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Fed Chairman Jerome Powell reiterated on Thursday evening that "the US economy is in good shape".World stock indices also rose by the end of last week. Investor optimism has grown amid reports of the upcoming signing of a new trade agreement between China and the United States, whose economies are the largest in the world.
Major US stock indexes completed the past week with a decent gain. In parallel with the growth of US stock indexes, oil price quotations also rose last week, despite the fact that oil reserves in the US rose again last week, surpassing analysts’ forecast, to 450.8 million barrels, the highest since November 2017.
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.
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