On Wednesday, there was a FOMC's meeting, which was headed by Janet Yellen for the last time. Probably, it is for the first time that the tradition is broken in history and the head of the Federal Reserve does not go for a second term. Apparently the positive Non-Farm of this Friday decided to "calmly" say goodbye to its main "guardian" ...
Since Monday, it is worth remembering a new name - Jerome Powell
Trump left his unforgettable track here too and decided not to nominate Yellen for a second term. Although for more than a quarter of a century, despite the posts, epaulettes and political flags, the current head of the Fed, without further discussion, was elected for a second term ...
Janet Yellen was the Ben Bernanke’s successor and, after the 2008 crisis, continued her policy of stimulating the economy. She was one of the initiators of the QE softening program. Moreover, Janet became the first woman to head the Fed.
On Monday, Jerome Powell will assume the duties of Fed Chairman, and the market has already tightly discussed the possibility of continuing a gradual increase in the interest rate: the chance of four increases is 25% this year. The first increase is expected in March.
The main stumbling block is still inflation, which sluggishly seek to target 2% ignoring the expectations of the Fed. Nevertheless, inflationary expectations are quite optimistic, and the last publication of Non-Farm Payrolls showed a clear sign that the incomes of the population have somewhat increased. It is believed that the growth of wages reflects the growth of the economy, which in turn will pull inflation from the bottom upwards to the target level of Fed.
The dollar remains sensitive to publications of the consumer price index (CPI), as well as to indicators of retail sales. The USD also remains dependent on political headings (debate around the budget, government shutdowns, etc.)
GBP still follows the mentions of Brexit. It is also worth noting that the Bank of England is "under pressure" of a fairly high level of inflation of 3% (with a target 2%). Any positive statistics will promote the topic of a continued tightening of monetary policy (the Bank of England already raised the rate in November 2017).
The Reserve Bank of New Zealand will also receive its new Chairman, although only in March. It seems that the global theme of "increasing inflation" (against the backdrop of a gradual growth of economies in the post-crisis period) also applies to the RBNZ. Despite some reduction in the consumer price index in the fourth quarter of 2017, the market closely follows the words of the RBNZ. Forecast for GDP for New Zealand was revised upward, which in turn gives reason to think about raising the interest rate. And despite the fact that analysts do not expect immediate actions from both the RBNZ and the neighboring Reserve Bank of Australia, the chance of an interest rate increase only grows. The RBNZ can follow the example of rate growth in the US, Canada and the UK.
Important trading events of the upcoming week
January turned out to be an unexpectedly good month when we are talking about the number of transmitted trade signals:
US ADP NONFARM EMPLOYMENT CHANGE [Buy 2]
AU CPI - TRIMMED MEAN [Q/Q] [Sell 1]
US GDP ANNUALIZED [Sell 2]
UK GDP [Q/Q] [Buy 1]
CA RETAIL SALES - CORE [M/M] [Sell 2]
NZ CPI [Q/Q] [Sell 3]
UK RETAIL SALES [M/M] [Sell 2]
US EIA NATURAL GAS STORAGE CHANGE [Sell 2]
US NONFARM PAYROLLS [Sell 2]
We did not expect such results at the start of the year, when the New Year holidays hold you in the comfort zone for a long time.
February consist of 28 days, so we will focus on fast and frequency trading of a busy schedule, interesting indicators will already appear on Monday.
Monday / UK Markit Services PMI
This indicator is just one of three UK PMI indicators, which is the most popular, but this is because the service sector makes the most of the country's GDP.
Tuesday / AU RBA Interest Rate
Probably the rate will remain unchanged, and the market will be most interested in the text protocol of the Reserve Bank of Australia, nevertheless, it's better to monitor ...
Tuesday-Wednesday / NZ Unemployment Rate
The New Zealand labor market is another key to understanding the mood of the RBNZ in relation to its interest rate.
Wednesday / NZ RBNZ Interest Rate
The decision on the interest rate of the Reserve Bank of New Zealand, the probability of changing the policy is small, the scenario is the same as for the Australian rate (see above).
Thursday / UK BOE Interest Rate
One more rate, but now from the UK. Here, the main trading emphasis on the structure of the voters is "raised/lowered/left the same". As soon as there is an additional, not predictive vote for the increase, the pound is expecting another strengthening.
Friday / UK Industrial Production
We follow the increase in production in the UK, and it would be better if it really grew, which would give additional pause for thoughts of raising the rate.
Friday / CA Net Change in Employment
One more Non-Farm, but now from Canada. It's good that this month the Canadian labor market is published apart from the American one...