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- Next week in one post: Trade wars, elections, GDP and Interest rate decisions
Next week in one post: Trade wars, elections, GDP and Interest rate decisions
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Loading...At first glance, it looks like the new week will be light on economic news. This, however, does not mean that it will be quiet and peaceful. There are many risks and concerns that are lurking around the corner and can bring many headaches (or profits for experienced) investors. US President Donald Trump tossed another Twitter bomb late Friday, promising 20% tariffs on imported cars from the EU. The president said on his feed that if the EU does not removed duties on U.S. cars, then the U.S. will have no choice but to act. The threat comes just two days after Commerce Secretary Wilbur Ross said no decision had been made on whether the U.S. would extend the volley of tariffs it has imposed on other goods to the automobile industry. Trump's tweet rippled through the financial markets, sending shares of BMW, Volkswagen, Fiat Chrysler and Mercedes-maker Daimler all lower. Ford and General Motors shares also slipped following the news. As part of tariffs expected to go online July 6, the administration has put a 25 percent tariff on Chinese goods including autos. China in turn has promised dollar-for-dollar retaliatory tariffs.
Trump threatens 20% tariff on all car imports from the EU
Remaining on the brink of commercial misunderstandings, all traders around the world are expecting China and their counter-attack solution in response to attacks from the US administration. It seems that things will not go away just as the indices definitely support this. Despite the rumors that the war will not get anywhere and things will be quiet, the Dow Jones Industrial Average registered 8 days of losses as it is only 1% of its 200-day period on the daily chart. Eight days of decline for the Dow Jones Industrial Average plunged the index to just 1% of its 200-SMA level, which turned out to be a turning point in April and May. Losses, according to many, are due to the fact that trade concerns around the US have a more negative effect on stocks than most would have admitted. As investors flee TNCs (Trans-national companies), Dow is now 1% in negative territory for the year, while the Russell 2000 - composed of companies that derive their revenues mainly within the borders of the United States - has a 10% profit . This phenomenon puts the indices on track to record their biggest divergence in the results for any calendar year for the past 2 decades.
Clouds over the automotive sector
It seems that trade relations between major economies will move stock markets. On Thursday and Friday of the new week, EU leaders will meet and discuss what they can do to protect their countries' businesses. This is an event that certainly should not be neglected by investors.
As for the forex markets, Thursday and Friday will be quite busy because, apart from the EU summit, there are still a bunch of economic reports that have the potential to generate volatile reactions from the crosses. On Thursday, we expect the Reserve Bank of New Zealand's decision on interest rates in the country. The projections are that there will be no change in monetary policy, but traders will watch for hints of future action. The divergence between Fed policy and that of the other major central banks continues to grow and action by bankers will soon be taking place, which will further boost markets. At 15:30 the same day, we will be watching for the US Gross Domestic Product report, which will show whether the economy is strong enough to withstand these interest rates or is about to overheat. On Friday, we have a Gross Domestic Product in the UK - here investors will watch carefully because the country does not stop disappointing with the economic news. Initially, a few months ago there was a set of interest rate hikes for this month. That didn't happen ... then comments moved on for a August hike, and now for November. If the news again disappoints on Thursday, it may not be possible to raise the base interest rate this year, which will send the pound to the bottom.
Lets not forget about the elections in Turkey as well. Turkish President Recep Tayyip Erdogan seems to have broken, voicing uncertainty days before the Turkish elections. "The Erdogan Party can seek coalition relief if it does not secure a full majority in parliament after Sunday elections," Erdogan said. Polls indicate that election results may be more controversial than Erdogan's expectations when summoning early elections in April. Since then, however, the Turkish president's rating has dropped significantly, and this may lead to a second round of presidential elections, while the AKP losing a majority in the 600 local parliament. Erdogan's victory will surely trigger Kurdish terrorist groups that have been seeking an independent state for years on the territory of present-day Turkey. I expect mass protests against Erdogan's policy, not excluding many terrorist acts in major cities, where Erdogan receives almost complete support. In summary, uncertainty in the country will rise significantly, and this will negatively affect TRY in the medium term. In the case of Erdogan's loss, I expect again uncertainty in the country, which will be caused by mass protests organized by the current president's supporters. On the other hand, it is no secret that Erdogan, like Putin in Russia and Xi Jinping in China, is a strong backbone of the local business. Loss of Erdogan will seriously worsen business climate in the country, and this will add extra weight to the Turkish economy, respectively TRY. Wherever we look at the situation, the prospects for TRY are extremely negative, regardless of the outcome of the local elections.
The important economic news for the new week 25.06 - 29.06.2018
Monday
11:00 Germany - Ifo Business Climate Index
17:00 USA - New Home Sales
Tuesday
Tentative UK - BoE Financial Stability Report
17:00 USA - CB Consumer Confidence
Wednesday
01:45 New Zealand - Trade Balance
11:30 UK - BoE Gov Carney Speaks
15:30 USA - Durable Goods Orders
17:00 USA - Pending Home Sales
Thursday
00:00 New Zealand - RBNZ Interest Rate Decision
09:00 Germany - Retail Sales
11:00 Europe - ECB Economic Bulletin
Tentative Europe - EU Leaders Summit
15:30 USA - Gross Domestic Product
Friday
02:50 Japan - Industrial Production
04:00 Australia - HIA New Home Sales
11:00 Germany - Unemployment Change
11:30 UK - Gross Domestic Product
12:00 Europe - CPI
15:30 Canada - Gross Domestic Product
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