With the start of the new year, traders returned to trading floors optimistic. The week, however, shook that optimism as the Middle East worsened after the US killed a senior Iranian and Iraqi general in Baghdad. The revenge of Iran was not delayed by the attack on three US bases in Iraq, but there were no casualties. With only Trump announcing that there will be sanctions against Iran imposed today, markets have resumed their endless rally.
But enough of the stories. Traders are already gearing up for next week. Expectations remain reserved – if these events had not occurred, I would have said that risk on would continue and that cash flows would continue to divert risk assets. Well, anyway with the destabilization of the region or not, the DOW reached 29,000 for the first time in its history.
We expect markets to remain concerned about Iran’s future response after the sanctions imposed, due to the possibility of a military coup. Rather, cash flows will remain directed to safe heaven’s assets until a new catalyst – positive or negative, can change the risk of sentiment. We also have enough economic data in the calendar for next week, and then the Phase I Deal between the US and China is expected and the start of the Phase II talks.
On the foundation, more importantly, what traders will focus on is GDP and UK industrial production on Monday.
On Tuesday – China’s Trade Balance, US CPI and API inventory data for oil.
Wednesday – UK CPI, Eurozone industrial production and official US oil data.
Thursday – German CPI, initial applications for US aid, Philadelphia production index and retail sales.
Friday – China’s GDP, industrial production and unemployment. Retail sales for the UK, CPI for the Eurozone, and for the US – building permits, industrial production, start of new construction and Michigan consumer expectations.
Next week will be interesting, not only in terms of data, but also in the likelihood of unexpected risks around the trade front (in a lull) and in the delicate relations between Iran and the US.
Trader Martin Nikolov