 2017

Asian equities roared back to life during early trading on Monday after oil’s sharp appreciation boosted global sentiment and rekindled risk appetite. European shares were mostly mixed as investors attempted to look beyond the political turmoil in Washington to focus on the macro-fundamentals in Europe. With concerns regarding Donald Trump’s presidency slightly easing and some still optimistic for his pro-growth policies, Wall Street is likely to receive some minor support this afternoon. 

Dollar bears remain relentless

The Greenback was “Trumped” last week with prices struggling to recover from six-month lows as investors re-evaluated the ramifications of the political instability in Washington and the impact it will have on Trump’s pro-growth policies. With the Dollar-Inspired Trump rally relinquishing all gains amid the growing uncertainty, bears are truly back in town. Much attention will be directed towards former FBI director James Comey’s pending public testimony, which should expose the Dollar to further downside shocks if any new information is brought to the table. On the macro front, the Federal Reserve minutes and US GDP will steal the limelight with investors heavily scrutinizing both for further clues on rate hike timings this year.

GBPUSD breaks above 1.3000

Sterling bulls have effortlessly exploited the Dollar’s weakness to elevate the GBPUSD above the stubborn 1.3000 resistance. With UK politics and Theresa May back in focus this week, the upside is likely to remain limited with Sterling instore for some fresh punishment.

There is still a strong sense of uncertainty over the pending Brexit negotiations, while suspicions of the European Union playing hardball in the talks should expose Sterling to further losses. With the pending second estimate GDP for the first quarter of 2017 likely to be unrevised, the main event risk for Sterling this week should be the inflation report hearings on Tuesday where BoE Mark Carney testifies on inflation and the economic outlook before the  Parliamentary Committee.

OPEC meeting in focus

Oil prices have ventured higher on Monday as optimism continues to sharply rise over big oil-producing countries extending output cuts to balance the markets. Although markets widely expect a meeting between OPEC and Non-OPEC members on May 25 to conclude with the current output deal extended by another 9 months, it remains a question of how U.S Shale reacts. The price action observed in oil markets suggests that prices remain entangled in a fierce bout with OPEC bulls and U.S Shale bears. While prices could edge higher following the extension of the production cut deal, the upside should face headwinds if U.S Shale continues to pump oil incessantly into the already oversaturated markets.

Commodity spotlight – Gold

The Trump woes have turbocharged Gold bulls this month with the yellow metal trading around $1254 as of writing. With political unrest in Washington hastening the flight to safety, investors sprinted to Gold as a form of protection. The yellow metal is in the process of turning bullish on the daily charts and a vulnerable Dollar should inspire bulls to conquer $1260. From a technical standpoint, a breakout above $1260 may open a path higher towards $1275.

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