The biggest news this week in the market was the truce between the United Kingdom and Germany. On Wednesday, it was reported that Germany had agreed to remove some of the hard-line positions it had on Brexit. On its part, the UK agreed to accept a narrowed approach that will extend the negotiations until after the divorce date of March next year. This was a breakthrough for the EU and the UK, which have remained divided about the future of the UK. Two months ago, Theresa May met with her cabinet at Chequers where they agreed on the approach. This led to the resignation of foreign affairs and the Brexit secretary. The bill was then passed narrowly in parliament, although major divisions remain. Last week, the chief EU negotiator said that he disagreed on many parts of the deal and on Sunday, Theresa May wrote a strong article saying her position. As shown below, the news on Wednesday led to a sharp increase in the pound.
The cryptocurrencies were also back in news this week. The combined market capitalization of the currencies dropped by more than $15 billion after a report said that Goldman Sachs was abandoning the plans to set a trading floor for cryptocurrencies. This was a big news for cryptocurrencies because of the role Goldman would play in the space. Goldman is the second biggest investment banks in the world with clients who include hedge funds, high net-worth individuals, and governments. Therefore, if other investors like Blackrock were to enter the cryptocurrencies industry, Goldman would have been an ideal partner. Another big news was an article by TechCrunch that found that ETH was likely worthless. This was confirmed by its creator, Vitalik Buterin who said that the network needed to change. Bitcoin is now trading at $6400 and ETH is trading at $220.
Australia was in the news a lot this week. On Monday, the country reported that the retail sales for the month of July were unchanged, which was lower than the growth the traders were expecting. The following day, the RBA left interest rates unchanged and signalled that a rate hike was not around the corner. The following day, the country’s data showed that the GDP for the second quarter was at 3.4%, which was better than the expected 2.8%. Still, the Aussie is trading lower as traders fear about the continuing trade war.
The Emerging Market worries continued this week. Last week, the problems were in Turkey and Argentina. This week, GDP data from South Africa officially ushered the country into a recession. This was a blow to the government of Cyril Ramaphosa who traders expected to usher a new era in growth. The decline in the country’s economy was attributed to the falling metal prices, reduced exports, and the political uncertainty.
The employment numbers from the US will be the highlight of the day. The labour department is expected to release the August’s jobs numbers. Traders expect that the Non-Farm Payrolls were at 191K, which will be higher than last month’s 157K. Better than expected jobs numbers will mean a higher dollar as chances for a December rate hike increases.