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EUR/CHF correction from 1.0986 short term top extended last week and dipped to 1.0865. But it few support from 1.0872 support and quickly recovered. Overall outlook is unchanged and initial bias is neutral this week for consolidation. Downside should be contained by 1.0791/0872 support zone to bring rise resumption. As noted before, the consolidative pattern from 1.1198 should be completed. Firm break of 1.0999 resistance will pave the way for a retest on 1.1198 high.

In the bigger picture, the price actions from 1.1198 are seen as a corrective move. Current strong rebound is raising the chance that it's completed after defending 38.2% retracement of 0.9771 to 1.1198 at 1.0653. Decisive break of 1.0999 resistance will target a test on 1.1198 high. For now, this will be the preferred case as long as 1.0791 support holds.

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Monday, May 22, 2017

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Tuesday, May 23, 2017

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Wednesday, May 24, 2017

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Thursday, May 25, 2017

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Friday, May 26, 2017

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U.S. Review

Economic Data Offer Mixed Signals

• Industrial production, a key barometer for the manufacturing sector, jumped 1.o percent in April, surpassing expectations for a more modest increase. The positive print for industrial production was accompanied by mixed results in the survey data, however, as the New York Empire State factory index slumped into contraction territory in May, while the Philly Fed index soared higher.
• Housing starts missed in April, declining 2.6 percent to a 1.172 million-unit annualized rate. The pullback was entirely driven by weakness in multifamily, which dwarfed a slight pickup in single-family starts. We continue to expect residential construction to be driven by growth in single-family housing.

Economic Data Offer Mixed Signals

Industrial production was arguably the most important data point of the week. This key barometer for the manufacturing sector jumped 1.o percent in April, surpassing expectations for a more modest increase. The series is now 2.2 percent above its year-ago level, which marks the strongest pace since 2014. The report details showed broad-based strength, as production rose across most household and business goods. Notably, manufacturing output climbed 1.0 percent on the month, and with that increase the overall level of manufacturing production is at a fresh cycle high (top chart).

The positive print for industrial production was accompanied by mixed results in the survey data. Post-election euphoria has largely receded from the sky-high levels registered earlier this year, with the ISM manufacturing index edging lower in recent months. The New York and Philadelphia Fed surveys, released this week, offered a first look at May manufacturing sentiment. The New York Empire State index slumped into contraction territory in May, while the Philly Fed index soared higher (middle chart). Despite the month-to-month fluctuations, in our view, the hard data are improving incrementally, and we continue to expect a gradual firming in the factory sector through our forecast horizon. For further reading on our business investment outlook, please see, Finally Making a Big Production Out of It?

Housing starts missed in April, declining 2.6 percent to a 1.172 million-unit annualized rate, disappointing consensus expectations for a modest gain. The pullback was entirely driven by continued weakness in multifamily, which dwarfed a slight pickup in single-family starts. Multifamily starts fell 9.2 percent in April, marking the sector's fourth consecutive decline (bottom chart). Growth in multifamily construction is expected to continue to slow amid lessening demand and the onslaught of supply that has inundated the market in recent years.

The shift toward single-family homes is also supported by recent household formation data. The number of owner-occupied homes rose faster than renter-occupied housing in Q1 for the first time since 2006. With residential construction increasingly expected to be supported by growth in single-family housing, we continue to monitor the sector closely. Single-family starts inched up 0.4 percent in April, driven by gains in the Midwest and West. For the first four months of the year, single-family starts are running a healthy 7.0 percent ahead of their year-ago level. Leading indicators for single-family construction are mixed, however. Single-family permits, an indicator for future construction activity, have edged down over the past two months and are now trending below the pace of starts. In contrast, the May reading for the NAHB/Wells Fargo Housing Market Index, which measures homebuilder sentiment in the single-family market, rose to its second-highest level of the current cycle. Given housing starts weaker start to Q2 and the reported decline in housing permits, we expect residential investment to provide a smaller contribution to overall GDP in Q2 relative to the gains posted in the prior two quarters.

U.S. Outlook

New Home Sales • Tuesday

New home sales surprised to the upside by rising 5.8 percent in March to a 621K-unit pace—its second highest point of the current cycle. Revisions to prior months' data added to the rosy picture of the new home buying season early in 2017. We could have had a bit of a payback from warm weather in January and February pulling forward sales from March, but that did not appear to be the case, which speaks to the strong underlying fundamentals currently supporting the new home market. The labor market is the number one support as job growth has pushed the unemployment rate to cycle-lows, putting homeownership in closer reach of more people.

Homebuilders have noted the improvement in housing demand in the NAHB/Wells Fargo Housing Market Index, which has hovered near its cycle-high in recent months. We expect new home sales increased further in April to a 622,000-unit pace, which would be a fresh cycle-high.

Previous:621,000 Wells Fargo: 622,000 Consensus:625,000

Durable Goods Orders • Friday

Growth in durable goods orders disappointed consensus in March, rising 0.9 percent as orders of motor vehicles slipped while aircraft orders surged. Boeing received 15 orders in April compared to 147 in March, increasing the likelihood that total durable goods orders slipped on a month-over-month comparison in April. Orders of nondefense capital goods excluding aircraft, our bellwether of planned business investment, appeared to be softening since the end of last year on weaker orders of computers and electronics.

The new orders index in April's ISM survey also slipped from recent highs, suggesting either some moderation in core goods orders may in the offing for April, or that "soft" data are starting to come back in line following the post-election surge. We continue to expect hard data from the factory sector to show a gradually improving trend behind month-to-month volatility.

Previous: 0.9% Wells Fargo: -1.8% Consensus: -1.4% (Month-over-Month)

Consumer Sentiment • Friday

The University of Michigan's Consumer Sentiment index remained elevated in April and into the first few weeks of May, with the first look coming in at 97.7 for May. In recent months, it appears that sentiment is bolstered by their positive assessment of the present situation; although the expectations index gave back some of the post-election surge. Consumers continue to note their current financial outlook has improved and are encouraged about future income gains. Notably, very few consumers complained about inflation, which helped boost expectations about future income.

The first look at May's results noted most interviews were conducted before the firing of the FBI Director and the tumult that followed—any impact of which would be apparent in the final print. The Univ. of Michigan Consumer Sentiment report has examined the partisan divide and consumers' economic outlook, particularly the issue of tax reform on future income.

Previous: 97.0 Consensus: 97.5

Global Review

Longest Growth Stretch in 11 Years in Japan

• Five straight quarters of growth. It may not sound like much, but as the chart at right shows, uninterrupted growth in Japan has been difficult to achieve. We break down the details in this week's Global Review on page 4.
• Other global economic highlights featured this week include a look at inflation dynamics in the United Kingdom and Canada as well as what is driving the remarkably strong growth in Australian jobs.

Japanese GDP

The fifth straight quarterly increase in real GDP growth in Japan came from broadly based support. The largest overall positive contributor came from consumer spending, which added 0.8 percentage points to the overall growth rate. Retail sales in Japan had strung together three straight monthly increases which has lifted the yearly growth rate for store sales to the fastest pace since April 2015 (the year-over-year surge then had to do with the 2014 implementation of a consumption tax hike which suppressed spending in April 2014). Bottom line consumers in Japan are spending again at a pace not seen in years.

Consumers are not the only ones feeling a bit more confident. The Tankan survey of large manufacturers rose in the first quarter to its fastest pace of expansion since 2015 and business spending also lifted GDP growth in Q1. Admittedly, the 1.0 percent annualized pace of growth for business outlays is hardly overwhelming but it marks the third consecutive quarterly increase—the longest winning streak for cap-ex since 2014.

Despite this better-than-expect GDP report, inflation moved further away from the central bank's target in March suggesting a continued dovish policy bias from the Bank of Japan.

Inflation in the United Kingdom

Speaking of inflation, we learned this week that CPI inflation continued to firm in the United Kingdom. In fact the year-overyear rate of CPI inflation of 2.7 percent is well-above the Bank of England's (BoE) 2.0 percent target and represents the fastest consumer prices have climbed since 2013. To some extent the higher prices are a pass-through effect of weakened sterling. If the BoE takes that view, which we expect it will, the current above target inflation will likely be viewed as a transitory and will not compel the Monetary Policy Committee to hike rates in response.

Australian Payrolls

The Australian economy added 37,400 jobs in April. This follows the largest monthly jobs surge in two years in the prior month. Most analysts evidently thought the solid job growth in March might be tough to follow in April judging by the more modest job increase of 5,000 that was expected by the consensus.

Taken together, the two-month period culminated in the secondlargest back-to-back job pickup in Australia in the past 13 years.

CPI Inflation in Canada

After an unexpected slowing in Canadian CPI in March, consumer prices picked up in April, but not as much as expected. The monthly increase of 0.4 percent kept the year-over-year rate of CPI inflation unchanged at 1.6 percent. We do not expect the latest inflation figure to substantively influence Bank of Canada (BoC) policy in the near term. In fact, the inflation story is more or less living up to the Bank's expectations. Following its April 12 meeting, the BoC said that "CPI inflation is expected to dip in the months ahead, as the temporary factors unwind, and then return to 2 per cent later in the projection horizon as the output gap closes."

Global Outlook

Mexico Q1 GDP • Monday

Mexico is slated to release the final print for Q1 GDP on Monday. While the flash release told a relatively good story regarding the performance of the Mexican economy during the first quarter of the year, we believe that Monday's release, which includes the demand side GDP, will be enlightening, especially regarding gross fixed investment, exports of goods and services, and personal consumption expenditures. Still, the data will be very noisy just because the Easter holiday occurred during the first quarter in 2016, while it occurred during the second quarter this year. This makes the comparisons tricky even if the INEGI, the Mexican statistical institute, tries to correct for seasonality as well as for calendar days in their data release.

Having said this, the Mexican economy surprised on the upside in the first quarter and having more details will help markets make better decisions.

Previous: 2.7% (Year-over-Year) Wells Fargo: 2.7% Consensus: 2.7%

German Ifo • Tuesday

The same day we get the German manufacturing PMI, we will be able to take a look at German business confidence numbers for May with the release of the Ifo business climate, expectations and current assessment indices. The business climate index has been improving since early this year, while the expectations index slowed down a bit in April after increasing during the first quarter of the year. Meanwhile, the current assessment index has been improving since August of last year. Consensus is expecting an improvement in both the business climate and expectations numbers, while a lower reading for the current assessment component of the index.

We will also get the GfK consumer confidence index for the month of June. This index has been hovering at 10 for more than a year but it hit a high of 10.2 in May, and consensus is expecting the index to remain at that level in June.

Previous: 112.9 Consensus: 113.1

Eurozone Manufacturing PMI • Tuesday

The manufacturing industry across the world has been recovering from a very weak performance during the past several years. On Tuesday, markets will be able to gauge if the recent improvement in manufacturing remains in place with the release of the Eurozone and German manufacturing PMIs.

The Eurozone's manufacturing PMI was at a high of 56.7 in April with consensus expecting that number to come down a bit, to 56.5 in May. The Eurozone manufacturing PMI has been slowly improving since August of last year. Meanwhile, consensus has the German May's manufacturing PMI at 58, slightly below the 58.2 reading in April. If consensus is correct, this will be the second consecutive weakening in this index this year.

Previous: 56.7 (Manufacturing) Consensus: 56.5

Point of View

Interest Rate Watch

Late Cycle Policy and Credit

Economic policy actions and their effectiveness must be judged by the state of the economic and credit cycle. Right now, the state of these cycles indicates to us the projections of monetary policy actions are too strong relative to the strength of the cycles.

Profit Challenge: Past the Peak

As illustrated in the top graph, profit margins for nonfinancial corporate companies are beyond the mid-cycle peak. Consistent with traditional economic cycle patterns, the employment cost index is expected to rise significantly in 2017 compared to both 2015 and 2016. With tighter profit margins, many firms did increase earnings in the fourth quarter, but primarily by cutting costs and not raising revenues.

Now enters the Fed with the intention to raise the funds rate at least twice more this year and three or more moves in 2018. Moreover, the Fed is also considering shrinking its balance sheet at the end of 2017 and through 2018 and thereby adding upward pressure to the middle and longer ends of the yield curve.

Weaker Credit Performance on C&I Loans

Noncurrent loan rates have risen in Q4 of 2016 over the same period a year ago as illustrated in the middle graph. Higher rates are across all industries and not just a result of the weakness in the energy sector over the past two years. Further interest rate increases are likely to increase pressure on business borrowing as the latest Fed Senior Loan Officer Opinion Survey already indicates that large and small businesses' demand for loans has been moderating since the start of 2016. Domestic and foreign banks reported weaker loan demand on net over the first quarter.

Tighter Auto Market

As illustrated in the bottom graph, the auto market is showing strains from both tighter credit standards and weaker demand. Add on declines in both new and auto prices, pressures exist to limit the Fed's ability to raise rates ahead.

Credit Market Insights

Loan Demand Cools in Q1

The Federal Reserve's April 2017 Senior Loan Officer Opinion Survey (SLOOS), pointed to a general slowdown in loan demand for businesses and consumers.

On the commercial and industrial front, domestic and foreign banks reported weak loan demand on net over the first quarter. Notably, the slowdown in C&I lending does not appear to be due to stricter lending standards, as banks reported no significant net tightening. Business investment was particularly strong in Q1, suggesting firms turned to other sources of funding to fuel their capital spending.

The Fed survey also showed a cooling in consumer loan demand, a finding consistent with the weak pace of consumer spending in Q1. Lenders reported reduced demand for most consumer loan categories over the quarter, with particular softness in demand for credit card and auto loans. Auto lending standards tightened for the fourth consecutive quarter, reflecting the continued slowdown in the auto sector.

Finally, a significant net share of banks reported further tightening in most CRE loans. The uncertain outlook for CRE property prices, vacancy rates and reduced risk tolerances all contributed to the more cautious approach by banks.

On balance, faster economic growth should help spur growth in loan demand, but the cautious approach by banks and businesses suggest economic growth is more likely to be moderate than robust in the quarters ahead.

Topic of the Week

Soft Data Softening

The current economic expansion, which began in the summer of 2009, is approaching its eight-year anniversary. Yet, industrial production (IP) is not currently above its pre-recession peak. This is somewhat perplexing as IP is a primary factor in business cycle dating. Broadly, IP surged due to increased activity in the energy sector, and then tapered in growth as commodity prices fell. At this mature point in the business cycle, a rebound is unlikely in our view.

Purchasing manager surveys and measures of consumer and business confidence have hit multi-year highs in 2017. However, the hard data do not necessarily support this heightened optimism. While the hard data, such as IP and factory orders, do support steady growth, April's ISM manufacturing print of 54.8 marked the third consecutive monthly decline and fell short of consensus expectations. After months of disparity between lackluster hard data and multi-year highs in soft data, there is a convergence underway. In our view, the weaker readings of soft data should not cause fear, as both the hard and soft data still supports growth at a modest pace.

Though fleeting, there are occasional glimmers of hope that the hard data could be moving higher. Revisions to hard data in recent months, such as orders and shipments, supports a solid 9.4 percent annualized pace of business fixed investment spending growth. Moreover, while IP has yet to reach pre-recession highs, April's reading of IP showed the largest monthly increase in three years of 1.0 percent, while factory sector production climbed to its highest level of the current expansion. Should a substantive corporate tax cut come to fruition, we would expect to see strengthening in both hard and soft production data points—however, the inability to pass any major legislation in the first 100 days causes skepticism of the size and scope of any legislation aimed at boosting business investment.

On trend, the hard data are firming incrementally and the sugar high is wearing off for business sentiment. What remains is a forecast that is anything but flashy: slow steady growth in the manufacturing sector and gradual firming for industrial production.

HIGHLIGHTS OF THE WEEK

United States

• Investors perceived this week's political developments in the U.S. as likely to delay the implementation of pro-growth policies. As a result, they risk assets sold off midweek in favor of gold and treasuries. Risk appetite appeared to make a comeback toward the end of the week along with some reversal in earlier trends, particularly among American equities.
• Underneath the political noise, the economy continued to emit mostly positive signals which included a rise in industrial production and capacity utilization, and falling jobless claims. Homebuilding appeared to be a soft spot at first glance, but the details reveal a better story.
• The Fed will keep an eye out for financial market stress, but is likely to continue focusing on signals from the economy. So far, the outlook for the second quarter remains solid, with growth currently tracking north of 3% annualized. As such, odds are still in favor of a June hike.

Canada

• The economic data out this week lifted our tracking for first quarter real GDP growth to 4% annualized. Real retail spending was up 1.2% in March, driven by spending on autos, while manufacturing shipments rose 0.2%. Both indicators were up 1.9% for the first quarter.
• While the Canadian economy is on track for its best three-quarter streak in almost three years, soft inflation and uncertainty over the near-term housing outlook are likely to keep the Bank of Canada on hold until early to mid next year.

UNITED STATES - CUTTING THROUGH POLITICAL NOISE

To say that political events dominated headlines this week may be somewhat of an understatement. The U.S. administration found itself in hot water once again over allegations of misconduct. Mounting political pressure reached a boiling point with the appointment of a special prosecutor to probe Trump-Russia ties. Financial markets perceived these developments as likely to delay the implementation of pro-growth policies such as tax reform and infrastructure spending, and quickly sold off risk assets. By midweek global stock markets followed the rapid decline in American indices (Chart 1). The trade-weighted U.S. dollar gave up all of its gains recorded since the U.S. election. In commodities, oil retained its upward trend and is poised to end the week above $50/bbl, buoyed by news that Russia and Saudi Arabia may extend their production cuts along with a report from EIA showing falling U.S. inventory levels.

Political turmoil was not limited to the U.S.. The president of Brazil was accused of bribery, sending both the national stock market and currency plunging 9% and 7% respectively the day after news broke. Under such global disorder investors poured their money in safe heaven assets, with gold gaining around $25/oz on the week and sending U.S. Treasury yields lower. However, risk appetite returned by the end of the week with some reversal in earlier trends, particularly among American equities. The heightened volatility was reflected in the VIX index, which spiked to a month high at midweek but subsided quickly thereafter.

Underneath the political noise, the economy continued to emit mostly positive signals. Industrial production rose 1.0% in April - the biggest monthly gain in more than three years. Capacity utilization also rose to 76.7% - the best level since late 2015, boding well for future business investment. Weekly jobless claims fell unexpectedly, with levels now resting near decade-lows seen as further signs of a tightening labor market. Lastly, homebuilding appeared to be a soft spot at first glance, but the details revealed a better story. The headline was pulled down by the volatile multifamily segment, while the single family segment retained its upward trend (Chart 2). The latter is a much larger and better indicator of economic conditions, and its advance is reflective of continued progress in the labor market. We expect this trend to continue as rising wages support household formation and demand for new homes.

Looking at the big picture there are two main points worth highlighting. First, investors will continue to pay close attention to political events because the implementation of pro-growth policies remains the cornerstone needed to validate today's rich stock valuations. Intuitively, this suggests potential for further volatility in the weeks and months ahead. Second, the Fed too will keep an eye on such developments, not because it has placed much emphasis on the pro-growth policies to begin with, but rather because a market downturn could weigh on the real economy. Unless it sees concrete signs of this occurring, it is likely to continue focusing on underlying signals from the economy, particularly those related to inflation where recent readings have disappointed. So far, the outlook for the second quarter remains solid, with growth currently tracking north of 3% annualized. As a result, market participants will continue to price in a June Fed hike, with odds from CME Group currently pegged at 74%.

CANADA - A WINNING STREAK

Financial markets in Canada this week took their cue from rising political uncertainty in the United States. Interest rates, the loonie and the TSX all dipped. In contrast, the economic news was overwhelmingly positive. While still awaiting the final tally, we now have data on the vast majority of Canadian economic indicators for the first quarter of the year. Taking this into account, TD Economics estimates that Canadian real GDP grew by a stunning 4% annualized rate over the first three months of the year, following a solid end to 2016 and marking the best three quarter streak since 2013. While the Bank of Canada will remain on hold a little bit longer, the case for a rate hike as early as spring of next year is certainly mounting.

The Bank of Canada does not target economic growth directly, but rather inflation, which exhibits a lagged response to growth. This week's consumer price report should give pause to anyone expecting an immediate central bank response. All measures of inflation watched most closely by the Bank of Canada are well below its 2% target and have been trending lower since January of this year, suggesting that the economy may have more slack than estimated. Still, with real GDP growth to hold at a healthy 2% to 2.5% pace following Q1's tunrout, slack is being absorbed quickly. As a result, inflation is likely to move higher, reaching the bank's target of 2% by late next year.

Moreover, while this week's manufacturing report showed that the export-heavy sector is picking up momentum, economic growth is still largely being driven by domestic, interest-rate-sensitive sectors. The retail spending report this week pointed to a 2% gain in real spending in Q1, mostly due to sharp gains in auto sales. Meanwhile, record housing activity during the quarter supported construction activity and services related to home buying. Both personal consumption expenditure and residential investment are expected to account for all of the economic growth in the first quarter.

Beyond an anticipated temporary break in activity, the Canadian housing market is likely to remain a key driver of economic growth throughout our forecast horizon. In the near-term, TD economics believes that housing market activity is likely to back off due to a lagged response to changes to mortgage regulation implemented in October of last year, along with the introduction of a nonresident buyer's tax and the expansion of rent control in Ontario. Indeed, market activity in Ontario reversed quickly in April, with a sharp 7% reduction in sales and a record spike in listings across the Greater Toronto Area. Following BC's lead, we do think that markets in Ontario will take a pause over the next few months. However, markets in BC have also shown that the impact of such measures can be temporary and have very little impact on price growth. Housing activity is starting to bounce back in the province and home price growth is still holding at a hefty double-digit pace.

The bottom line is that while the economy is picking up steam, the combination of low inflation and more restrictive housing policy measures will bide the Bank of Canada some time to raise rates at least until the spring of next year.

James Comey to Testify in Russia probe

The US dollar is lower across the board and has given all the 2017 gains to end up near pre-elections levels. The turmoil in Washington continues to be the main driving factor for markets with the potential testimony of former FBI Director James Comey on Wednesday the biggest event risk for the greenback. The U.S. Federal Reserve has sent mixed signals via non-voting members on the path of rate hikes but the market still holds a 78.5 probability of higher rates when the US central bank meets in June.

The Bank of Canada (BoC) will release its rate statement on Wednesday, May 24 at 10:00 am EDT. The central bank is heavily expected to hold rates unchanged despite growing pressure from a heating up house market in major cities. The CAD has been caught between a falling dollar and the more aggressive tone of the US regarding NAFTA renegotiation. The US has set in motion the process needed to renegotiate the deal in late August. The Fed will release the minutes from the April Federal Open Market Committee (FOMC) meeting on Wednesday at 2:00 pm. The Fed hosted no press conference in April, leaving the market to wait for the minutes to gather insights into the views of the central bank on the path of rates for the reminder of the year.

Organization of the Petroleum Exporting Countries (OPEC) members met on Wednesday, Thursday and Friday, as part of a panel to discuss the different scenarios ahead of the Thursday, May 25 meeting with non-OPEC members. Sources said that there is no agreement on the final scenario with additional cuts an option as US shale production continues to ramp up.

The EUR/USD gained 2.466 percent in the last five days. The single currency is trading at 1.1190 after the USD had a dismal week as more information around US President Donald Trump's communications were shared after the dismissal of FBI Director James Comey. There has been limited economic data in Europe and the US with the currency pair trading on investor's risk aversion as political risk focus shifted from Europe to the US.

The U.S. Federal Reserve was active in the markets via the comments of Cleveland Federal Reserve President Loretta Master who was hawkish calling for more rate hikes and warning about waiting too long to hike. On the other side was James Bullard President of the St Louis Fed that called the current path overly aggressive and that the market hasn't quite bought in to the central bank messaging. The minutes from the FOMC in April will shed more light into what are the different viewpoints inside the rate setting board ahead of the June 13/14 two day meeting that is anticipated will end with higher rates, but current political turmoil and underperforming economic data has put the rate policy decision into question.

The USD/CAD lost 0.267 percent in the last 24 hours. The pair is trading at 1.3560. The USD has retreated versus the loonie by 1.077 on a weekly basis as political drama has engulfed the Trump administration and President's Trump handling of information with Russia. The price of oil is rising after a 1.8 million barrel drawdown in weekly US crude inventories and the continued press releases by OPEC members supporting the extension of the production cut agreement.

The financial troubles at alternative lender Home Capital Group was responsible for Moody's downgrading the six Canadian banks as their risk has grown. Canadian household debt is reaching record levels as historic low rates have fuelled an appetite for credit that has turned the real estate market into a bubble. There has been multiple warnings but its almost a running joke as home owners dismiss the statements from the OECD, World Bank, ratings agencies, the government and the central bank as the boy who cries wolf. The reality is that without higher rates the wolf will certainly not come, but rates will be higher as macro conditions could force the BoC into a raising rates and then it will find Canadian households even deeper in debt.

Oil prices gained 2.81 percent on Friday. The price of West Texas Intermediate is trading at $50.19 closing a week where crude gained 5.4 percent after the Saudi Arabia and Russia press release on the OPEC cut extension and the drawdown in weekly oil inventories in the US. The market will be watching next week's inventories released on Wednesday at 10:30 am and the OPEC meeting on May 25 where more details about the extension will be announced. The oil market has been caught between the OPEC's efforts to reduce the glut of oil in the market, but as prices have risen so has the levels of US shale production.

Gold has gained 1.741 in the last five days. The yellow metal is trading at $1,251.23 after risk aversion has driven investors to seek a safe haven. The gold rally lost momentum on Friday but is on target to book one of the best weeks for the metal. The uncertainty around the US President and Russian contacts is a developing story that has driven VIX higher and boosted gold as a result. Next week will be an important one for the commodity and the USD as former FBI director could appear before congress to answer questions regarding what Trump did and didn't tell him about the FBI's investigations into his campaign connections to Russia.

Market events to watch this week:

Tuesday, May 23

• 4:00 am EUR German Ifo Business Climate
• 5:00 am GBP Inflation Report Hearings

Wednesday, May 24

• 8:45am EUR ECB President Draghi Speaks
• 10:00 am CAD BOC Rate Statement
• 10:00 am CAD Overnight Rate
• 10:30 am USD Crude Oil Inventories
• 2:00 pm USD FOMC Meeting Minutes
• 10:00pm NZD Annual Budget Release

Thursday, May 25

• 4:30 am GBP Second Estimate GDP q/q
• All Day ALL OPEC Meetings
• 8:30 am USD Unemployment Claims

Friday, May 26

• 8:30 am USD Core Durable Goods Orders m/m
• 8:30 am USD Prelim GDP q/q

*All times EDT