Trade wars will yet again be the topic of conversation for many as we move into the new week, with the President finding it hard to accept any criticism when his tone with the US’ main trading partners, and with North Korea has bought them all to the table ready to negotiate deals. Deals that will have to be more beneficial to the US, if not they could face the uncertainty of more Trump led roadblocks.
Deals are already in progress with both Canada and Mexico, after their exemptions from the steel and aluminium tariffs, and now this is also the case for Australia, after Trump had talks with PM Turnball over the weekend, with the two leaders supposedly working on security agreements to avoid the imposing of the same tariffs. Talks will continue as the week goes on with a number of other countries, with the EU the next to push for an exemption. This is likely to be a huge topic of conversation when EU finance ministers meet on Tuesday.
As the week rolls on, apart from finding out just how deep the fear runs over Trump’s tariff plans at the EU finance ministers meeting on Tuesday, there is likely to be a focus later in the week on US macro data as Tuesday has the CPI readings released. Ahead of next week Fed rate decision, inflation will of course be closely watched, and remains a key battle ground and sticking point on a decision to hike rates either three or four times in 2018. Expectations remain well above 95% for a rate hike at the meeting next week, but a reading tomorrow away from expectation will cause some US dollar, and US bond yield movement as the market yet again shifts it’s sentiment.
Last week’s US jobs report showed a bumper reading on the Non-Farm Payroll number with a huge 330K new jobs created. However, we saw a subdued average hourly earnings number as it dropped to just 0.1% MoM. With inflation forecasts expecting the CPI reading to be at the 2.5% target by the end of the year, if wage growth remains stagnant it will yet again bring the cost of living question back to the US, something that could well slow the Fed down on its policy tightening plans.
The calendar looks a little quite for the start of the week, with very little due for release this afternoon. This could leave traders looking back at last week’s jobs data for some early moves. It’s a bit of mixed picture on the major currency pairs this morning, with the dollar moderately lower across the board. US sand European stock futures are all showing green numbers so far with European indices up moderately, on what is a rather subdued start to the trading week.