Welcome to the easyMarkets weekly review where we look back over the results of some of this week’s economic indicators. It gives us the chance to reflect on whether expectations were met or missed and to examine a successful trade you could have made this week.
Event: UK Consumer Price Index (Nov)
Date: Tuesday 13 December 2016 at 09:30 GMT
Markets affected: GBP/USD, EUR/GBP
Trending hashtags: #gbp, #inflation, #uk
The UK Consumer Prices Index (CPI) for November increased to 1.3% compared to the previous month’s result of 0.9%, its highest level since the end of 2014. According to the Office for National Statistics (ONS), the increase in inflation was as a result of a rise in clothing prices and also fuel prices. Petrol prices rose by 1.4% during the month and the price of diesel also increased by 1.7%. It is still estimated by some investors that the continuing weakness of the pound could be an important factor in raising business costs, and those increases are expected to weigh on households.
Event: US Retail Sales (Nov)
Date: Wednesday 14 December 2016 at 13:30 GMT
Markets affected: EUR/USD, AUD/USD, USD/CAD
Trending hashtags: #usd, #retailsales
US retail sales just managed to increase during November. According to the Commerce Department, retail sales edged upwards by 0.1% and so failed to continue the encouraging gains achieved during October by 0.6% (revised downwards from 0.8%). The result was somewhat disappointing as analysts were forecasting an increase of 0.3% for November. During the last twelve months, retail sales increased by 3.8%. Excluding, food, building materials, and auto sales, retail sales marginally increased by 0.1%. The weaker than expected report suggests that economic growth was not as strong during the year’s final quarter.
Event: Fed Interest Rate Decision
Date: Wednesday 14 December 2016 at 19:00 GMT
Markets affected: EUR/USD,
Trending hashtags: #interestrate, #usd, #federalreserve
As anticipated by analysts, members of the Fed voted unanimously and raised interest rates by 0.25% to now sit between 0.5% and 0.75%. This is the first hike for 2016 and only the second time it’s gone up in a decade. Gold plunged to a 10-month low closing at $1.140 an ounce after the announcement. At one point it dropped below $1,139 not just due to the expected rate rise but also due to the hawkish comments from the Fed implying further rate hikes and soon. There was mention of three rate hikes for 2017 showing confidence in the health of the US economy; at best the markets were predicting only two hikes for next year. Chair of the Fed, Janet Yellen commented on a strong labour market and resilient economy. The US added 2.25 million jobs in the past year leading the Fed to increase its growth expectation for next year from 1.9% to 2.1%. The US dollar experienced highs while commodities priced against it like gold and oil dropped
Event: Australian Unemployment Rate (Nov)
Date: Thursday 15 December 2016 at 00:30 GMT
Markets affected: AUD/USD
Trending hashtags: #aud, #unemployment
Australia’s unemployment rate came in at a higher-than-expected 5.7% for November, more than the 5.6% seen in October. Economists are not too concerned yet for the health of the economy but worries may be ahead if unemployment continues to rise. Overall for this year, the job market has been showing some weakness. Unemployment has dropped but so has participation in the job market, and job creation has been mostly in the part-time sector. People in employment rose by 39,100 in November, much higher than the expected 17,500 according to the Australian Bureau of Statistics. The bureau also announced that the seasonally adjusted workforce participation rate rose to 64.6%, better than October’s 64.4%.
Event: UK Interest Rate Decision (Nov)
Date: Thursday 15 December 2016 at 12:00 GMT
Markets affected: GBP/USD
Trending hashtags: #gbp, #interestrate
The Bank of England kept rates unchanged at 0.25% as the sterling took a pounding on US dollar strength following the Fed’s intention to continue raising its own rates. The divergence between the two central banks is putting added pressure on the pound which saw a 0.8% drop after the Feds rate hike announcement of the previous day to trade at $1.25. Even though the CPI figure released earlier this week show inflation has risen and is well on target to go above the 2% target rate next year, the BOE are keen to hold off on any rate hikes as a hedge against the uncertainty of the Brexit negotiations. Analysts are now turning their eyes to the 2 February interest rate decision where the Bank will also release the quarterly inflation figure.
The Trade of the Week
Time in: Wednesday 14 December 2016 at 17:00 GMT
Market : XAU/USD
Investment: $500 with 200:1 leverage
Time out: Wednesday 14 December 2016 at 21:00 GMT
If you had sold the gold with a $500 margin at the price of $1,163.32 per ounce and closed the deal after the Fed announcement on Wednesday at 21:00 GMT which saw a 1.8% drop in the gold’s price you might have made $1,830. Note this example does not take into account spread.
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