UK data and Brexit eyed, while US team heads to Beijing for more talks
It promises to be another very interesting week for investors, with the US, China and UK very much at the centre of most of the headlines sending ripples through the markets.
In the UK, we’ll be bouncing back and forth between Brexit and the economy, as we get an almost daily update on the economy. That starts with GDP data this morning, which is expected to show the economy flatlined in December but grew slightly across the whole quarter. In a week in which Germany could follow Italy into technical recession, this suddenly doesn’t seem quite so bad.
Trade talks between the two largest economies continue to be the primary focus for investors, with the narrative around the success of them appearing to change week by week. The prospects for a deal now look very slim, with the best case scenario now looking like an extension of the deadline and a commitment to no more tariffs during that period. Of course, assuming anything when Trump is involved isn’t wise and, well you know the rest.
Robert Lighthizer and Steve Mnuchin have been tasked with heading to Beijing this week to work on the differences and try and rescue a deal, with the 90 day deadline fast approaching. Traders will continue to closely monitor the progress with the dollar being well backed as talks appear to falter, much in the same way that it did during the initial escalation phase.
Gold remains above $1,300 after first test of key support
The rebound in the dollar, following a period of weakness since mid-December, has taken some of the shine off gold. Not much has changed in terms of the key levels here. We continue to see it flirting with $1,300 from above and came within a whisker of testing it last week. As long as this holds, it continues to look bullish, even if the dollar remains a major headwind.
OPEC monthly report eyed as prices remain pressured
Oil is also feeling the weight of a stronger dollar dragging on price, with both WTI and Brent coming off their highs and further delaying a very bullish technical break to the upside. Of course, there are other factors contributing to the declines we’ve seen including record US output and questions over Russia’s compliance with the deal but together all of these are weighing.
The OPEC monthly report will be one to look out for on Tuesday and should give us much better insight into how the group and its allies are complying with the output agreement. With there being so many doubts over global growth this year, it will also be interesting to see what impact this has on the cartel’s assessment of demand growth and whether that will exacerbate the oversupply issue.