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Three more banks are ready to go the length of tightening the policy

Three more banks are ready to go the length of tightening the policy

This sounds positive and means additional opportunities for the news trading. Mario Draghi acknowledged the growth of the European economy, Mark Carney agreed with the need to tighten the monetary policy of the Bank of England, and Stephen Poloz noted that the low-interest rates of the Bank of Canada have already taken their toll.


Mario Draghi recognizes the growth of the economy but still tries to play with the markets

Monday was the last pre-start day for the euro, the basic US orders disappointed investors, and the ECB head’s evening speech provoked the sale of the dollar against the euro, intensified during the Mario Draghi’s morning speech on Tuesday.

The main banker of the Eurozone, at the conference in Portugal, confirmed the fact of the restoration of the Union's economy.

The remarkable fact is that trying to stop the growth of the Euro, ECB’s clerks tried to explain on Thursday that their boss was “misunderstood” but the statistics of the Eurozone’s countries (Spain and Germany), released later, confirmed the words about economic stability.

We are waiting for clarification on the QE program of the European Central Bank, namely, how the bank will get out of it.


Remains on its accommodative line of interest rate increase

The final US GDP of the first quarter was published above forecasts: 1.4% versus 1.2%, but this figure did not impress the markets as the price index (Core PCE index Price), which is partially used by the FRS for inflation coordination, stopped somewhat: 2% with the previous 2.1% and with the same forecast.

The most interesting thing is that Bullard, who is usually not against the rate increase, noted: perhaps the FRS was somewhat more hawkish than it should against the background of the sudden drop in inflation and weak economic growth.

In addition, the IMF slightly lowered the forecast for US GDP growth, but at the same time, Morgan Stanley increased it for the second quarter of 2017.

The probability of the interest rate increase according to the CME  Group remains stable; there is about 50% of the chance for the December meeting.


 It seems that Trump will return to the reform of the tax issue in September.


Apparently, Mark Carney has changed his attitude to the rate increase

On Tuesday, there was a Mark Carney’s duty speech (but much more interesting on Wednesday) and the Bank of England's Financial Stability Report was published, which didn’t contain anything negative.

On Wednesday, at the conference in Portugal, the head of the Bank of England announced the imminent abandonment of the stimulus of the economy, which, against the background of the disagreements of the Regulator last week, sounded loudly for the markets. This fact significantly supported the pound.


It seems that Mark Carney was not against raising the rate, although a few days ago he denied such a possibility, arguing that such a probability is “not relevant at the moment.”

According to the Mark Carney’s statement, changes in monetary policy will occur in the “next few months.” 


Those two banks that will be next

On Tuesday, the rapid growth of the national currency, upon exports data above expectations, was interrupted by a speech by the head of the Reserve Bank of Australia, which caused a fall for the currencies of Oceania.

The Tuesday’s speech of the deputy head of the Bank of Australia caused a sharp drop in quotations of the Australian dollar, the growth of which was recovered only on Thursday upon the released statistics on the new housing sale (better than expectations).

Please note that in Australia there is such an indicator when they count the number of ads with vacancies (jobs), and so, this indicator reached a 6-year maximum. And this is good…

According to ANZ, the New Zealand’s business Index is also at a nine-month extremum.

It seems that the RBA and RBNZ will be the next who will talk thoroughly about raising the interest rate.


The chances of the rate increase have increased from 20% to 40%!

A weak trend of the Canadian dollar growth was strengthened by the speech of the country's chief banker Stephen Poloz, who said that low rates played a role in strengthening the national economy. This allowed speculators to increase the Canadian currency in their portfolios, and the probability of increasing the interest rate rose to 40% next month (by the way, the meeting will be held very soon on 12/07).

Watch the Bank of Canada, now it aims for raising the interest rate.

Expected events of the coming week

Please note that the US Independence Day is coming, which is fraught with delicate trading on July 4 (this is Tuesday) as a result of low market liquidity.

Traditionally, the beginning of a new month promises a huge flow of fundamental data. We start directly from Monday. The attention should be paid to the data of manufacturing PMI from the USA and Great Britain.

On Tuesday, with closed US exchanges, Australia's retail sales data will be published at night, and the Reserve Bank of Australia will hold a meeting on the interest rate, but the markets will primarily expect the minutes as changes in the interest rate are not expected.

Riksbank will also hold its meeting on this day, the markets also do not expect a change in the rate, but the negative rate of the bank has been held for a long time.

The Great Britain will publish the construction PMI for June; it will require additional comments from our side since the indicator can be dangerous this time.

On Wednesday, the Services PMI is published in addition to the publication of the key PMI for the Great Britain. In the evening, the minutes of the FOMC meeting will be published. This is a summary 3-week-old meeting, pay attention but minimal one (this is not an FOMC meeting, nothing should happen).

On Friday, Non-Farm Employment Change! Canadian labor market data is hidden behind the back of the American brother this time (they are published together with it at the same time) and it is not subject to trading. Before this, there will be a small movement at the time of the publication of British industrial production, and inconveniently, in the evening, natural gas reserves data will be published.

On Thursday, do not miss the publication of ADP Non-Farm Employment Change, recently it works well on signals. Attention should be paid to the ISM Non-Manufacturing PMI and oil trading.

July begins, the month, which will also contain additional reports for the second quarter of 2017, and these are additional trading signals to your attention.