Ben Robson – The week of 27th-31st May 2019

Monday saw public holidays in the UK and the US. The fate of UK Prime Minister May is certain- the fate of US President Trump, less so.

After failing to deliver her version of BREXIT to the “country she loves,” Theresa May has quit- some say not before time- and will be replaced after the State visit of US President Trump (and family) in early June.

Quite who will replace her is uncertain. Maverick MP Boris Johnson is currently favorite, but many argue he doesn’t have the support of his colleagues to be a credible contender.

In the US, the Democrats are chipping away at US President Trump, trying to build a case for impeachment. Maybe they will get their man. But Mr. Trump carries on, seemingly impervious to threats, and shrewd enough to have a solid team defending his interests.

There will come a time when the Democrats might realize that focusing on promoting the best candidate for the 2020 elections is perhaps a better use of their time. The country has had a good look at Mr. Trump and his style of presidency. And it is often said that “All great things must come to an end!!!”

To this shortened trading week which has a big focus on the US and Canada, with several timely data announcements that will gives better clues as to the relative economic health of the neighboring countries. Amongst them are US consumer confidence, GDP releases from both countries, an inflation gauge from the US and an interest rate decision from the Bank of Canada.

At the time of writing USDCAD is a trading at 1.3444. The Canadian dollar has weakened since the October 2018 rate hike from 1.5% to 1.75%.

In the US, The Federal Reserve has paused in its hiking schedule. There are increasing calls for the Fed to cut interest rates, which in turn would allow other countries to cut in order to maintain some kind of equilibrium in currency markets. In my mind we are in a relatively fragile state of affairs with respect to World growth. Escalating trade tensions between the US and China cause concomitant ripples for peripheral benefactors of solid World trade alliances. This causes uncertainty which is apparent in US stock indices. We have seen increasingly choppy US equity markets and spikes in the VIX, Gold, EURGBP and the Yen. I think Canada will keep rates on hold on Wednesday and save the quarter point cut for a day when it may need it more.

US Consumer Confidence is a big number to watch out for. It is scheduled for release on Tuesday afternoon and forecast to read 130 (for May) vs last month’s 129.2. I think it may disappoint. If Consumer Confidence start to erode, it can have a negative impact on “growth stocks” and also luxury items.

US GDP surprised to the upside last month and Thursday’s figure should show US 1st quarter GDP maintaining a level above 3.0%. On Friday, Canadian GDP (Y/Y) for March is set to print 1.2%. US Core Personal Consumption Expenditure is forecast to print 1.6% (Y/Y for April) keeping the US “low inflation” narrative in check.

Elsewhere, Swiss 1st quarter GDP at 1.7% Y/Y surprised to the upside on Tuesday morning, ratcheting up the case to hold some Swiss Francs in your portfolio (especially if markets become more volatile) and on Friday Eurozone CPI( Y/Y for May) is expected to disappoint at 1.6%.

Good luck and good trading! Ben Robson

Ben Robson is the CEO of Spectrex Commodities and author of Currency Kings- How Billionaire Traders Made Their Fortune Trading Forex And How You can Too.

 

 

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