Analytics › MARKET REVIEW SEP 10 - SEP 14



Last Friday, we witnessed an extremely strong report on the US labor market. Yes, unemployment did not decrease to a record level of 3.8% as expected, but a strong increase in the non-agricultural sector by 201,000, which leveled the unemployment data because of the wage growth. After all, unemployment has not increased, but remained at the same level.

Eurozone, on the contrary, disappointed with slowing the GDP by 0.1% on an annual basis, industrial production in Germany altogether went into the red zone.

This week, the most volatile news will start to come out from Wednesday. The Federal Reserve will publish its “Beige Book”, where the investor learns about the plans of the American regulator for the near future. On Thursday, a meeting of EU financial ministers will take place, after lunch the ECB will announce a decision on the interest rate. Since nobody expects changes, the key driver will be the speech by the President of the European Central Bank, Mario Draghi, who will speak at a press conference at 15:30 Moscow time. Investors are very interested in the question of QE, whether the ECB will continue the program for Italy in the light of recent developments. Italy is currently the main risk for the euro, although the new government has assured that it will adopt the country's budget within the framework of EU regulations. Hence, the representatives of Italy will listen especially carefully.

By the end of five-day trading period, there will be two important news for the main pair. The level of wages in the EU for the second quarter and the base index of retail sales in the US. As we know, the growth of salaries increases the paying capabilities of the population, which ultimately nudges inflation, which stubbornly does not want to grow. Retail sales are one of the main indicators of GDP growth, and GDP is an indicator of health of the economy.

The closer the Federal Reserve meeting on the interest rate, the more interesting and volatile the market becomes.



The United Kingdom will please us with the volatile news of this week. Immediately on Monday, while the currency-competitors "digest" a strong report on the US labor market. On the opening of the European trading session, Great Britain will discuss its GDP, the volumes of industrial production and manufacturing in the manufacturing industry. In general, of course, the positive is not enough, but the release better than expectations will definitely support the pound sterling, which is not the first week under the pressure of Brexit.

On Tuesday, Britain will report the labor market. The average level of wages considering premiums, where growth is expected to be 0.1%, which is good. The change in the number of applications for unemployment benefits is also expected to decline. Employment, unfortunately for the pound, will also decline, but unemployment will remain at the same low level of 4.0%. It is worth noting that unemployment last time was at such a low level was way back in 1975.

A meeting of the Bank of England will be held on Thursday. The regulator will announce the decision on the interest rate. No changes are expected, all members of the bank's board will vote to save the current rate (as expected). However, perhaps the main event of this day will be the accompanying statement of the Governor of BA Mark Carney, which will be held on Friday. The governor will inform about the vision of the Central Bank and the nearest prospects for the development of monetary policy.



The green continent also deserves attention on this five-day event. Australia surprised everyone with a record, for the past four years (precisely), GDP growth of 3.4%. This week, we learn about the business confidence from NAB on Tuesday, and the consumer sentiment from Westpac on Wednesday. In addition, on Thursday, Australia's labor market will generate a report. The employment level is expected to emerge from the red zone, unemployment on the other hand, will remain at a low level of 5.3%. Change in full employment will know later.

In general, we can say that the Australia raised its head, but is not yet ready for a counterattack. The reason for this is of course the US trade war with China. The intention to pressure the US president, Donald Trump, on the PRC has a negative impact on partner countries.

Speaking on Friday on BBC, Trump said that the administration already planned tariffs for additional Chinese goods worth a total of 267 billion dollars. The further escalation of the trade conflict between the two most powerful economies will continue to pressure the emerging markets and, finally, the partner countries of the People's Republic of China.



In the energy market, the tension is subsiding. Support for the price of oil this week will be the beginning of the hurricane / storm season, so on Friday yet another hurricane, “Florence”, was born. Over the weekend, it gained strength and is approaching the eastern coast of the United States. Currently, meteorologists do not dare speak of its power; only approximate figures of 1-3 points (wind speeds of up to 150 km / h).
This "bad weather" can make adjustments in the supply of raw materials, because in the US logistics of raw materials occur mainly by land transport. Another plus to the price increase from the US is a decrease in drilling activity. Therefore, last Friday Baker Hughes reported the reduction of drilling rigs by 2 pieces.

The next factor in maintaining prices is the clash of conflicting armed groups in Libya, which can also lead to disruptions in the supply of raw materials.

Finally, the main deterrent to the growth in the price of black gold is the further escalation of the US trade conflict with China. As we have said, the administration of the American president has planned additional tariffs on Chinese goods worth $ 267 billion. That can reduce the demand for fuel. Moreover, this conflict makes the US dollar a defensive-asset, provoking its growth to competitor currencies, which in consequence makes raw materials more expensive for emerging markets. As a result, again reducing demand. Carefully follow the news, both geopolitical and the weather forecast!


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