Weekly Briefing: Spotlight to be on Trade, Fed, BOJ, BOE, and Middle East Crisis

This week, investors will continue to focus on the ongoing trade skirmish between United States and China. This is ahead of the G20 meeting, which will take place in Japan. Donald Trump has expressed hopes of meeting with China’s Xi to try and resolve the trade issue. On the other hand, China has not confirmed whether the meeting between the two leaders will happen. China believes that it has a bigger leverage compared to the United States because of the size of its market. Trump on the other hand believes he has more leverage because the US imports more goods from China. This week, there will be public hearings on the proposed $300 billion tariffs on more Chinese goods. In submissions by companies, most of them argue that it will be impossible for the US to produce those goods.

The Federal Reserve will be on focus as the policymakers make the interest rate decision. This decision will be released on Wednesday this week and investors expect the bank to leave rates unchanged. In the recent statements, the bank’s officials have indicated that they are more inclined to slashing interest rates this year. This is after the four rate hikes made in 2018. The main reason for the cut, which will likely come in September is that the economy has weakened slightly as the trade war continues. In May, the economy added just 75k jobs, which was lower than expected 180K. The inflation numbers released last week showed that the consumer prices have softened, even with the Trump tariffs.

The Bank of Japan (BOJ) will release the interest rates decision on Thursday. The bank is expected to leave rates unchanged at the current -0.10%. The rate has been at these levels for the past few years, as the policymakers have focused on the low rate of inflation. While the country’s unemployment rate is at a historic low of 2.4%, the inflation rate has been subdued. There are a few reasons for this. First, the country has an old population and the birth rate remains low. Historically, the older generation does not buy a lot compared with the young. Second, the country’s labor force mobility is low, which means that employees don’t move from one company to another.

The Bank of England (BOE) will also release the interest rates decision on Thursday. The bank is expected to leave rates unchanged at 0.75%. The country is currently going through a transition as the conservative party selects the next leader. Boris Johnson, who has been supportive of leaving without a deal has an upper hand in the negotiations. This means that the bank will likely continue sounding dovish.

Crude oil will also be in focus as the world continues to watch out on the progress of the two tanker attacks that happened last week. The United States has already blamed Iran for the attacks, allegations that the country has rejected. This confrontation could lead to higher oil prices ahead of the upcoming OPEC meeting.

Other main data that will be released this week are RBA minutes, EU CPI, US building permits, UK CPI, Canada CPI, New Zealand GDP, UK retail sales, and German CPI data.

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