Politics and trade tensions to take centre stage this week – Rabobank

Trade tensions, Iranian sanctions and the prospect of another hike in US interest rates in the coming weeks provides the backdrop for markets, according to analysts at Rabobank.

Key Quotes

“Most G10 central banks have pushed back against hawkish policy expectations recently, leaving the Fed as the most aggressive major central bank even though a softening in recent US inflation data has triggered a reappraisal of some market calls.  There is little noteworthy US data due today, although retail sales, industrial production and housing data are due in the coming days.  In addition, several Fed officials are due to speak this week.”

“The May BoE meeting may be out of the way but UK markets are unlikely to find much reprieve from Brexit related confusion. Over the weekend UK Environment Secretary and leading Eurosceptic Gove declared there were “flaws” in PM May’s ‘customs partnership’ plan, while Anna Soubry, a pro-EU Tory MP criticized the ‘maximum facilitation’ option.  Both the EU and the UK want a final decision on a solution regarding the N. Ireland border by the June EU summit.  Without a breakthrough, further progress on trade talks seems unlikely.  EUR/GBP is holding steady this morning but is trading over 2% above its April low.”

“Despite the relaxation in trade tensions, a softer tone of oil stocks and a still relatively firm EUR are providing headwinds to European stock indices. Second estimates of German Q1 GDP and April CPI inflation data are due this week.  Eurozone releases this week include March production, current account and trade data.”