Week Ahead: Turkey, Trade, and Economic Data

This week, the focus among investors will remain in Turkey. On Friday, the crisis in Turkey led the global markets to have a major decline, with the Dow and the DAX having double digit losses. The crisis started after the US administration announced new sanctions on two Turkish ministers. As the crisis unfolded, Donald Trump announced fresh tariffs on the country, leading to more problems for the Turkish Lira, which fell by more than 15% on Friday. Traders will watch closely the unfolding issues and react to any headline that emerges.
Traders will also focus on the issue of trade. In recent months, headlines on trade have moved markets as traders expect for retaliations between the US and China. Already, the two countries have placed tariffs on each other worth more than $50 billion and the US is in line to add more tariffs worth $200 billion. Last week however, traders became complacent as the trade talk failed to have the impact it had a few months ago. As shown below, the VIX has in recent weeks moved to the lowest levels this year.

Apart from Turkey and trade, traders will this week focus on economic data. Today, OPEC will release its monthly report. This is a report that shows the major developments in the crude oil market. Traders look at it closely because it gives them an indication of the ongoing in the oil market. In today’s report, the issue of Iran sanctions will be watched closely. This is because some sanctions went into effect last week with major ones expected in a few weeks’ time. Crude oil prices are high today as traders wait for the report and wait for the talk on sanctions.

Tomorrow, the focus will turn to China and the EU. China will release the industrial production data. This data will give traders an indication of the impact of the ongoing trade war with the United States. On the surface, the production should decline, which will be a win to Trump. However, the opposite could happen. In recent weeks, Chinese data on exports shows that the country is still doing well. Traders expect the data to show that industrial production rose by 6.3% in July, which will be better than the 6.0% in June. The unemployment rate is expected to remain at 4.8% while fixed asset investments is expected to remain unchanged at 6.0%.
Tomorrow, they will also focus on the Germany GDP growth, UK jobs numbers, and the EU GDP growth for the second quarter. In the second quarter, traders expect the Germany’s GDP to have grown by 2.5% after the slow growth in the first quarter. The EU economy is expected to remain at 2.1%, which is lower than the 4.1% growth rate from the US.

On Wednesday, we will get the UK CPI numbers which will give us an indication of what the BOE will do in the September meeting. Traders expect the CPI to be at 2.5%, which will be higher than the 2.4% in June.

Other data expected this week will be the US retail sales, US building permits, the Australian employment numbers, and the EU CPI numbers.

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