After the acrimonious culmination of the G7 meeting at the weekend, financial markets are already looking forward to a hectic few days ahead. A crucial geopolitical summit between the US and North Korea, in addition to crucial central bank decisions from the FOMC and ECB. We consider the outlook on forex, equities and commodities markets.
Volatility will rise this week with a raft of huge events and data due. Once the fallout from G7 is factored in, traders will face up to a far more seismic geopolitical on Tuesday. Given how volatile and belligerent both Presidents Trump and Kim are, how the US/North Korean summit will pan out is anybody’s guess. However, there is clearly a desire from Trump to have something tangibly positive on foreign policy which increases potential for an amicable meeting. The sticking point is both parties’ definitions of “denuclearisation”, but Kim Jong Un will remember the fate of Colonel Gaddafi, so is unlikely to cede to terms from the US. It could therefore easily be a fudge that kicks the can down the road, but a lack of certainty could drive volatility from any result. Less globally significant, but crucial for the UK, is Tuesday’s Parliamentary debate on Brexit to discuss the UK’s EU Withdrawal Bill. If Parliament forces the issue, a path towards a softer Brexit could be seen. The week is jam packed with tier one data with inflation and retail sales for both UK and US. There are also set to be crucial monetary policy decisions, including the latest rate hike from the Federal Reserve and what could potentially be an historic ECB decision to wind down its asset purchase program. The existing program ends in September and expectation is that the ECB will announce in either June or July that the program will be tapered from €30bn down to zero by the end of the year. This would be the much anticipated first formal step on the road to normalisation of monetary policy. Is this the month though?
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