› MARKET REVIEW OCTOBER 08 - 12

MARKET REVIEW OCTOBER 08 - 12

EUR / USD

The rally of the American dollar lost momentum on the mixed report of the US labor market. The release of the number of people employed in the non-agricultural sector did not meet expectations, but as Janet Yellen (Former Federal Reserve Chairman) stated earlier, and now the current Federal Reserve Chairman Jerome Powell confirms, the labor market is enough for 120 thousand new jobs per month. Moreover, we should not forget that in September, the States were pretty batted by a hurricane, which left many without work. Based on this, we can expect a stronger report on the labor market in November.

Also worth noting is the US unemployment, which has dropped to new record levels. The last time such low unemployment was observed was nearly 48 years ago. Therefore, the only weak point was the growth of salaries, in September it was unchanged. Given all of the above, many investors consider the dollar undervalued, and that right now there is a good opportunity to buy the American dollar on a drawdown.

This trading week, the most volatile will be the days from the equator, that is, from Wednesday. On the third day of the trading five-day week, there will be a release of the US producer prices for September. On Thursday, two important events are expected at once. The publication of the protocol of the last meeting of the ECB on monetary policy, unrecorded comments that can contribute to the value of the European currency. However, an hour later, after the publication of the aforementioned protocol, the release of US inflation will take place. Experts expect further acceleration of the indicator, which will continue to motivate members of the Federal Open Market Committee (FOMC), led by Federal Reserve Chairman Jerome Powell, to continue raising interest rates.

The nearest rate increase by the Federal Reserve is expected in December of this year. As well as the market has already started talking that the Federal Reserve may raise the rates three times next year, not twice, as previously expected.

The end of the week will tell us about the volume of industrial production in the EU for August. Bloomberg experts expect the indicator to grow and leave the red zone, which will support the single European currency. Later, Friday evening, the University of Michigan, USA, will publish the indices of expectations and consumer sentiment, where mixed readings are foreseen, but remain at the peak of recent years.

The week will start, as usual, sluggishly, but do not forget about geopolitics and the “US versus all” trade war, the latest news about which can also adjust some currencies. The main pair is no exception.

MARKET REVIEW OCTOBER 08 - 12

GBP / USD

British Sterling turned out to be one of the best currencies of the past week. Investors do not leave hopes for a deal within the framework of Brexit of the United Kingdom with the EU. Frankly, this optimism is not unfounded. European Chief Negotiator Michel Barnier shared comments that the European Union is ready to make the UK a more “unique” and “comprehensive” proposal than previously considered.

On one hand, these are positive signals for Great Britain, but on the other hand, this means that the EU will abandon the option of the British Prime Minister, Theresa May. Last week, the conservatives congress of the Prime Minister of the United Kingdom was held, at which Theresa May made it clear that the UK is better off without a deal from the EU altogether than on unfavorable terms. If EU representatives offer a deliberately disadvantageous option, the negotiations for the separation may again be on the verge of failure.

On Wednesday, the EU negotiators will meet with Teresa May, where we will learn about the details of the proposal from the European side and the British side’s reaction to it. The outcome of this meeting will definitely reflect on the strength of the British Sterling.

Wednesday will also be saturated with volatile economic news. There will be a release of the GDP of Great Britain, where on a monthly basis, the indicator is expected to slow down amid the “separation” process with the EU. However, the manufacturing is expected to increase production. In addition, there is data on the condition of the trade balance of Great Britain, including the EU and excluding. Closer to lunch, a member of the Monetary Policy Committee of the Bank of England, Andy Haldane, will speak. The speeches of BoE members often contain data on possible future rates of the monetary policy of the regulator.

MARKET REVIEW OCTOBER 08 - 12

OIL

The black gold market remains nervous, full of fears and associated speculation. And not without reason, I would like to note. The number of US oilrigs has been falling for the third week in a row. Drillers in the USA removed two oilrigs, resulting in a total number of 861.

Last Friday, a US official said that the United States might consider an exception for countries that have shown efforts to reduce imports of Iranian oil in the framework of the upcoming US sanctions, which will come into action on November 4. Frankly, many hope so. For example, India plans to buy 9 million barrels of Iranian oil next month, according to Reuters.

However, traders claim continuous concerns about the US-China trade war, which could slow global economic growth. For example, the head of the Asia-Pacific trade department at futures brokerage company Oanda in Singapore reported, “further evaluation of oil prices was nothing but talk, and that Saudi Arabia replaced all of Iran’s lost oil in the market.”

We have previously noted that China completely abandoned American light oil in the framework of a trade war with the United States. This means that China switched to the Eurasian raw materials market, which will reduce the supply on the market, while the United States will have to give substantial discounts on its oil in order to attract buyers.

MARKET REVIEW OCTOBER 08 - 12


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