Evdokia

Evdokia Pitsillidou, Head of Risk Management at easyMarkets. She specialises in commodities, options and currencies and loves to solve analytical problems and overcome challenges.

2017 was an interesting year with many significant events around the world. Last year, investors started the year concerned about the elections in France and Germany. Previously, Brexit and Trump had shocked the world and many were concerned about a shift to rightwing politics.

Today, we are starting the year at a high note. The global markets are stable, central bankers have signaled a new era in monetary policy, and other than Italy, there are no major elections in the developed countries. The problems in Germany and UK will likely be solved through talks, and not through a new election.

The first day of the week is usually very important for traders and investors. This is as the holiday period ends and investors resume business.

During this time, investors seek to initiate new positions for the year. As a result, this week, we may expect volumes to start picking up as investors who exited positions at the end of the year for tax reasons start investing again. This was evidenced with last week’s sell-off that led the Dow and Nasdaq down by 118 and 67 points respectively.

This week, investors will be watching out crucial manufacturing data from China. This data, which will be released tomorrow is an important gauge into the manufacturing space in a country that is so important to the markets. A slowdown in China can mean a slowdown in other countries that export their products to the country. Investors expect the manufacturing to slow to 50.6 from last month’s 50.9. Traders remember the sell-off that happened two years ago when this data was released.

Investors will also pay attention to manufacturing data from Germany and the United Kingdom on Tuesday. As the biggest economy in Europe, the data from Germany is very important. Investors expect the country’s PMI to remain steady at 63.3. A PMI is seen as positive if it happens to be above 50. In the UK, investors expect the PMI to slow to 50.0 from last month’s 50.8.

On Wednesday, the attention will shift from manufacturing to employment in Germany. Germany will release its employment change which traders expect to fall by 14K. On the same day, the United States will release its manufacturing PMI which investors expect to remain steady at 58.2. Going forward, investors will watch out for these numbers as the country implements the sweeping tax reform package.

On the same day, the Fed will release its minutes for the December meeting. Investors like to read these minutes as they give direction on the Fed policy. As you recall, in the previous meeting, the Fed signaled three increases for this year. In the minutes, investors will like to see the finer details.

The biggest news of the week will be the employment data from the United States. On Thursday, ADP will release its employment change data and on Friday, we will get the non-farm payrolls, unemployment rate, and wages data. As the economy remains at the full employment territory, traders will shift focus to wage growth.

This week, we will also focus on the Middle East. In recent days, anti-government protests have flared up in Iran. The question among investors is, are we starting to see a new Middle East Spring?

Sources:

https://www.reuters.com/article/us-iran-rallies/iranian-protesters-attack-police-stations-raise-stakes-in-unrest-idUSKBN1EP064

https://tradingeconomics.com/germany/manufacturing-pmi

https://tradingeconomics.com/china/manufacturing-pmi

http://www.independent.co.uk/news/world/brexit-trump-le-pen-and-the-rise-of-the-right-a7443241.html

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