The weak report of the US labor market from last Friday spreads the idea of slowing the US economy. Let's analyze the data a bit. Employment in the non-agricultural sector has increased by 155 thousand, which is critically close to the lower acceptable limit of 150 thousand. Yes, indeed, it can be alerted. As for the rest, the year-over-year wage growth remained the same as unemployment itself. Therefore, investors were frightened only by a weak increase in employment.
Now, at the end of the year, investors are more meticulous about economic data. After all, it is time to build investment plans for the next year. Moreover, if US statistics continue to disappoint, it may signal a change in the Federal Reserve’s plans toward a softer monetary policy. As a result, the number of interest rate increases next year will be completely dependent on incoming economic data.
This week will bring us this necessary data. One of the important days for the US will be Wednesday, as the inflation report will be released. If this indicator also disappoints, the sale of the US dollar will be more rapid. Because core inflation is one of the most important indicators when deciding to tighten monetary policy by the US Federal Reserve. Expectations, in general, are bullish, specifically the growth of the indicator by 0.1%.
The second important day for the US dollar will be Friday. As we know, retail sales form the lion’s share of any country's GDP. At the opening of the US trading session there will be releases of the base retail sales index and their volumes.
For Europe, the most volatile will be Thursday-Friday. After the equator of the week, a meeting of the ECB will be held and the interest rate will be announced. Nobody expects changes, but the rhetoric of representatives of the regulator is of interest. According to the plans and expectations of the market, the QE program ends this month. And this will be the focus. If the European regulator decides to continue the program, or introduce another incentive program, the euro will be sold out on disappointments. On the other hand, if the ECB closes QE according to the latest announced plans of the regulator, and talks about tightening monetary policy soon, the euro will start to buy.
On Friday, there is data on business activity in the manufacturing sector and the service sector, as well as a composite indicator. Closer to dinner, a Eurogroup meeting will be held and wages will be released.
The nearer the end of the year, the more nervous the markets become. Investors are eager to go into the emerging trend as soon as possible. A change in the trend in the main pair is quite possible, but this requires a number of changes both in the economic data and in the rhetoric of regulators.
Great Britain has a very volatile week. A slight improvement in macro statistics, could speak about the hints of strengthening the sterling. However, the main driver will be the vote of the British Parliament on the issue of the exit from the EU, which has already been agreed with the European Commission. The situation in the London parliament is very controversial, both the opponents and the Brexit-supported legislators split into two camps. Some say that there will be no better deal, the second want to remove Prime Minister Theresa May from her post.
In the first case, the pound sterling will have a weighty reason to strengthen, but in the event of an escalation of the political conflict in the British government, chaos will ensue with possible re-election, by holding another referendum. There are a lot of options for the progression of events, if the parliament does not miss the current Brexit deal. Voting will take place tomorrow (Tuesday 11, December), despite the fact that this week will be released volatile statistics, this vote has the highest priority.
Economic indicators are expected to release GDP, industrial output, manufacturing production and trade balance. All of this is already expected from Monday. On Tuesday, the labor market of the United Kingdom will be reported, the average wage level, employment, unemployment and changes in the number of applications for unemployment benefits.
In the labor market, it is worth noting that cheap labor is leaving Britain, in fear of uncertainty about Brexit. In addition, the British themselves will not work for low wages, therefore salaries can be expected more bullish data. However, this is only a logical reasoning, not a recommendation. Also, do not forget about voting in the British Parliament, as discussed above.
Here, in fact, are all of the volatile events regarding the British pound sterling for this week. We have a lot of patience and from Tuesday we make plans for trade, as a result of voting.
Last week was quite interesting. OPEC meeting made the markets nervous. However, a reduction consensus was found. The cartel agreed to cut production by 1.2 million barrels per day, which should contain a further fall in prices. The United States for the first time became a full net exporter of raw materials last week. The export of oil and its products to the United States for the first time exceeded imports.
However, a bullish factor was a report from Baker Hughes about reducing the number of oil rigs in the United States in more than two years. Last week, the number of installations was reduced by ten. This indicator is ahead of US production. Because of such a sharp reduction, we can talk about the reduction of stocks in the United States, which we will find out about on Wednesday.
In general, market participants tried to keep a drop in prices. So far they have succeeded, but OPEC is not the only one regulating prices now, the United States is becoming a full-fledged participant in the oil market. Angry tweets of the American President are expected soon, since he asked not to cut production.