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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.
Last week, investors once again gave preference to the dollar. The DXY dollar index, which tracks the US currency against a basket of 6 other major currencies, ended the last week with a gain of 0.53% (+52 points) to 96.84. The escalation of the US trade conflict with China (the White House threatened to double the import duties on Chinese goods) also forces investors to choose the dollar as a defensive asset. In the new week, investors will pay attention to the speech of the head of the Fed Jerome Powell, the publication of data on US GDP for the 3rd quarter, the protocol from the November meeting of the Fed, as well as inflation index of consumer prices in the Eurozone.
British Prime Minister Theresa May has faced strong resistance in parliament with the promotion of a draft agreement on withdrawal from the EU. If the vote on the agreement fails, then Teresa May may be dismissed. It can also lead to a general election or a second referendum. The probability of a Britain exit from the EU without an agreement rose to 50%, against 20% the previous week.
As reported last Friday by the US Department of Labor, the average hourly earnings rose by 3.1% in October compared with the same period last year. This is the highest annual earnings growth since 2009. Unemployment in October remained unchanged, at the level of 3.7%. This is the lowest level since December 1969. The number of non-agricultural jobs increased by 250,000 in October. Economists had expected that the number of jobs in October increased by 188,000.
The US dollar continued to strengthen last week after the publication of the minutes from the September Fed meeting, according to which the US central bank is going to continue to raise interest rates. The Fed signalled the possibility of another rate hike in 2018 and three raises in 2019. Higher interest rates usually increase the demand for national currency. The dollar also receives support due to faster economic growth in the USA, than in other countries.
Negotiators from the UK and the EU over the weekend could not agree on measures to avoid the appearance of a physical border between the UK and Ireland. Negotiations on Brexit once again reached a dead end, reducing the chances of a possible conclusion of an agreement on the British exit from the European Union during the upcoming EU summit this week.
As reported last Friday by the US Department of Labor, the number of non-farm jobs increased by 134,000 in September (the forecast was +185,000). At the same time, the values for July and August were revised upwards by a total of +87,000. The unemployment rate dropped to 3.7% versus 3.9% in August, reaching the lowest level since the Vietnam War. Low unemployment, a continuing increase in the number of new jobs and higher real wages lead to higher consumer spending, which contributes to the growth of GDP.
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