LONDON (Reuters) – As global growth worries grow, the coming days could be defined by relief if further U.S. trade deals come through – with focus on China – or more pessimism if data disappoint.
U.S. President Donald Trump heads to the Middle East, Asian currencies are on the rise, and Germany’s new leader just got off to a wobbly start.
Here’s your heads-up on the week ahead in financial markets from Amanda Cooper, Karin Strohecker and Dhara Ranasinghe in London, Rae Wee in Singapore, and Lewis Krauskopf in New York.
1/ SAUDI CALLING
Trump’s first major diplomatic trip kicks off next week with a three-country Middle East tour starting in Saudi Arabia.
The visit will be accompanied by investment conferences, with a raft of trade and security issues on the agenda. Trump has flagged he will soon have an announcement on whether the U.S. will ease microchip export restrictions to some Gulf countries.
Saudi Arabia has said mining and minerals deals will be discussed.
Energy is also set to feature prominently. Washington, sources say, will no longer demand Saudi Arabia normalise ties with Israel as a condition for progress on civil nuclear cooperation talks.
This would be a major U.S. concession. Notably, Trump’s trip is not expected to include a stop in ally Israel.
2/ THE TARIFF EFFECT
A fresh look at inflation and consumer spending are the highlights of a busy week of U.S. data as investors and policymakers assess how Trump’s tariffs are affecting growth and prices.
Tuesday’s April consumer price index will give a fresh read on inflation trends, while April retail sales numbers on Thursday offer the latest view on consumer spending. Retail sales increased by the most in over two years in March, as households stepped up auto purchases and other goods to avoid higher prices from tariffs.
Investors are waiting to see whether weakness in sentiment surveys and other “soft data” translates into a slowdown. The Federal Reserve on Wednesday, keeping rates steady, said the risks of both higher inflation and unemployment had risen.
U.S. quarterly earnings also continue, with Walmart results among the most closely watched in the coming week.
3/ ONE WAY FROM HERE?
Asian currencies are back, after years of being sidelined by the mighty dollar.
An unprecedented surge in Taiwan’s dollar, up 8% over two trading days, suggests money is moving into Asia at scale, capturing the attention of central banks.
The Hong Kong Monetary Authority has intervened to maintain its currency peg to the dollar. Investors are also speculating that the meteoric rise in Taiwan’s currency could be telling of a ‘Mar-a-Lago Accord’ with the United States, despite pushback from the island’s president.
The notion countries will allow their currencies to strengthen as part of trade negotiations with the U.S. will remain on investors’ minds as long-awaited talks between the U.S. and China get underway.
Notably, South Korea’s delegation in Washington has said the country’s finance ministry and the U.S. Treasury would hold separate discussions on currency policy at the request of Treasury Secretary Scott Bessent.
4/ A DEAL’S A DEAL
Britain has struck the first trade deal with Washington.
Trump and Prime Minister Keir Starmer hailed the “breakthrough” agreement on May 8 that included lowering or removing tariffs on UK shipments of cars, engines and plane parts, and aluminium and steel, in return for more access to the British market for U.S. beef and machinery, among others.
The kicker – Trump’s 10% tariff for everything else remains, and this is for a staunch U.S. ally that boasts a trade surplus, meaning it may not serve as a blueprint for others.
The impact of tariffs on the economy has created such uncertainty that Bank of England policymakers are split on monetary policy. Next week’s data on UK employment and growth would ordinarily offer a decent steer, but now might be in investors’ rear-view mirrors.
5/ BUMPY START
New German Chancellor Friedrich Merz got off to a bumpy start after failing to win parliamentary backing for the role in a first vote, an unprecedented snub in post-war Germany.
That’s focused attention on the challenges Merz faces in delivering on his plans to lift Europe’s biggest economy out of its malaise. Germany’s economy has contracted for three straight years.
Merz lit a fire under European markets following February’s election, pushing for a spending splurge on defence and infrastructure to help boost long-term growth. The euro and German stocks rallied.
Tuesday’s temporary setback in parliament is a reminder of the frailty of the ruling coalition and makes it even more unlikely, some reckon, that Merz would back a permanent financing of European spending through joint bonds – deeply unpopular with his centre-right party.
(Graphics by Sumanta Sen, Rae Wee, Compiled by Dhara Ranasinghe. Editing by Mark Potter)
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