The U.S. has a relatively light calendar this week. Today the housing permits and starts number will be released. After a strong start this year, lumber prices have had a substantial correction. If we get weak housing numbers on Tuesday, combined with softening lumber prices, the Fed might be less likely to raise interest rates three more times this year as previously thought. On the 21st the Philadelphia Fed will issue their report and the leading economic indicators will come out. We don’t expect any great fanfare from either number, but it is the surprises that move the markets.
Despite stronger than expected corporate earning results, uncertainty about the meeting of OPEC and non-OPEC oil producers in Doha has kept a lid on stock indices like the S&P.
Many thought Doha would bring a production freeze by oil-producing nations. With Doha being a bust because of non-participation by Iran, crude started the week on a weak note. The next OPEC meeting is in the beginning of June.
We will be looking for future clues from China as to the strength of its economy. Recent indications that there has been a rise in new credit, plus strong housing prices reported this morning, point to success by its central bank in stabilizing their economy.
Changing expectations on the June 23rd referendum in the U.K. for Brexit will influence trading in the British Pound.
This week we will be following statements from the RBA on the future state of the Australian economy. Reserve Bank Governor Glenn Stevens will be speaking on Tuesday at the Credit Suisse Conference in New York. Right before his speech, the minutes from the RBA’s April meeting will be released. We assume the minutes will be incorporated into his speech. Traders in the Australian Dollar will be paying close attention to his words.
Currency traders are waiting to see if the Bank of Japan will intervene to control the recent rise of the Yen.
While the ECB is unhappy with the U.S. Dollar’s recent decline, there is little indication that it will intervene to limit future Euro gains. Though on Friday, ECB President Mario Draghi gave notice that the ECB is ready to take further necessary action to increase inflation. The ECB’s 25-member governing council is scheduled to hold its next policy meeting on Wednesday and Thursday.
Silver has been the recent star of the precious metals market after prices have been languishing relative to gold. With prices trading above their 20 and 100 day moving average, traders will be looking to see if the gold/silver ratio will approach previous historical levels.
Natural gas enters the week a bit humbled. After failing to decisively break through the magical “200” barrier, prices on Friday traded down to its two-week lows. Traders will be watching to see if normal spring weather is finally here to stay, and eagerly await Thursday’s storage number, to see how the recent burst of chilly weather has affected storage figures. This week Barrons’ featured commodity article is entitled “The Price Isn’t Right to Invest in Natural Gas—Yet.” A contrarian might think that this is the perfect buy signal for the market.
Traders will also be looking to see if sugar can add to its recent gains. The market rallied sharply after trade house Czarnikow recently reduced its forecast for world sugar supplies. Their number deficit was much greater than the projections from other trade houses. Traders will be analyzing the expected increase in European beet plantings to see if it can help offset the deficit.
By the end of this past week, the strong soybean market started dragging up the moribund corn market. We will watch for the effects of the wet weather on the Argentinian crops. We also await news from Brazil on the attempt to impeach President Rousseff and how it will affect the Real.