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market analysis
Five major events to happen in the global market this week
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Market Analysis]: Five major events that will happen in the global market this week". Hope it will be helpful to you! The original content is as follows:
Who will be the next country to receive a letter from the United States? U.S. President Donald Trump continues to issue tariff threats over the weekend. Has the U.S. economy already felt the consequences of imposing tariffs? These are another hot summer months topics.
1. Has the market underestimated Trump's tariff threat?
Trump did not waste time on the weekend, threatening the EU and Mexico to impose 30% tariffs starting August 1. He added that any retaliation measures could mean higher tariffs. This development follows similar remarks to about twenty countries including Japan, South Korea, Canada and Brazil—all large trading partners.
There are one pattern for these threats: stocks fall, related currencies depreciate, but these declines are quickly bought. This is called the "Trump Always Retreat" (TACO) deal. Investors are convinced that Trump will eventually return from the edge of the cliff, reaching a deal to lower tariffs and delay deadlines.
The "reciprocal tariffs" announced by the President on "Liberation Day" were originally scheduled to take effect on April 9. On the same day, he announced that it would be postponed 90 days to July 9, with the new deadline being August 1.
But are investors too www.xmhouses.complacent? I expect panic will only occur when these tariffs www.xmhouses.come into effect. With about two weeks left before the deadline, buying on dips seems to be a more likely scenario.
2. Despite tariffs, China's GDP will still show healthy growth
Tuesday, 10:00 Beijing time. Has the trade war hit China's economy? Probably no, or at least no significant effect. Domestic in the second quarterThe GDP report will provide answers.
While many people are skeptical of the accuracy of data from Beijing, there are good reasons to expect some strong performance. Trade with the United States has declined, but China was able to reschedule some goods that were originally intended to be shipped to the United States through Vietnam or other locations. In addition, sales of electric vehicles to Europe and higher domestic demand have also driven economic expansion.
The economic calendar shows that the second quarter grew by 5.1% year-on-year, close to the 5.4% reported in the first quarter. There may be a small upward surprise, benefiting the Australian dollar (AUD) and global stock markets.
3. U.S. inflation is expected to show an increase in core prices
Tuesday, 20:30 Beijing time. Are prices rising due to tariffs? The average tariff rate in the United States has risen sharply, but not all price increases are passed on to consumers. Why? Some retailers have stockpiled pre-tariff goods in advance and are still selling them. In other cases, the seller absorbed the tariff costs.
However, at some point, inflation will rise and the June Consumer Price Index (CPI) report may provide some insights. The market and the Federal Reserve focus on core CPIs, excluding volatile energy and food prices.
After a few months of slight price increases, such as 0.1% in May, it is expected to rise rapidly in June by 0.3%. Any higher figures will boost the US dollar (USD), while a slight increase in another month will support stocks and gold.
4. UK inflation may strengthen the concept of stagflation in the UK
Wednesday, Beijing time at 14:00. The UK's headline CPI surged in April due to government-mandated energy price changes. But in May, it remained stubbornly at 3.4% (headlines) and 3.5% (core CPI).
Economists expect the core CPI to remain at 3.5%, partly due to rising wages. These data will impact the next decision by the Bank of England (BoE), which includes the "Super Thursday" decision for the quarterly report.
Salary to 3% will be a boon for the British, but will put pressure on the pound (GBP), and a rise to 4% will boost the pound.
5. The US PPI will help shape the Fed's expectations
Wednesday, 20:30 Beijing time. Producer Price Index (PPI) reports are at a secondary level in CPI data, but these data can affect the calculation of personal consumption expenditure (PCE)—the Fed prefers inflation data.
Core PPI rose 3% year-on-year in May, and similar results are expected in June. This is 2% higher than the Fed’s core PCE target, but it is far from worrying.
However, an accelerated rise in factory gate prices will indicate that higher tariffs have driven costs at the producer level. Another modest report will be confusing.
6. US retail sales
Thursday, Beijing time 20:30. About two-thirds of the world's largest economy are concentrated on consumption. Although Toutiao retail sales fell 0.9% month-on-month in May, the retail control group—i.e., “core in the core”—up 0.4%, showing that consumers are still shopping.
The economic calendar shows that headline sales in June changed to 0%. This means that the market may jump in either direction due to accidents. I expect a slight decline, especially in the control group.
7. American consumer confidence
Friday, 22:00 Beijing time. The last event of the week is forward-looking—the University of Michigan’s initial consumer confidence index in July provides insight into how Americans feel.
The index rose to 60.7 from a low of nearly 50 in June, with similar figures expected in July. Confidence is expected to increase considering the stable gasoline price.
It should be noted that there is a loose correlation between soft data such as this kind of survey and actual consumption. Nevertheless, this will remain a driving factor in the market in the near term.
While there are several big data this week—especially the U.S. CPI we will cover in real time—the market will be shaken by Trump’s eye-catching tariff headlines. These headlines may appear at any time.
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