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The focus of traders this week will be the publication on Wednesday (18:00 GMT) of the minutes from the November Fed meeting (minutes FOMC). The publication of the protocol is extremely important for determining the course of the current policy of the Fed and the prospects for raising the interest rate in the United States. According to interest rate futures, the probability of a rate hike in December in the US is above 90%.
It is expected that in the coming week in the US House of Representatives will vote on the tax reform. But, it seems that in the Senate, the bill is expected to face considerable resistance. Senators and members of the House of Representatives have a slightly different vision of the future tax reform. Senators want to postpone the reduction of corporate tax until 2019 and make some changes to the project itself. Obviously, it will
A number of economists still recommend betting on the dollar, despite the fact that the new chairman of the Fed is unlikely to raise interest rates more than the market already takes into account, given the "favorable conditions for the growth of the American economy". The focus of traders this week will be meetings of the ECB, the RB of Australia and the RB of New Zealand.
The dollar remains the favorite in the foreign exchange market. Positive data on retail sales, industrial production, orders for durable goods, companies sentiment, and strong GDP (up 3% in the third quarter, with a forecast of 2.5%), coupled with positive reports from companies and the success of the presidential administration in the conduct of economic reforms in the US contribute to maintaining the positive dynamics of the US stock market and the dollar.
The most important event of the week will be the decision of the European Central Bank on the interest rate, as well as the press conference of the head of the ECB Mario Draghi and ECB comment on monetary policy, which will be held on Thursday. Despite the obvious economic growth, inflation in the Eurozone still does not reach the target level of the ECB at the level of 2% per year. Therefore, as is widely expected, the ECB will keep the interest rate at zero level, and the deposit rate is negative at the level of -0.4%. It is likely that this decision will not have a strong impact on the euro. Greater interest will be the speech of Mario Draghi at a follow-up press conference. If he signals the curtailment of the QE program in the near future, the euro will respond with growth.
The dollar continues to hold a leading position, while in Europe the degree of political opposition in connection with the events in Catalonia does not decrease. For the euro, the results of the last elections in Austria, where FPOE, the right-nationalist Austrian party of freedom won with the second place of 27.4%, could also be negative. The current winner Sebastian Kurtz announced his intention before October 26, the National Day of Austria, to decide on the formation of the coalition.
Investors continue to assess the publication of ambiguous indicators of the state of the US labor market. According to data released last Friday by the US Department of Labor, the number of jobs outside of US agriculture in September decreased by 33,000, for the first time since 2010 (the forecast was +90,000). Other parameters of the employment report were more optimistic. Thus, unemployment in the US fell more than expected, to 4.2%, reaching its lowest level since 2001. The average hourly earnings in the US in September increased by 0.5% (+ 2.9% compared to the same period of the previous year).
Last weekend Catalonia voted for independence from Spain, the Constitutional Court of Spain and the European Commission recognized the referendum as illegal. For independence, more than 90% of citizens who came to the polls voted. The situation can take the scale of the pan-European crisis. The euro reacted with the decline. So far, the sales volume of the euro is small, but if the situation with the referendum in Catalonia will worsen, then, probably, a more large-scale weakening of the euro is just beginning.
In Germany, the ruling party won, and Angela Merkel secured herself a fourth term in the Chancellor's chair. The party led by the Christian Democratic Union (CDU) will receive 33% of the vote in the German parliament; this is the weakest result for this party since 1949. None of the parties won a parliamentary majority. The surprise was that the extremely right-wing party "Alternative for Germany" won seats in the parliament, gaining more than 12% of the vote.
The result of the previous week was the continuation of the decline in the US dollar, which weakened amid concerns about natural disasters in the US and geopolitical tensions, as well as lower expectations about higher interest rates in the US this year. On Friday, the index of the dollar WSJ reached a minimum of more than two years. The ICE dollar index reached on Friday the lowest intraday level since January 2015, 91.01 and closed with a decrease of 0.3%, at the level of 91.35.
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