Will market volatility pick up in the week ahead?

Article by ForexTime

Last week represented an unusually quiet one for the financial markets in terms of volatility and with the economic calendar relatively light over the next couple of days, the week ahead might be similar. It is a bit early to attribute the lower levels of market movements to a possible summer lull being upon us and instead, I would refer it to traders being on the right side of the trade in regards to the recent French election and not needing to make any sudden moves in reaction to the event.

It is important to also bear in mind that there are two major event risks over the next couple of weeks, including the OPEC meeting on May 25 in Vienna and the UK elections scheduled for June 8. This should ensure that investors remain alert towards possible developments, preventing traders from taking their foot away from the pedal with summer fast approaching.

China making further steps towards globalization

One of the major financial stories to have gathered attention over the weekend has been the news that China’s President Xi Jingpin has pledged $124bn to the Belt and Road global trade project, which provides further indications that China is making more steps towards embracing globalization. While populism and initiatives to move away globalization are still seen as threats in some advanced economies, China seems to be going full steam ahead with embracing the concept and proving itself as a reliable superpower in the global economy.

The news around the China’s $124bn investment in the Belt and Road initiative falls sharply on the heels of the headline late last week that the United States and China has signed its own trade agreement. Under the US and China agreement, it is thought that the Chinese market will be open to US credit rating agencies and credit card companies, while Chinese banks can also enter the US market in return.

Get our Weekly Commitment of Traders Report: - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.

Get Our Free Metatrader 4 Indicators - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter

This move does go some way towards supporting the previous indications of late that diplomatic relations between China and the United States are improving, which should gradually improve the public perception of President Trump in mainland China and also cool down the fears from late last year that China would suffer under a Trump presidency.

GBPUSD to remain under pressure with UK inflation ahead?

The Pound/Dollar found itself on the end of two days of successive losses to conclude the previous week, after investors found encouragement to drag the pair lower from its recent 2017 high narrowly below 1.30 following the Bank of England (BoE) downgrading its growth forecast for the UK economy this year.

For those looking for a recovery in the pair from here, it is worth pointing out that the BoE also repeating its negative views on price pressures might weigh on investor sentiment with the latest UK inflation reading scheduled for this coming Tuesday.

Will upcoming data from Europe continue to suggest the Euro is undervalued?

Now that the French election is out of the way and with Europe appearing like it has fared better than the United States and United Kingdom when it comes to defeating populism, I am expecting for more arguments to be made that the EU currency is undervalued.

Most headlines around Europe over the past couple of months have ignored macro-economics and instead focused on the several political events that have been scheduled around the continent. While this makes sense with it in recent memory that there were shocks when it came to the EU referendum and US election, it has completely slipped under the radar that the EU economy has been picking up momentum in 2017.

I do feel that investors should now start paying closer attention towards the economic data coming out of Europe, and I am firmly bullish on the Euro over the medium and longer-term.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Forex-Time-LogoArticle by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com