Just because the economic calendar isn’t chock full of data releases this week doesn’t mean we’re short on potential market movers! In fact, some of these could even dominate price action in the next couple of weeks.
Here are the non-data events you should watch out for:
U.S. – China trade drama
Unless you’ve been Netflix and chillin’ for most of 2018, then you’ll know that a war is brewing between two super powers and, no, it doesn’t involve Captain America and Iron Man. I’m talking about the trade war between the U.S. and China, the two largest economies in the world!
The monster crept out of the closet in late January when Trump imposed crippling tariffs on imported solar panels. A direct hit to China, which is one of the biggest solar panel producers in the world.
A few weeks and a couple of billions’ worth of additional tariff proposals later, President Xi Jinping has backtracked a bit and was praised by Trump for it:
Very thankful for President Xi of China’s kind words on tariffs and automobile barriers…also, his enlightenment on intellectual property and technology transfers. We will make great progress together!
— Donald J. Trump (@realDonaldTrump) April 10, 2018
But are trade war threats really over? Until the U.S. and China’s teams actually put together new trade deals, global markets will remain wary. And if the previous weeks’ price moves are any indication, that means bad news for high-yielding bets like equities, commodities, and the comdolls.
Remember that a protectionist trade war between the world’s largest economies could start a domino effect that would weigh on other countries as well.
Ripples in the North American Free Trade Agreement (NAFTA) might not affect as many economies as a full-on trade war between China and the U.S., but it’s still closely-watched by market players.
And why not? Protectionist trade policies could make basic products more expensive for businesses consumers, which could then drag overall economic activity in Canada, Mexico, and the U.S.
Analysts are currently taking comfort in the U.S. granting its neighbors temporary exemptions to stiff steel and aluminum tariffs, as they believe these represent the Donald’s willingness to negotiate instead of implementing its steep initial demands.
It also helps that Canadian Prime Minister Justin Trudeau himself is optimistic. Just last week he shared that negotiations are “moving forward in a significant way” and that there might be “some good news coming.”
Some market players are betting on an announcement of new trade deals as early as the end of this week at a summit in Peru. If we do see a deal, then the Loonie could gain some of the losses it had sustained since the start of the year.
Conflicts in oil-producing countries
What’s a trading year without geopolitical events that push oil prices higher?
On this episode, we’re talking about a chemical attack in Douma, Syria over the weekend. State-run news agencies had pinned the attack on U.S. forces even as Washington denies involvement in the attack.
In any case, the attack prompted Trump – who had just declared his intentions to get U.S. troops out of Syria “pretty soon” – to reconsider his position. The POTUS shared yesterday that he will make some “major decisions” in the next 24 to 48 hours, which many believe translate to military response against Syria’s Assad.
If tensions continue to escalate between the U.S. (and friends) and the Syrian government (and its oil-producing allies), then oil prices could extend their uptrends. Don’t forget that increased military skirmishes also cause uncertainty, which could eventually weigh on risk sentiment.