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While the fall of the dollar resumed, the past week has become the best for the stock indices for many years. World stock markets recovered last week after the falling that occurred in early February. StoxxEurope600 recorded a maximum weekly gain from December 2016; the weekly gain for S&P500 became the largest since 2013, and for Nasdaq - the highest for seven years.
Last week saw a significant strengthening of the dollar, which was taking place against the backdrop of the continued collapse of global stock markets and the growth of yield on US government bonds. Thus, the yield on 10-year US bonds rose to 2.857% last week, having updated the absolute maximum for the last four years. The increase in the yield of government bonds facilitates the task for the Federal Reserve in raising interest rates, which creates the basic prerequisites for the growth of the dollar.
The week started is full of important news and events of an economic nature. Nevertheless, the focus of traders will be meetings of the central banks of Australia, New Zealand and the UK on monetary policy issues, as well as monthly data from the Canadian labor market.
The week started is full of important news and events of an economic nature. Nevertheless, the focus of traders will be the meeting of the Fed, which will end on Wednesday with publication of the decision on rates, as well as the publication on Friday of monthly data from the US labor market. It is expected that the interest rate will remain unchanged at 1.5%. Traders will carefully study the texts of the Fed's comments in order to understand its future plans.
ECB meeting on monetary policy will be in the center of attention of investors this week. The decision on interest rates will be published on Thursday (12:45 GMT). According to market participants, the ECB will not make changes to the current monetary policy. The ECB press conference, which will begin soon after the publication of the decision on rates, will be more interesting. From the head of the ECB Mario Draghi, market participants will wait for signals regarding the timing of the start of the curtailment of the QE program. Previously, the ECB leaders spoke in favor of maintaining a soft monetary policy.
Last week’s NFP showed an increase in the number of jobs outside of US agriculture in December at 148,000 (the forecast was +180,000 new jobs). Unemployment in December remained at 4.1%, a minimum for 17 years, and the average hourly salary rose by 0.3% in December (forecast was + 0.2%) and by 2.5% in annual terms. The above statistics on the labor market, despite a weak report on the number of new jobs (NFP), is unlikely to lead to a revision of market expectations regarding 3 interest rate increases in 2018.
The new 2018 began with a further weakening of the dollar. The index of the dollar WSJ, reflecting the value of the US currency against a basket of 16 currencies, shows the negative dynamics for the sixth consecutive session. The past year has become for the index of the dollar WSJ worst in a decade. The index lost more than 7% in 2017.
There are 2 weeks before the celebration of the New Year. The coming week is the last trading week before the Catholic Christmas, and already on the following Monday, the volume of trading is expected to decline, but at the same time the increase in volatility is expected. At low volumes, the number of speculative short-term trade transactions often increases, which leads to increased volatility, especially during news releases.
we expect an extremely volatile and busy trading week with important news. In addition to the Fed meeting, which will be held on December 12-13 and will be the last one this year, important decisions of the three leading central banks of the world and fresh data on inflation are expected. So far, on the eve of the statements of the Fed, the Swiss National Bank, the Bank of England and the ECB on monetary policy, trading in financial markets is calm.
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