Weekly Market Analysis

Long term bias for major markets

This is where the markets are trending in the long run ( updated weekly )

EURUSD

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GBPUSD

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USDJPY

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AUDUSD

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USDCAD

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NZDUSD

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Weekly Risk Events and Market Movers

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.

It is likely that the dollar will continue to rise new week. Investors prefer the dollar not only in connection with the policy of the Fed, aimed at further raising the interest rate. Market participants again recalled the trade risks in connection with the intentions of the US president’s administration to introduce additional import duties on goods from China worth $ 200 billion. Last Friday, Donald Trump said that he was ready to expand new duties on Chinese imports in the near future, adding to the tariffs goods worth $ 267 billion. New statements in the context of trade disputes negatively affected the stock markets. In the situation of escalation of trade wars, the dollar acquires the status of a safe haven.

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.

Tuesday

08:30 (GMT) GBP Average Earnings Index 3m / y

Monthly, the National Statistics Office of Great Britain (ONS) publishes a report on average earnings, which includes the period of the last 3 months, including bonuses and without bonuses.

This report is a key short-term indicator of the dynamics of changes in the wage level of employees in the UK. The increase in earnings is a positive factor for GBP, while the low value of the indicator is negative. Forecast: the report for July assumes that the average wage, including bonuses, increased by 2.5% in the last 3 months (against +2.4% in the previous period). With the confirmation of the forecast, the pound will strengthen on the foreign exchange market.

Wednesday

12:30 USD PPI m / m

Producer Price Index (PPI) is one of the leading indicators of inflation in the United States. The PPI indicator estimates the average change in wholesale prices determined by the producers. Higher production costs increase wholesale prices, which ultimately is transferred to the consumer, increasing inflation. A strong result strengthens the US dollar. Forecast: the growth of the indicator in August was 0.2% (against the previous value 0.0%), which should positively affect the USD. If the data are weaker, the dollar will decline.

14:30 USD Crude Oil Inventories

Energy Information Administration (EIA) of the US Department of Energy will publish a weekly report on oil and petroleum products in US stores. Decrease in reserves, as a rule, has a favorable effect on oil prices. The publication of data usually is accompanied by a surge in volatility in oil prices, which are denominated in US dollars, and oil futures. The previous value of the indicator was -4.3 million barrels of oil and oil products. Forecast: -3.46 million barrels of oil and oil products, which should support oil prices.

Thursday

01:30 AUD Employment Change / Unemployment Rate

The employment rate reflects the monthly change in the number of employed citizens of Australia. The growth of the indicator has a positive impact on consumer spending, which stimulates economic growth. The high value of the indicator is a positive factor for AUD, and the low value is negative. Forecast: in August the number of employed citizens of Australia increased by 18,400 people (against decreasing by -3,900 people in July)./

Also at the same time, the Australian Bureau of Statistics will publish a report on unemployment – an indicator that measures the ratio of the proportion of the unemployed population to the total number of able-bodied citizens. The growth of the indicator shows the weakness of the labor market, which leads to a weakening of the national economy. A decrease in the index is a positive factor for AUD. Forecast: unemployment in Australia in August remained at the same level of 5.3%.

If the values ​​of the indicators are worse than the forecast, the Australian dollar will decrease.

11:00 GBP Official Bank Rate / Monetary Policy Summary / MPC Official Bank Rate Votes

The Bank of England’s interest rate decision. It is likely that the rate will remain at the current level of 0.75%. /

Also at this time are published: a report on the monetary policy with the results of voting on the rate and other issues, as well as with comments on the state of the economy; the protocol of the Bank of England’s Monetary Policy Committee (MPC) with the distribution of votes for and against the increase / decrease in the interest rate. The main risks for the UK after Brexit are associated with expectations of a slowdown in the country’s economic growth, as well as a large deficit in the current account of the UK’s balance of payments.

At the same time, with regard to the stability of the pound, everything can be not so bad. High inflation in the UK may force the Bank of England to take the path of further tightening of monetary policy and a new interest rate hike.

This in the long run can strengthen the pound, even against the backdrop of the negativity associated with the Brexit procedure.

The intrigue about the further actions of the Bank of England remains. And in trading with the pound and the FTSE100 index, a lot of trading opportunities are provided during the publication of the bank’s decision and during its subsequent press conference.

11:45 EUR Main Refinancing Rate

The ECB will publish its decision on the key rate. The ECB’s tough position on inflation and the level of key interest rates helps strengthen the euro, a soft position and lower rates weaken the euro. Forecast – the rate will remain at the same level of 0%. The ECB deposit rate for commercial banks is also likely to remain unchanged at -0.4%.

The rate increase in the Eurozone is unlikely in 2018. It is widely expected that the ECB will confirm its plans from October to reduce the monthly purchase of bonds to 15 billion euros and complete QE in December. Earlier, the head of the ECB Mario Draghi stated that the QE program can be extended if necessary.

12:30 EUR ECB Press Conference

It is expected a surge in volatility not only in the euro, but in the entire financial market.  ECB President Mario Draghi is famous for being able to develop financial markets with his own comments. Similar previous ECB decisions on interest rate and subsequent press conferences have moved the euro rate by 3-5% in a short time.

12:30 USD CPI m / m / Core CPI m / m

The block of inflation indicators for the USA for August.

The Consumer Price Index (CPI) is a key indicator for assessing inflation and changing consumer preferences. A positive result strengthens the USD, a negative result weakens. Forecast: +0.3% (against +0.2% in July). /

The Core Price Index (Core CPI) determines the change in the prices of the selected basket of goods and services for a given period. Food and energy are excluded from this indicator to obtain a more accurate estimate. A strong result strengthens the US dollar, while a low one weakens. Forecast: +0.2% (against +0.2% in July).

If the data are weaker, the dollar will decline.

Friday

10:00 GBP BOE Gov Carney Speaks

From him, participants in financial markets will be waiting for the clarifying of the situation regarding the future policy of the central bank of Great Britain. Volatility during his speech usually grows abruptly in pound trade and in the index of the London Stock Exchange FTSE, if Mark Carney will give any hints at tightening or easing monetary policy.

If he does not touch upon the questions of the monetary policy of the Bank of England, the reaction to his speech will be weak.

12:30 USD Core Retail Sales m / m / Retail Sales m / m

Retail sales excluding sales of cars (Core Retail Sales Ex Autos) reflect the total sales of retailers of all sizes and types, with the exception of car dealers. The change in sales in the retail sector is the main indicator of consumer spending. The report is leading, and further data can be heavily revised. A high result strengthens the US dollar, low – weakens. Forecast: +0.5% in August (against +0.6% in July). /

Retail Sales is the main indicator of consumer spending in the US, showing a change in sales in the retail trade. A high result strengthens the US dollar, and vice versa, a low result – weakens. Forecast: +0.4% in August (against +0.5% in July).

This is good performance, despite their relative decline. If the data are weaker, the dollar will decline.