Forex Fundamental News Facts for 27th May, 2024

Forex Fundamental News Facts for 27th May, 2024

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[Quick Facts]
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1. Asia Shares Nudge Higher as US, EU Inflation Data Loom.
2. Trump Rakes in Millions from Oil Industry, Outpaces Biden in Campaign Funds.
3. Could Developments in Iran and Saudi Arabia Turn the Tide for Oil?
4. Struggling Economy Awaits Winner of British Election.
5. Prospects for a German Economic Revival.

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[News Details]
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Asia Shares Nudge Higher as US, EU Inflation Data Loom:

Inflation Data and Rate Cuts:

Investors should pay attention to inflation data, especially the core personal consumption expenditures (PCE) figures.

Median forecasts suggest a 0.3% rise in April, maintaining an annual pace of 2.8%.

Analysts warn that core PCE inflation lost momentum in April after a strong start to the year.

The European Central Bank (ECB) may ease policy next week despite an expected tick up in euro zone inflation to 2.5%.

Global Monetary Policies:

The ECB’s chief economist indicates readiness to cut rates, but policy will remain restrictive.

The Bank of Canada might also ease rates soon.

The U.S. Federal Reserve is expected to wait until September for its first move.

Market Trends:

Equities and commodities benefit from lower borrowing costs globally.

MSCI’s Asia-Pacific index outside Japan gained, while Taiwan stocks reached a record due to tech bullishness.

Japan’s Nikkei rose ahead of Tokyo consumer price data.

Chinese blue chips remained firm.

Nasdaq hit record highs, with Nvidia contributing significantly to S&P 500 gains.

Currency markets focus on the yen and Japanese intervention risks.

Gold prices retreated from an all-time peak.

Oil prices near four-month lows amid demand concerns.

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Trump Rakes in Millions from Oil Industry, Outpaces Biden in Campaign Funds:

Bloomberg recently highlighted that the Trump campaign amassed $76 million in the previous month, significantly outpacing Biden’s $51 million. The New York Times further noted that Trump’s campaign has received $7.3 million from the oil sector since the year’s commencement, with additional fundraising events planned before the November elections.

Historically, numerous oil magnates have backed the Republican party. This support has intensified recently due to the energy policies of the Biden administration. The New York Times, citing industry insiders, reported that the oil and gas sector was particularly affected by the halt in new LNG terminal approvals. This has led the industry to rally behind Trump, a known advocate for hydrocarbons.

Thomas Pyle, the president of the American Energy Alliance, told the New York Times that the LNG permit pause served as a “wake-up call” for the industry, prompting it to take action. He highlighted the potential impact on long-term LNG contracts worth billions of dollars.

In contrast, Bloomberg reported that a consortium of oil executives, including Harold Hamm of Continental, Vicki Hollub of Occidental, and Kelcy Warren, the chairman of Energy Transfer, were planning a fundraising lunch this week, aiming to raise around $26 million for the Trump campaign.

Bloomberg’s authors suggested that Trump’s energy policies during his previous term were inconsistent, implying that oil executives should reconsider their support. They pointed out Trump’s requests to OPEC for increased production and the termination of some policies unfavorable to the oil industry.

However, despite Trump’s overall unpredictability, his support for oil and gas was consistent. This was evident during the initial pandemic lockdowns when he negotiated a production cut deal with OPEC+ to prevent further oil price drops.

On the other hand, Biden has consistently aimed to undermine the U.S. oil and gas industry, even requesting OPEC to increase production during the 2022 price surge. Despite approving the Willow project, which could be seen as a poor decision considering his primary voter base, he also implemented a “pause” in new LNG terminal approvals.

His administration attempted to limit offshore leasing and drastically reduced the offshore acreage available to the industry over the next five years. It also committed billions in financial aid to EVs, wind, and solar energy, which are direct, albeit not entirely comparable, competitors to oil and gas.

Several media outlets have noted that U.S. oil and gas production reached record highs during the Biden administration. However, the growth rate was slower than under Trump, suggesting that the industry expanded its output despite, not because of, Biden’s policies over the past four years.

It’s understandable that the oil industry would financially back a candidate who, despite overall unpredictability, has consistently shown support for oil and gas. This was expected, especially considering Biden’s pledge not to accept any donations over $200 from any oil executive.

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Could Developments in Iran and Saudi Arabia Turn the Tide for Oil?:

The Iranian Presidential elections are slated for June 28, following a helicopter crash that led to the demise of President Raisi and other senior officials. This incident initially caused market unrest, but the oil price has since returned to its bearish trend. An interim president is now in place, and the country’s direction is expected to remain unchanged under Iran’s supreme leader, Ali Khamenei.

Interestingly, Iranian authorities have not commented on the cause of the helicopter crash or Israel’s potential involvement. The longstanding Iran-Israel feud has escalated since the October Hamas attack and Israel’s alleged attack on Iran’s consulate in Syria. If Iranian officials suggest Israel’s involvement in the crash and discuss possible retaliation, it could raise concerns about a direct Iran-Israel confrontation and destabilize the Middle East.

In Saudi Arabia, King Salman’s health scare has drawn attention. The King, who has been effectively running the country since 2012, is being treated for a lung infection, potentially paving the way for his son, Crown Prince Mohammed bin Salman (MBS), to assume power. MBS, who has been implementing his Vision 2030 plan to reduce Saudi Arabia’s oil dependence, is expected to centralize political power ahead of his official takeover.

Despite his leadership style not being fully endorsed by the West, MBS has maintained good relations with the US and Russia. There is also an ongoing US-mediated process to normalize relations with Israel. His official takeover will mark the first time a Saudi King is not one of the sons of the nation’s founder, King Abdulaziz.

Oil prices have been losing momentum since early April due to the unexpected strength of the US economy, continued oil production cuts by most OPEC countries, and concerns about Iran’s involvement in the Israel-Hamas conflict. However, developments in Iran and Saudi Arabia, coupled with optimism about China’s recovery, could reverse this trend and push oil prices north, potentially causing headaches for central banks considering rate cuts.

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Struggling Economy Awaits Winner of British Election:

Economic Challenges:

Britain faces slow growth and high debt levels, limiting the government’s ability to drive a significant recovery.

Factors impacting the economy include the global financial crisis, Brexit, the COVID pandemic, and energy and food price surges.

Productivity growth lags behind European peers, contributing to a living standards gap.

Current Economic Situation:

Prime Minister Rishi Sunak claims the economy is turning a corner after a shallow recession in 2023.

Inflation has fallen to nearly 2%, down from a peak of 11% in 2022, potentially allowing for Bank of England interest rate cuts.

However, the recovery remains uncertain, with the International Monetary Fund predicting modest growth.

Political Landscape:

The Labour Party blames the Conservatives for declining living standards.

Labour leader Keir Starmer aims to attract private investment to make Britain the fastest-growing G7 economy.

British business investment lags behind other G7 nations.

Challenges Ahead:

Public debt is at its highest since the 1960s, limiting tax cuts or large green economy investments.

Both parties commit to reducing public debt as a share of GDP.

The IMF recommends higher taxes and reforms to boost economic growth.

Labor Market and Trading Relations:

Britain must address labor market issues, including a high share of working-age people outside the workforce.

Improving the UK-EU trading relationship could enhance productivity and growth.

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Prospects for a German Economic Revival:

Germany, the largest economy in the European Union and the third-largest globally, is facing economic challenges despite its stock index, the DAX, reaching all-time highs in early spring 2024. The country’s economic outlook is bleak, with government officials expressing pessimism and acknowledging that “Germany’s fat years are over.”

In recent years, Germany’s performance has lagged behind the EU average, and its rising stock prices reflect expectations for renewed monetary easing and a devaluation of the euro rather than real productivity gains or improved economic conditions. Negative trends are evident in macroeconomic indicators, including GDP, industrial production, competitiveness, migration numbers, and the cost of living.

Chancellor Olaf Scholz’s administration faces significant economic challenges, the most daunting since German reunification. Overcoming these challenges requires a shift in political direction, including reversing certain measures to return to robust economic growth.

Germany’s economic performance has been disappointing for a long time, with real GDP growth averaging less than 1.2 percent per year since the introduction of the euro in January 1999. The country’s industrial sector, which accounts for a fifth of Germany’s economic output, is suffering from rising energy prices and a decline in industrial production.

The situation worsened after the Covid-19 pandemic, with industrial production collapsing by around 30 percent in both Germany and the EU. While Europe has returned to above pre-crisis levels, Germany has not. The German government’s climate measures, such as phasing out the combustion engine and switching to electromobility, are impacting the German automotive industry, which has not yet compensated for these losses.

Record levels of subsidies have not solved the problem. German industry is becoming a pawn in a large-scale project of central planning, losing competitiveness as businesses are guided by subsidies into ventures where they lack a comparative advantage over international competitors.

Germany’s labor market is facing a shortage of skilled workers due to demographic pressure and low-skill immigration. This leads to declining productivity overall, as indicated by rising unit labor costs. These developments gradually make Germany a less attractive country for corporate investment.

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🔥News releases on THIS WEEK :

20/05 Mon All Day GBP, USD Bank Holiday

20/05 Mon 6:05am JPY BOJ Gov Ueda Speaks

20/05 Mon 2:00pm EUR German ifo Business Climate

28/05 Tue 7:30am AUD Retail Sales m/m

28/05 Tue 7:00pm USD S&P/CS Composite-20 HPI y/y

28/05 Tue 8:00pm USD CB Consumer Confidence

29/05 Wed 7:30am AUD CPI y/y

29/05 Wed All Day EUR German Prelim CPI m/m

29/05 Wed 8:00pm USD Richmond Manufacturing Index

29/05 Wed 11:45pm USD FOMC Member Williams Speaks

30/05 Thu 12:00am USD Beige Book

30/05 Thu 4:50am AUD RBA Assist Gov Hunter Speaks

30/05 Thu 5:00am USD FOMC Member Bostic Speaks

30/05 Thu 6:00am CHF SNB Chairman Jordan Speaks

30/05 Thu 7:30am AUD Building Approvals m/m

30/05 Thu 6:30pm CAD Current Account

30/05 Thu 6:30pm USD Prelim GDP q/q

30/05 Thu 6:30pm USD Unemployment Claims

30/05 Thu 8:00pm USD Pending Home Sales m/m

30/05 Thu 10:05pm USD FOMC Member Williams Speaks

31/05 Fri 7:30am CNY Manufacturing & Non-Manufacturing PMI

31/05 Fri 8:00am NZD Annual Budget Release

31/05 Fri 6:30pm CAD GDP m/m

31/05 Fri 6:30pm USD Core PCE Price Index m/m 

N.B. Time mentioned here is on Gmt +6

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Sources :
– CNBC, Bloomberg, Reuters, Fastbull, Yahoo Finance, CNN, ForexFactory News, Myfxbook News etc

Prepared to you by “Akif Matin“

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