The last week of May will not be a calm time. There is no exact day of the end of self-isolation in Russia and the quarantine outside it; neither we know what that outer world has become like. This week, there is going to be much statistical data that may attract the attention of capital markets and a lot of geopolitical noise from the US and China, constantly angry with each other.
Geopolitics: everything is important
Monday morning, it has become clear that the draft law considered in the National People's Congress of China may become an acute problem for the capital markets. The bill deals with the national security of Hong Kong but investors are right to suppose that it may deteriorate the rights and freedoms of the citizens. This has already happened in Hong Kong history, and that time has been real trouble. The USA may intervene, which would be a completely different story capable of reducing to zero the investment attractiveness of risky assets.
USD enjoying demand
The USD rate at the beginning of this week is enjoying support as a safe haven asset. During the week, we expect a lot of statistics from the USA. First, they publish the sales volume of newly built houses and then - in the secondary housing market. The digits in April are definitely going to be gloomy because the quarantine was to its utmost, and people were seriously restricted in their moves. We should not be afraid of weak results: as soon as life gets back to normal, the low interest rate will show its effect and return the demand. The more neutral the reports, the better for the USD.
JPY: the market has its attention on the yen
Japan will take a lot of space in the macroeconomic calendar this week. They will issue the data on retail sales, industrial production, basic inflation in Tokyo - which is a leading indicator. We should not expect any miracles in the statistical data because deflation is here already, and the household expenses are very modest. The Bank of Japan had an extraordinary session to agree on a new package of stimuli; however, it needs time to be efficient. The JPY may yield demand as a safe haven asset but right now this support is limited.
RUB: everything is good but something is disturbing
At the end of the month, the RUB enjoys a lot of support - from oil, from the market interest to risk, from the demand for the ruble after successful auctions of federal loan bonds by the Ministry of finance. It is the taxation period as well. According to the Central bank, the inflation in Russia is slowing down, which will allow decreasing the interest rate sharply in June - by 100 base points at once. However, the question is whether this will be efficient: people have no free money and are generally in financial trouble. For the ruble, a decrease in the interest rate will be locally positive, however, let us keep an eye on the Bank of Russia rhetoric.
Brent: what will calm us down?
It has almost been a month since the OPEC+ agreement on the decrease in oil production started to work. The first facts concerning it will appear in the publication of the statistics in the middle of June, however, judging by the US oil stocks digits, the quotations are correcting. Nowadays, only a decrease in production may bring the supply and demand to a certain balance. There is little hope that the demand will increase - keep an eye on the data on production then. For Brent, the comfortable channel in the current circumstances lies between 30-35 USD per barrel.