It would seem that the week on Friday should have been boring, but dollar sales on the weak USA consumer price index indicators breathed life into quotes: inflation continues to decline, and the question of what will happen with the Fed's interest rate after the December FOMC meeting is getting sharper and sharper ...
We promised a surprise in October and it seems it has taken place: despite a significant reduction in the number of people employed for the past month according to NFP (-113K), the dollar, on the contrary, increased, and the reason for this was the conflict with the dynamics of wages, and not only for this reason ...
September gave us a wonderful trading for the unexpected increase in the interest rate of the Bank of Canada. What kind of a trump card did October prepare for us? How will North Korea hold the anniversary of the founding of the Communist Party, will the tax reform project in the US go beyond the Republicans, what will the third quarter GDP indicators be for key players, and will the Bank of England give us another “surprise” this year. The tenth month of this year, perhaps, will be holding our attention constantly.
An unexpected increase in the interest rate of the Bank of Canada came as a surprise of this week. This surprise is not only “weekly”, but also easily seems like the “event of the year”. Mario Draghi also noted, not keeping his promise - the discussion of the reduction of QE in September did not take place and it was postponed to October. The dollar remained subject to a “weather forecast”, then to a “political talk show.”
The last week of the month, traditionally boring, will be replaced by the active beginning of August: Non-Farm Payrolls and others are on the horizon ... The dollar continues to remain under political influence, Canada raised the rate, and Australia knew less inflation.
The market got an extra dose of “misunderstandings”. While a number of interest rate increases by the key Central banks are expected, the inflation, necessary to stimulate consumer expenditures, is still chilling out in the shadow of a hot summer. So, NZD and GBP experienced special shocks, their data turned out to be worse than forecasts. The dollar remained in the shadow of politics, and the biggest volatility was brought to the market by Mario Draghi. Don’t wait for tightening from the ECB until late autumn.
The Bank of Canada expectedly hiked the interest rate and, most importantly, gave hope for another hike this year. The dollar suffers from low inflation, and the markets set themselves up to the ECB policy tightening this fall. Quarterly reports begin next week.
Job market reports of Canada and the USA have become the leading topics of the week. If in the former case statistics caused the markets to bargain on the Bank of Canada interest rate increase up to 0.75%, then in the latter case investors entertained doubts about next FRS interest increase rate (that is strange considering futures chart provided by CME Group).
The main volatility of the week, perhaps, can be considered the movement of the pound sterling, which suffered from disagreements between the members of the MPC of the Bank of England: Mark Carney said that it is still too early to raise the interest rate, but the chief economist and some members of the Committee think quite differently.