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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.
The new week has already begun with a gap in the quotes of the Canadian dollar. As it became known, last Sunday the US and Canada reached an agreement on NAFTA. This is a positive factor for the Canadian currency, which reached its highest level in four months against the US dollar. Also worth highlighting Tuesday, when at 04:30 (GMT) will be published decision of the RB of Australia on the interest rate, and Friday, when at 12:30 (GMT) the US Labor Department will publish data on the labor market for September
This week two of the world’s largest central banks hold meetings and decide on the interest rate. Wednesday at 18:00 (GMT) the Fed’s will publish the decision on the interest rate, and at 21:00 (GMT) – the RBNZ. It is expected that the US Central Bank will raise the interest rate by 0.25% to 2.25%. The probability of such a decision, according to the CME Group, is almost 100%. Many investors have already have pawned in the prices another rate hike in December, and they will be interested in the Fed’s monetary policy course planned for the next year. On the part of the RB of New Zealand, investors do not expect changes in the current monetary policy, despite strong data on the country’s GDP for the 2 quarter, published last week.
In the new week, the release of consumer inflation and retail sales in the UK will be published. It is expected that retail sales in August fell, and inflation began to decline again. All these are negative factors for the pound. Market participants also need to take into account that the trade conflict between the US and China this week is likely to intensify. The administration of President Donald Trump plans to announce the introduction of new duties on Chinese goods worth $ 200 billion, and in Beijing, they are discussing retaliatory measures. The increase of trade risks can again provoke the growth of demand for the dollar as a protective asset.
As shown by the US Department of Labor data, published last Friday, the number of jobs outside agriculture in August increased by 201,000, the unemployment rate was 3.9%, and wages in August rose by 2.9% compared with the same month a year earlier (the forecast was 191,000, 3.8%, 2.7%, respectively). The data indicate a high growth in employment and wages, which allows the Federal Reserve to continue raising interest rates at a planned pace. The focus of traders’ attention this week will be meetings of central banks in the UK and the Eurozone, as well as the publication of a number of important macro data for the UK, Australia and the USA.
The focus of traders this week, in addition to the decisions of the central banks of Australia and Canada on interest rates, will be the report on the US labor market for August, which will be released on Friday. Data on the unemployment rate and the number of jobs created outside the agricultural sector (NFP) will be published, but the dynamics of the average hourly wage of Americans will be of greatest interest in the report. The higher the salary, the higher may be the future inflation and the greater the impact this will have on the rhetoric and the actions of the Fed in relation to monetary policy.
Powell’s speech encouraged the bulls of the US stock market and supported the stock indices, which rose on Friday and continued to rise at the beginning of the new week, reaching new record levels. Investors abstracted from foreign trade risks. Two-day talks between the representatives of the United States and China could not fundamentally change the situation after earlier in the week the US and China introduced reciprocal customs duties on goods worth another $ 16 billion, while the total amount of duty-imposed imports reached $ 50 billion on each side. Trade conflicts so far went into the background This week, market participants will also follow the publication of the US GDP data for the second quarter, and inflationary consumer price indices in the Eurozone.
Market participants will follow the economic conference in Jackson Hole, organized by the Federal Reserve. Unexpected statements by management representatives of the world’s largest central banks at this conference can increase volatility in financial markets, which are already in the turbulence zone due to the escalation of international trade conflicts.
This week, investors will follow the publication of the results of the meetings of the central banks of Australia, New Zealand, devoted to monetary policy issues. Market participants will also monitor the publication of data on UK GDP for the 2nd quarter and data from the Canadian labor market for July.
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