Five fundamentals for the week: Markets set to shake on trade, the Fed and more

Another strong Nonfarm Payrolls (NFP) report in April,  but doubts about trade remain prevalent. The ball now temporarily shifts to the Federal Reserve (Fed), but trade deals could steal the show.

1) Trade talks and deals eyed

"They want to make a deal very badly" – said US President Donald Trump about China, but also added that a phone call between him and Xi Jinping, his Chinese counterpart, is not planned for this week. That is hardly encouraging for markets, which want to see the draconian duties of up to 145% come down.

Washington is actively negotiating with over 10 countries about deals, and there are hopes an accord could be struck with India, which mostly exports services, not goods, into America. Japan was also high on the list, but officials in Tokyo poured cold water over enthusiasm.

The first deal matters, as it will serve as a blueprint for the rest of the world. Will the baseline 10% levy come down? That is what investors want to see. However, with every passing day, the damage to trade is real.

After a nine-day winning streak on the S&P 500 – the best since 2004 – it seems that only a trade deal could send Stocks up.

2) ISM Services PMI may show some calm among businesses

Monday, 14:00 GMT. This forward-looking survey is usually watched as a leading indicator for the Nonfarm Payrolls, but this time, it stands on its own. The US economy is centered on services and consumption, so another decline would impact markets.

After a score of 50.8 points in March, a slide toward the 50-point threshold separating expansion from contraction is on the cards. A slide under that level would be worrying and could hurt sentiment.

However, soft survey data has been weak and sometimes horrible, while hard data, such as Nonfarm Payrolls, remained resilient. Can the ISM Services Purchasing Managers’ Index (PMI) beat estimates? A positive surprise cannot be ruled out, after President Trump delayed reciprocal tariffs and exempted some goods from tariffs.

3) Fed set to lean on jobs data to keep calm

Wednesday, decision at 18:00 GMT, press conference at 18:30 GMT. "A total stiff" – is how Trump called Fed Chair Jerome Powell in an interview, adding that the world's most powerful central banker "just doesn't like me." While the Commander-in-Chief clarified that firing Powell is on the cards, frustration from high interest rates seems to be bubbling in the White House.

Nevertheless, the Fed is widely expected to leave rates unchanged once again.

Consumer surveys support interest rate cuts,  but do not necessarily reflect what people do, only what they say. Economic data has been upbeat. The labor market continues growing steadily, as seen by the NFP.

Employment is one Fed mandate, and the other is inflation, which remains low but still does not make that final push to the central bank’s target of 2%, which means it could rise if left unchecked.

In addition, there is "unusual uncertainty" about what lies ahead, which warrants waiting before acting.

What will Powell say about the next decision? Apart from sticking to the "data-dependent" mantra, any hint suggesting a rate cut would boost Stocks and Gold, while weighing on the US Dollar (USD). Sounding skeptical of such a move would do the opposite.

I expect Powell to refrain from any promises, disappointing those who expect a cut. At the time of writing, bond markets point to a 35% chance of a move in June.

4) BoE set to resume rate cuts

Thursday, 11:00 GMT, press conference at 11:30 GMT. It is "Super Thursday," which means the Bank of England (BoE) publishes its quarterly Monetary Policy Report in addition to its interest rate decision. Another thing that is expected to be different is that officials are set to reduce borrowing costs after pausing in March.

UK inflation has been edging lower, and one has to struggle to find meaningful growth. While only one member backed a rate cut last time, hints from BoE Governor Andrew Bailey and his colleagues point to a cut.

The "Old Lady," as the central bank is also known, is set to slash inflation and growth forecasts. However, that does not mean any pledges for further cuts. I expect Bailey to stress that this is a period of extreme uncertainty, echoing his colleagues from other central banks.

In addition, the BoE makes its decision one day after the Fed, and if Powell is cautious, Bailey will likely echo his tone.

5) US Unemployment Claims will likely come down

Thursday, 12:30 GMT. If Trump's policies impact the labor market, jobless claims could show them first. Nevertheless, this weekly gauge has been stable, hovering around 220K in the past few months.

Last week's rise to 241K was an exception, but it was due to a change in recess times for schools in New York. That data quirk means expectations now stand on a decline toward previous levels.

Nevertheless, traders should be aware of a potential genuine jump in claims, which would signal an impact from firings at the Department of Government Efficiency (DOGE) and tariffs. So far, it has not happened – but such a move cannot be ruled out.

Final Thoughts

Trump has upped the rhetoric against Powell once again – and there's room for another escalation. Headlines from the White House are set to continue making waves, and it comes at unexpected times. Trade safely.