Source: Forex News
Yesterday, US stocks rose
sharply after Fed chair announced that the Fed was likely to lower rates if the
trade war escalates. Analysts believe that the closest the Fed can lower rates
is in its September meeting. In response to the US gains, Asian stocks rose as
well. Today, investors will focus on the following.
First, they will continue
to focus on the delicate issue of trade between United States, Mexico, and
China. On Mexico, the tariffs announced by Trump are set to take effect on June
10. To prevent these tariffs, Mexican officials are already in Washington,
meeting with key officials like Mike Pompeo. However, with Trump in Europe,
these talks will likely yield no results. As traders wait for a way forward,
the Mexican peso remains being weaker than the US dollar as shown below.
Second, investors will
focus on crude oil. Since April, the price of crude oil has been teetering on
the edge of a bear market, after falling by almost 20%. The declines are
associated with the increased US inventories and the likelihood of a low demand
as the trade war escalates. Yesterday, a report by the American Petroleum
Institute (API) showed that inventories rose by more than 3.5 million barrels
in the past one week. This was higher than the median estimate of 2 million
barrels decline. Today, investors will receive the inventory data from the EIA.
The chart below shows the recent trend of the Brent and WTI prices.
Third, investors will
receive the jobs data from ADP. ADP is a public company that offers staffing
solutions, which gives it a unique perspective of the labour market. The data
is expected to show that the economy added more than 180K jobs in May. This
will be lower than the 275K jobs created in April. Still, it will be a good
number. This data will come a day after the Fed chair talked about rate cuts.
However, investors don’t follow this number a lot because it tends to differ
from the official government data. The chart below shows the performance of the
dollar index. In addition, investors will receive the non-manufacturing PMI
data from ISM.
In Europe, investors will
receive the German composite and services PMI. They expect this data to remain
unchanged. In the EU, the retail sales are expcted to fall to 1.5% from the
previous 1.9%. The PPI is expected to rise to 3.2% from the previous 2.9%. In
the United Kingdom, the services PMI is expected to rise slightly to 50.6 from
the previous 50.4. This data will come as the ECB starts its monetary policy
meeting. It is expected to leave rates unchanged tomorrow. The chart below
shows the performance of EUR/GBP pair.