What to expect next week 14.08 - 18.08.2017

During last week the focus was on the tension between USA and North Korea. The president of the United States Donald Trump made a warning towards North Korea, regarding their threats to U.S. allies. This cast a shadow on all markets. S&P 500 made its biggest decline since May, despite the good earnings reports. CBOE Volatility Index soared 62%, the biggest since election day last year. Trump said further threats from the country would be met with “fire and fury.” The comments jolted markets from a summer slumber, with U.S. assets largely little changed for most of the session. The 10-year Treasury yield rose. Crude retreated toward $49 a barrel.
Trump’s comments followed a report in the Washington Post, citing a Defense Intelligence Agency analysis, that Pyongyang successfully developed a miniaturized nuclear warhead that could fit onto its missiles. He said North Korea will be “met with fire and fury and, frankly, power the likes of which the world has never seen before” if Kim Jong Un’s regime continues to threaten the U.S.

The FX markets also reacted swiftly on the news. The USD declined to a 8-week low against the Yen on Friday, as the uncertainty around North Korea gave investors a good reason to bet on the hedging currency.

Gold added 0.4% to $1,265.32 per ounce, after climbing with 0.3% in Tuesday. The movement was due to the heightened tensions between the U.S. and North Korea. Oil held losses near $49 a barrel amid speculation that a forecast rise in U.S. output will offset OPEC-led efforts to trim a global glut. Futures lost in 0.8 percent in the previous two sessions and were little changed in New York on Wednesday, even as industry data showed crude inventories slumped. The Energy Information Administration marginally increased its estimates for U.S. output in 2017 and 2018, changing its forecast this year to average 9.35 million barrels a day, up from 9.33 million.
While oil is down for a third day, prices are less than $1 lower from Friday’s close as investors weigh rising global supply against output curbs from the Organization of Petroleum Exporting Countries and its allies. OPEC said Iraq, the United Arab Emirates and Kazakhstan, which have lagged in their pledged curbs, affirmed their commitment to the accord after a meetings in Abu Dhabi that ended Tuesday.

In the economic news front, RBNZ decided to keep the interest rates in New Zealand unchanged at 1.75%

Friday's CPI report disappointed traders, which led to an additional decline in the greenback.

The important economic news that will drive the markets during next week:
Monday:
01:45 New Zealand - Retail Sales
02:50 Japan - GDP
04:30 Australia - RBA Meeting Minutes
05:00 China - Industrial Production
12:00 Europe - Industrial Production

Tuesday:
09:00 Europe - German GDP
11:30 UK - CPI
15:30 USA - Retail Sales

Wednesday:
11:30 UK - Average Earnings Index + Bonuses
15:30 USA - Building Permits
17:30 USA - Crude Oil Inventories
21:00 USA - FOMC Meeting Minutes

Thursday:
01:45 New Zealand - PPI
02:50 Japan - Trade Balance
04:30 Australia - Employment Change
11:30 UK - Retail Sales
12:00 Europe - CPI
15:30 USA - Philadelphia Fed Manufacturing Index

Friday:
15:30 Canada - Core CPi

During the next trading week, the accent will fall once again on the relationship between USA and North Korea. Markets will keep a close eye on these headlines, as they will set the mood for the indices. If the geopolitical tensions remain calm, we could see strengthening in the indices, which had a really bad week.

Also, the upcoming week will provide important economic data for the USD, which is strongly over-sold due to the uncertainty around North Korea, as well as the incapability of Trump to keep his pro-business promises. It is possible for the greenback to retain some of its grounds, as the strongest setback was against the Yen and the common currency.

Jr Trader Alexander Kumanov

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