The Week in Focus: May 29 – June 2 Outlook

May 27, 2017 (Commerzbank AG) – President Trump – Was that it?

Donald Trump’s presidency has been far from smooth so far. Following the most recent scandals, there has even been discussion of a risk that he could be impeached. Even in the likely event that Trump weathers these crises, it is unlikely that significant new economic measures will be implemented during his presidency. Markets will thus have to abandon any hopes of moves in this direction.

Further topics:

Euro zone: Negative depo rate has a positive impact on lending

The ECB sees no reason to hike rates before its bond-buying programme comes to an end, though if negative interest rates threatened the monetary policy transmission, it might revise its opinion. But we consider this an unlikely scenario. According to the bank lending survey, commercial banks believe that the negative deposit facility rate, while somewhat weighing on their net interest income, has a moderate positive effect on lending volumes.

Outlook for the week of 29 to 2 June 2017

  • Economic data: Core CPI inflation in the euro zone is expected to fall back below 1% in May as the distortionary effects of Easter drop out of the calculations, whilst the headline rate is expected to fall even more sharply from 1.9% to 1.4%. We expect to see another decent labour market report out of the USA.
  • Bond market: Bund yields are expected to remain volatile, while ten-year yields are unlikely to top recent highs. The trading range since the autumn will remain intact, at least until the ECB meeting in early June.
  • FX market: 
  • Equity market: Although the economy is still growing strongly, corporate restructuring remains the order of the day.
  • Commodity market: When the oil producing countries extended their production cuts by nine months, the market responded with a drop in prices. But they are unlikely to fall much further, as compliance with production quotas remains high.

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