A few develpoments to keep in mind from the weekend: Austria’s 17 month old government collapsed yesterday after Chancellor Kurz quite and called snap election after a video showing Heinz-Christian Strache (the leader of his junior coalition partner) negotiating with the niece of a Russian oligarch for a public contract in exchange for party donations. Elsewhere, with the AU elections out of the way, and especially with a confirmation of the previous government, the RBA will feel free to make policy adjustments now.
Reminder: Canada is away tomorrow (Monday) and there will be an early close to US trading on Friday ahead of Memorial Weekend.
Themes for the Week:
- China/US trade debate. This has been the main theme over the past couple of weeks and it will continue to influence markets. Trade talks turned sour last week, and the Yuan has weakened tremendously. A break of the 7.00 level would likely generate another round of risk-aversion.
- NAFTA 2.0: there were some positive developments regarding the US/Canada/Mexican trade agreements into the end of last week. So markets will be looking out for any further news on this theme.
- FOMC: will Chair Powell sounds as positive as he did during his press conference back on May 1st? Will the trade war or global growth issues appear? The minutes of the April 30-May 1 meeting, due on Wednesday, could show if the escalating noise figured in the Fed’s discussions.
- RBA: potentially key RBA guidance kicks in after the election. It has always been thought that the RBA has been waiting until at least after the election before firming up guidance or policy action. Minutes to the May 7th RBA meeting will be released on Monday and Governor Lowe will deliver a potentially key speech on the outlook and monetary policy on Monday night eastern time.
- European Elections (May 23-26): this was the event that UK politicians wanted to avoid, yet failure to reach a Brexit deal necessitated participation. Full results will likely not be available until Monday May 27th. However the results for the UK will likely be available late on Sunday May 26th and Nigel Farage’s Brexit Party is forecast to win the majority of UK seats. The key here is where other EU anti-establishment parties will gain enough space to create havoc in the EU Parliament.
Data in the Week Ahead:
- RBA Minutes
- UK inflation hearings
- NZD Retail Sales
- UK CPI
- Cad Retail Sales
- FOMC Minutes
- Eurozone PMIs
- EU Elections
- UK retail sales
On the Radar:
I continue to like GBP and AUD shorts against CHF, USD and CAD. I also like Silver shorts going into the week. The Euro might take a hit later in the week on PMIs, but don’t expect too much movement until after the EU elections.
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