Trade back in focus

It has been a busy week on the news front. The early part of the week was dominated by the political crisis in Italy, which weighed on the euro. Later in the week, President Trump announced that he was lifting the temporary exemptions from steel and aluminium tariffs granted to the EU, Canada and Mexico, raising the prospect of a renewed escalation of trade tensions. Unusually, the price of gold shrugged off these geopolitical risks although it dipped on Friday in the wake of the strong US employment report. Turning to next week, developments on the trade front are likely to dominate investor sentiment. The US negotiations with China are set to continue over the weekend but the EU, Canada and Mexico have already declared that they will retaliate. May trade data for the US (Wednesday) and China (Friday) may be scrutinised more than usual next week. The solid May PMI data for China suggest that the country’s commodity import demand is likely to have held up last month.