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Next week, financial market participants will study economic indicators presented by the static services of Australia, New Zealand, USA, Canada, as well as the results of the meetings of the RB of Australia and the Bank of England. Also, next week in China will celebrate the New Year, in connection with which the Chinese stock exchanges will be closed.
This week, participants in financial markets will study economic indicators presented by the static services of Australia, Germany, Eurozone, USA, as well as the results of the Fed meeting and of the vote in the British parliament according to the new Brexit plan proposed by Prime Minister Theresa May.
Last week, the British Parliament rejected Teresa May’s plan for secession from the EU. And now, on Monday, British Prime Minister Theresa May will present an updated version of the Brexit agreement, which should be put to a vote on January 29. However, no big differences can be expected. Further confusion may lead to a slowdown in trade between the UK and the EU, and cause additional tension that will put pressure on the British and European economies.
Statistics on consumer inflation in the UK will be published on Wednesday. Economists expect inflation in December at 0.2% (+ 2.2% year on year). If the figures turn out to be higher than the forecast, then this will increase the pressure on the Bank of England towards a faster increase in the interest rate, and this is already a positive factor for the pound.
Futures on federal funds, which investors use to bet on Fed policy, last Wednesday indicated a 91% chance that interest rates would be reduced this year or remain at the same level. Investors are increasingly inclined to think that in 2019 the Fed will not raise interest rates. The more cautious position of the Fed in this matter, voiced by Powell on Friday, confirms investors’ opinion that the Fed is likely to refrain from raising rates in 2019 at all.
A number of important macro statistics are expected to be published in the new short week, and the 4 January is the most intensive day for news. On this day, data on consumer inflation in the Eurozone will be published, as well as data from the US and Canadian labor markets.
The central event of the next week will be the Fed meeting, which will end on Wednesday with the publication of the rate decision. It is widely expected that the rate will be increased by 0.25% to 2.5%. Investors will carefully study the Fed’s statement following the meeting in order to understand the Central Bank’s future plans for the next year. This meeting promises to be decisive for the medium and long term perspective of the dollar. The harder the Fed’s statement on this will be, the greater potential for growth in the next year will be the dollar.
In the new week investors will follow the voting in the British parliament on the Brexit agreement reached in November, the publication of data from the UK labor market, indicators of consumer inflation in the US, the Swiss National Bank's monetary policy statement with a decision on the rate, the ECB meeting and decision on the rate and the program QE, the publication of data on retail sales in the United States.
In the new week that has begun, market participants will follow the publication of data on the US labor market in order to understand how actively the economy of this country is developing. Strong values may force the Fed to accelerate interest rate increases, and this will once again push the dollar up. Participants in the oil market will follow the meeting of OPEC and the allies of the cartel, which will be held in Vienna. The pressure on Saudi Arabia, in fact the head of OPEC, and the allies of the cartel led by Russia, is growing, as the cartel, as many believe, must reduce production in order to limit the offer and provide support to prices.
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