› MARKET REVIEW DECEMBER 31-JANUARY 4

MARKET REVIEW DECEMBER 31-JANUARY 4

EUR / USD

The US labor market surprised market participants last Friday, showing a fairly strong increase in employment and wage growth, updating the annual maximum. A slight increase in unemployment was offset by the remaining strong data. In his speech, Chair of the Federal Reserve Jerome Powell showed caution, saying that this year’s monetary policy will be flexible and will depend entirely on incoming economic data.

Futures on the interest rate of the Federal Reserve System at the moment implies a decline this year, which is fundamentally different from the expectations of the Federal Reserve, which expects two more increases.

At the beginning of this week, all attention will be focused on the start of trade negotiations between China and the United States in Beijing. Negotiations last two days on Tuesday, inclusive, either positive, or negative, will immediately be included in the financial quotes for not only the currency pairs, but also traditional defensive assets such as gold, for example.

Certainly, the suspension of the work of part of the federal government will not be ignored. Just yesterday, US President Donald Trump announced the firmness of his position on the construction of the wall on the border with Mexico. The only concession he voiced was the wall material itself. “The barrier can be made of steel, not concrete, as a potential compromise with Democrats who refuse to finance it,” Trump said.

An additional incentive will be set by macro statistics, which will be released within a week. Therefore, today will be the release of retail sales for November in the EU. The US will publish data on the volume of industrial orders, employment index in the non-manufacturing sector and business activity in it. Later in the evening, a member of the Open Market Committee (FOMC) Raphael Bostic will speak.

Tuesday will be held with the volume of industrial production in Germany, the first EU economy. States will report import/export volumes and trade balance. As we have already mentioned, it was the negative trade balance that caused the trade war that the US President launched.

On Wednesday, the main news will be the unemployment rate in the EU and the trade balance in Germany, which also suffered from a trade war. After all, the German economy is export-oriented. In the evening of Wednesday, the Federal Reserve will publish minutes from the last monetary policy meeting.

On Thursday, the ECB will publish its minutes from its last monetary policy meeting. Recall that the head of the European Central Bank, Mario Draghi, announced the termination of the quantitative easing program. Find out the details after the publication of the protocols. Later in the evening, Chair of the Federal Reserve Jerome Powell, will declare who will answer questions on the protocol that was published the day before and tell about the upcoming plans for the US regulator.

The end of the week will fix our view on American inflation. The consensus forecast does not provide for changes, showing a slowdown in inflation in December. However, a very strong growth in employment and wages for December may give hope for the acceleration of the indicator. Especially in the New Year holidays, as a rule, the population spends much more money than usual.

We are facing an interesting week, filled not only with economic news, but also with political and trade negotiations, which will also have significance.

MARKET REVIEW DECEMBER 31-JANUARY 4


GBP / USD

This week, after weekends and holidays, the UK Parliament will continue its work. British Prime Minister Theresa May may again postpone the final vote on the achieved Brexit deal with the EU. This is three months before the final withdrawal from the Euroblock.

Yesterday, the BBC reported that Theresa May will hold a deferred vote of the Parliament of Great Britain on January 15, citing its sources in the government. This is a day later than the London government itself reported. May herself said that Britain would be in the dark if her Brexit deal were to be rejected by the Parliament. The situation is very precarious and the chances of its outcome are estimated at 50-50.

Managers of large companies and investors are alarmed by the growing risks of withdrawing Britain from the EU without a deal. Already, some investors are withdrawing their assets from the United Kingdom, and the largest companies are transporting their offices.

This week, the most volatile days will start from Wednesday. In the middle of the week, the head of the Bank of England Mark Carney will hold a presentation, after assessing GDP growth from NIESR. On Friday, there will be official data on the GDP of Britain. Production volumes in the manufacturing industry and the change in monthly GDP. Also, be aware of the state of the trade balance of the country.

MARKET REVIEW DECEMBER 31-JANUARY 4


USD / CAD

We will continue to talk about the promising Canadian dollar, for which this week also looks very promising. In light of the commencement of trade negotiations between the United States and China, a reduction in the production of crude oil by the OPEC member countries, there is a prospect of an increase in the price of raw materials. That will provide additional support to the Canadian Dollar, who has already shown a very rapid strengthening.

Already on Monday it is worth looking at the entry point, because in the late afternoon there will be data on business activity in Canada. The very strong data on the labor market, which we saw last Friday, can give hope for stronger data and business activity. On Tuesday, we will learn about the country's trade balance.

Wednesday is the most important and volatile day for the Canadian Dollar. When will the meeting of the Bank of Canada on monetary policy. No one expects changes and, indeed, to wait for a rise in the interest rate right now, very recklessly. However, the change of the rhetoric of the Central Bank, this is something to expect. Warm relations with the United States, the prospect of a recovery in oil prices, a growing labor market, and all this can give the regulator confidence in planning.

The press conference will be held an hour after the announcement of the decision on the interest rate at 19:00 Moscow time. This is where we will hear the rhetoric of the Bank of Canada and its head, Stephen Poloz, in particular.

MARKET REVIEW DECEMBER 31-JANUARY 4


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