Week Ahead: Will Trump and Xi Meeting Deliver the Goods?

After the Fed lifted investors’
optimism last week, attention will turn to Japan this week. The leaders of the
20 most powerful economies will meet this week for the annual G20 summit. The
most important things in the summit will be the meeting between Donald Trump
and his Chinese counterpart, Xi Jinping. This will be an important meeting that
will come at a time when the two biggest economies are engaged in a trade war.
The last meeting was at Argentina, where the two leaders agreed to restart the
talks on trade. Since then, talks have broken down and the two countries have
put in place tariffs. Investors are skeptical that any major outcome may come
from this meeting but they hope that at least there will be ceasefire.

Focus on Crude Oil

It might be an important week for the oil market for two reasons. First, investors will be keen on the ongoing developments on the Iran and US standoff. This comes a few days after Iran downed a US spy drone that was at the Strait of Hormuz. It also comes after Donald Trump cancelled an authorized military strike, which could have escalated to a full-blown war in the region. The US has announced a series of targeted cyberattacks on Iran and investors will be keen to see Iran’s reaction. Second, investors may be watching out for the upcoming meeting of OPEC+ members. This will be the first major meeting after the members voted to reduce supplies. On Wednesday, IEA will release the data on crude oil inventories. Last week, this data showed that the inventories declined by more than 3.1 million barrels.

Reserve Bank of New Zealand

The Reserve Bank of New Zealand
(RBNZ) will release its interest rates decision on Wednesday. This will make it
the only large central bank to release this decision. Investors expect the
central bank to leave interest rates unchanged at 1.50%. As a result, they will
watch out for the bank’s statement so that they can potentially know what it
will do in future. This comes after the Federal Reserve announced that it could
slash rates in the near future. The Reserve Bank of Australia lowered rates
this month while the ECB has a dovish outlook. The BOE has pointed that it
could raise rates soon if there is a smooth Brexit.

Next UK Leader

This week, investors will likely know who the next UK leader will be. Recent conservative votes have leaned towards Boris Johnson, who is the former mayor of London and the former foreign affairs minister. Johnson has indicated that while he favors a deal with the European Union, he is also comfortable with a no-deal scenario. Meanwhile, investors will again listen to Mark Carney, the BOE governor as he participates in the inflation hearings.

US Data

It might be an important week for
the US, as investors receive key economic data. On Thursday, the US will
release the final reading of the first quarter GDP data. Investors expect the
number to remain at 3.1%. On Thursday, the country will release the durable
goods data, which is expected to show that the sales were unchanged in May.
Other key economic numbers from the US will be the new home sales Richmond
Manufacturing index, house price index, and the CB consumer confidence data.

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