This week, markets, in addition to the situation with the US – China trade war, will focus on the publication of US GDP data for the first quarter, the values of the business activity index in the manufacturing sector in China and, of course, inflation indicators from United States.
According to the presented forecasts, it is assumed that the US economy in the first quarter of this year will reduce the growth rate to 3.1% from 3.2% a year earlier. In principle, if the values turn out to be exactly that – it is unlikely to have a negative impact on the local stock market, since investors logically believe that a slowdown in economic growth will force the US government to think about the beginning of lower interest rates, and if the numbers turn out to be better than expected, it will also positive and will stimulate market interest in the shares of US companies.
However, in this situation, the negative for global markets may be the publication of the values of the index of business activity in the manufacturing sector in China, which suggest a decrease to 49.9 points from 50.1 points. If the forecast is confirmed – this may cause a new wave of sales in the markets.
Another important data coming out this week will have to have a direct impact on the dynamics of the US dollar. These are the values of the basic index of consumer spending, or personal consumption expenditure (PCE), as well as figures on income and expenditure of Americans for the month of April. It is assumed that the data will show a positive trend in monthly terms. If they really show it, we can expect a local growth of the US dollar, as the published values of the indicators may strengthen the expectation that the US government will continue to wait and not lower interest rates in the near future, and this is the main factor influencing the dynamics exchange rate of the American currency.
Summing up, we note that after the release of possibly strong US GDP data, the dollar may receive support, as well as after the publication of positive values of the basic index of personal consumption expenditure (PCE) and figures for income and expenditure. But if they disappoint, then the dollar may be under local pressure.
Forecast of the day:
The EUR / USD pair is trading below 1.1185 in the wake of expectations, perhaps new stimulus measures from the ECB, as well as the publication of important economic data from China and the US, which will be released this week. If the pair consolidates below 1.1185, it may continue to fall to 1.1125.
The pair GBP / USD on the wave of the government crisis in Britain remains under pressure. It has significant potential to fall first to 1.2620, and then to 1.2575.