The ECB is ready to increase QE in terms or volume
If the forecast becomes less favorable or the financial conditions become tougher.
The Mario Draghi’s ECB expectedly left the interest rate at the same level. Promising to keep the asset relief program until December 2017 in the final communique, the banker got rid of the proposal for a possible further rate reduction.
As a result, the regulator refused to continue to reduce interest rates, while it is ready to keep them at a record low level for a long time.
Theresa May did not receive the proper parliamentary majority
UK voters once again surprised speculators and investors, falling the pound with unexpected election results.
The Prime Minister Teresa May's party does not receive a parliamentary majority, loses influence and the possibility of developing independent political decisions, from the formation of the government to negotiations on Brexit.
It was the most interesting trading of this week, it looked like this.
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The pound again loses two patterns. Perhaps, when the political dust settles (it is already beginning), all attention will shift to the fresh monetary thoughts of the Bank of England.
Preserves silence before the FOMC meeting
The brightest colours for the picture with USD quotes were drawn by political events last week. On Thursday, the former director of the USA Federal Bureau of Investigation James Komi, dismissed by the president Donald Trump one month ago, made his speech in the US Senate Intelligence Committee. The reason for the dismissal of Komi, as Donald himself publicly acknowledged, was the unwillingness of the country's lead FBI agent to promptly complete the investigation of the Russia's intervention into the last year's election campaign.
According to Komi, Trump dismissed him to undermine the investigation.
- Do you have doubts that Russia tried to interfere in the elections of 2016?
It's good that the FOMC meeting will be on Wednesday, and the accents and information background will be diluted somewhat, and the markets are already talking about the chances of an additional rate increase in December: 52% of the probability that we will see a level of 1.25-1.5%.
It experienced troubles with oil, but it recouped with a trump card in the form of Non-Farm Payrolls
The publication of data on oil stocks from the USA Department of Energy on Wednesday caused a sharp drop in oil futures quotes. Traders expected that the trend towards their decrease, started in February of this year, would continue, which affected not only the oil trading instrument itself, but also in pairs with CAD, which continues to react swiftly to the incidents with oil quotes. Besides, another player has returned to the oil market - Nigeria.
Thursday’s speech of the head of the Central Bank of Canada did not affect the exchange rate of the national currency. The problems voiced in the speech, such as the growth of household debt and house prices, did not contain prescriptions for their solution.
According to the latest macroeconomic data, economic growth accelerated in the spring, exceeding expectations, the driver was the increase in domestic demand.
Positive labour market data from Canada is completing this week, showing an increase in the employment above expectations. The latter factor seriously worked out well for the strengthening of the Canadian dollar in the USD/CAD pair.
CA Employment Change 54.5K vs 15K
CA Unemployment Rate 6.6% vs 6.6%
Reserve Bank of Australia remains in neutrality
At the meeting on Tuesday, the Bank of Australia expectedly left the rate at the same level, the pair kept the trend on the inside of the expected GDP growth.
Released indicators in annual terms were higher than analysts' expectations and allowed the Australian economy to set a record of constant GDP growth (without recessions – falls of two quarters in a row) during 26 years. Thanks to this indicator, it came out on top in the world among developing countries.
Australian GDP Growth Rate (Q1) Q / Q 0.3% vs. Exp. 0.3% (Prev 1.1%)
Australian GDP Growth Rate (Q1) Y / Y 1.7% vs. Exp. 1.6% (Prev 2.4%)
RBA: Wage growth remains slow, labour market indicators are mixed
RBA: China's high debt level, medium-term risk
99% on raising the FRS rate this Wednesday
The publication of the results of the FOMC meeting and the subsequent press conference of Janet Yellen are the most important fundamental events of the week, after which medium-term and long-term trends in financial markets can be formed.
Analysts estimate the probability of the FRS rate increase by 99% (not a joke!) compared to 91% last week. The meeting will last two days with the announcement of the decision on Wednesday and the conference after half an hour from the moment of the release. Any statements by FRS bankers before announcement of decisions, as well as current data accounting, are forbidden despite the fact that inflation indicators will be published day in day with a rate.
One of the conditions for raising a rate, previously voiced by Yellen, is the full employment of the labour market, which was shown in the last week's reports.
The fall in new jobs has not affected the unemployment decrease according to the head of the FBI of Philadelphia – “Another good report”. Friday’s speech occurred after the publication of the “ambiguous” figures of the two reports. On the same day, Kaplan, the silent spokesman of the FRS, hinted that the figures of these two reports speak about “not fully loaded capacities”.
Many perceived this as a signal to achieve full employment, based on the previous speeches of the head of the FBI of Dallas, where he openly stated about such a benchmark for raising the rate. Both bankers are members of the FOMC Commission with the right to a decisive vote.
It is worth noting that seven days of June have already brought more signals than in March: the “summer” it is.
All the events, which are worth paying algorithmic attention on, you can find in the calendar. Note that the NZVVP quarterly data, the FRS interest rate, the Turkey interest rate, the meeting of the Bank of England will follow.