A week full of important events lies ahead of us with major data expected from both sides of the Atlantic, the Dollar and Pound are set to take center stage over the next five days. On the political arena, US President Donald Trump is heading to Helsinki to meet with Russian President Putin after casting doubts over the future US relationship with Europe and the UK, calling the former a trade “foe” and criticizing the latter's Brexit plans. Currencies ended last week on an upbeat tone while equities look poised for a mixed opening when London comes online.
The Dollar will remain front and center this week following a busy schedule for the US currency over the past few days. Today, the release of the US Retail Sales data will kick off a series of important events for the greenback that saw its gains slipping away on Friday. The consumer spending data today is expected to print on the softer side and this suggests that Dollar's retreat has more room to run at the beginning of the week.
However, we need to remain vigilant as Fed Chairman Powell will be testifying in front of the US Congress on Tuesday and Wednesday and fresh bullish rhetoric can send the US currency higher once again. Dollar/Yen rallied above 112.50 on Friday but the momentum is clearly slowing down now. The support for the currency pair lies at the 112.00 mark and a break below this could drive prices towards the 111.40 area but again we'd rather be careful with Dollar's retreat at this stage ahead of Powell's remarks on Tuesday.
The Pound on the other hand has been on a tear since mid-Friday rallying 150 pips to trade to 1.3250 this morning. Trump's remarks that he wants to strike a profitable agreement with the UK after Brexit supports the rally, even though the US President criticized PM May's plan earlier. Looking ahead, the UK employment data tomorrow and the inflation reading on Wednesday will dictate the price action. Wage and price growth will be critical in pushing the Pound further to the upside with the 1.33 mark being the next area of focus while a miss will push Sterling towards the 1.3190 lows and 1.31 below that.
Commodities are on a upwards trajectory with Gold coming off its $1,236 lows and Oil climbing above $70 again. Gold's upswing will put the $1,248 resistance to the test and depending on Dollar's performance we might see an extension towards the $1,255 levels. Oil moved higher on Friday but the move was cut short when it tried to enter the $72 area. If prices manage to remain above the $70 support then an extension $2.5 higher is on the cards.
Equities in Asia are trading with a bearish bias at the start of the week with Japan off for a holiday. Friday's bullish US session didn't spill over to the Asian opening today but the European and US futures are pointing towards a positive opening bell. As we draw closer to the earnings season, investors divert their attention to US corporate results and away from trade-related themes. For the Dow Jones, the 25,400 points' area is the next focus while the FTSE 100 is close to break above the 7,700 points' threshold en route to the 7,800 area.
MARKET EVENTS TO WATCH
All times are GMT +4.